Tune in this morning for a Webinar on dynamic scoring of the presidential candidates’ tax plans. The Penn Wharton Budget Model and TPC collaborated to analyze how the proposed changes of each candidate would affect the economy and the federal budget, using a dynamic economic model that employs big data, cloud computing, and visualization. Two experts will discuss each proposal and the sensitivity of estimates to key assumptions. Register here for the webinar; it starts at 9:30 am EDT.
TPC updated its traditional analyses of the latest tax plans from Clinton and Trump. Make sure you read them, because there’s a quiz. Here’s how TPC’s Howard Gleckman breaks them down: The new TPC analyses “quantify the dramatic contrast… Clinton has proposed a significant tax increase on high-income households and businesses. Trump’s plan, while less ambitious than his 2015 version, would still largely benefit high-income households and result in a substantial boost in the federal debt.” The Center on Budget and Policy Priorities offers its takes on Clinton’s Child Tax Credit proposal here and the impact of Donald Trump’s plan here.
There’s tax policy, there’s trade policy, and there’s economic theory… TPC’s Eric Toder critiques the economic logic that Donald Trump's economic adviser, Peter Navarro, used at last week’s TPC discussion of Clinton’s and Trump’s tax plans. Navarro argued that an improved trade balance would offset the tax cuts, so the deficit would not increase. He has, Toder explains, “turned economic theory on its head.” That’s because “when the budget deficit and private borrowing both rise, so does the trade deficit. The rule: Sources of sales by US businesses must equal uses of those sale proceeds by US households.”
Treasury finalizes regulations to curb “earnings stripping.” Treasury Secretary Jack Lew says the rule will “get at egregious tax behavior, not normal business practices.” Earnings stripping occurs when a subsidiary company pays deductible interest to a parent company or affiliate based in a low-tax country. Limiting the practice could curb tax inversions, in which a corporation acquires a smaller competitor in a lower-tax foreign country.
Princeton University maintains its tax-exempt status with an $18 million settlement. Local homeowners in New Jersey filed suit against the Ivy League institution, claiming that it should pay property taxes. That’s because Princeton, the plaintiffs argued, uses some of its buildings for commercial purposes, and shares commercial royalties with pharmaceutical giant Eli Lilly on a patented cancer drug. Princeton opted to settle before trial. Princeton will give $10 million as property tax relief to 869 homeowners, who will share the money from 2017 to 2022. Princeton will also give the borough government $7 million and donate $1.25 million to a nonprofit group to meet housing needs of lower-income residents.
Nevada’s state Assembly just approved the largest ever tax subsidy for an American sports stadium. Republican Governor Brian Sandoval plans to sign the bill that will boost the current 12 percent hotel tax in the Las Vegas area by up to 1.4 percentage points. The tax revenue, estimated at $750 million, will subsidize construction of a new NFL stadium and expansion of a convention center. TPC’s Howard Gleckman noted last year that these types of subsidies have at best only a modest effect on economic development.
The World Health Organization asks countries to tax sugary drinks. WHO says a tax that raises the prices of sugary beverages by 20 percent would cut consumption by a proportionate amount. A drop in consumption could curb the rate of obesity, which has more than doubled since 1980. Last year TPC’s Donald Marron, Maeve Gearing, and John Iselin examined whether countries should tax unhealthy drinks and food and concluded, “Taxing can influence what people eat and drink, but it is not a silver bullet.”
Warren Buffett’s (and Donald Trump’s) tax returns tell you a lot about how the US taxes the wealthy. TPC’s Gene Steuerle explains how, and concludes, “Tweaks to the individual income tax system, including higher tax rates, are unlikely to increase dramatically the taxes paid by the very wealthy. Instead, policymakers need to think more broadly about how estate, property, corporate, and individual income taxes fit together and how to reduce the use of tax arbitrage to game the system.”
Congress is in recess. The Daily Deduction will post Mondays in the interim.
Interested in subscribing to the Daily Deduction, the Urban-Brookings Tax Policy Center summary of the day’s tax news? Sign-up here to get the Daily Deduction delivered to your inbox every morning. If you’d like to tell us about a new research paper or have any comments about our feature, write us at dailydeduction “at” taxpolicycenter “dot” org.
Posts and comments are solely the opinion of the author and not that of the Tax Policy Center, Urban Institute, or Brookings Institution.
- © Urban Institute, Brookings Institution, and individual authors, 2016.