Where do TCJA benefits come from? TPC’s Ben Page explains, based on a new TPC analysis of the tax Cuts and Jobs Act. For the vast majority of households, individual income tax provisions (which include pass-through business income) account for most changes in after-tax income. By contrast, cuts in corporate and estate taxes drive much of the increase in after-tax income of the highest-income taxpayers.
Mnuchin: The TCJA still will pay for itself. Despite estimates from a wide range of private and government analysts, his own career staff, and even President Trump’s latest budget, Treasury Secretary Steven Mnuchin continues to insist the $1.5 trillion tax cut will not increase the budget deficit. "I stand behind my previous comments on this," Mnuchin told the Senate Finance Committee last week. Mnuchin says the new law would be self-financing if it boosts economic growth by between 0.3 percent and 0.4 percent, which he says is an easy target to meet. Back in December, TPC’s Ben Page explained what’s wrong with the theory.
State of the States: Guess how governors feel about taxes? TPC’s Richard Auxier notes that “in annual state of the state addresses, Republicans touted tax cuts they say will promote economic development, while Democrats were either silent on the topic or used their speeches to promote new energy taxes.” Surprisingly few chief executives of either party had anything to say about the TCJA.
Capping the SALT deduction comes at a price. TPC’s Tracy Gordon says, “Although imperfect, the SALT deduction encouraged states to spend more than they otherwise would on important public services and to tilt their revenue systems toward progressive income taxes. Both steps may have helped reduce income inequality.”
Singapore looks ahead, plans to increase its GST. Its finance minister announced a range of tax increases, including a hike to the property tax and a boost in the goods and service tax from 7 percent to 9 percent within the next several years. “In the next decade, between 2021 to 2030, if we do not take measures early, we will not have enough revenues to meet our growing needs,” he said.” Singapore currently runs a balanced budget but, unlike some countries, the government worries about paying for the costs of an aging population.
The Corrections, ReDutch? The Dutch Finance Ministry has reviewed tax deals with international companies and found 72 errors. These include five decisions that were either wrong or likely wrong. The ministry says policies allowing early approval of pricing agreements within company units should be revised “in some ways.” Such flexible transfer pricing rules can encourage profit-shifting to zero-tax jurisdictions.
Russia cracks down on some tax avoidance. Grain traders are now able to buy directly from farmers thanks to a government crackdown on tax avoidance in agriculture. Last May, many Russian grain exporters promised to avoid working with firms suspected of failing to pay taxes. Some used a series of complex transactions to sell grain while dodging the Russian value-added tax.
Congress in recess. The Daily Deduction returns Monday, February, February 26.
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