Wait ‘til next year. President Trump seemed to acknowledge what Hill Republicans have been saying for days and independent observers have been predicting for months: Congress probably won’t pass a tax bill in 2017. Asked yesterday if a bill would be completed by the end of the year, Trump told reporters, "I would like to see it be done this year. But don't forget it took years for the Reagan administration to get taxes done — I've been here for nine months." Senate Majority Leader Mitch McConnell said 2017 passage is a “goal.” Perhaps the president will use some of the extra time to woo conservative Senate Democrats.
A bold claim from the White House. President Trump’s Council of Economic Advisers has released a white paper that asserts that the average American family would get a $4,000 raise under President Trump's tax plan—the details of which have not yet been finalized—by reducing the top corporate tax rate from 35 percent to 20 percent. Said TPC’s Mark Mazur of the estimated income gains: "You’d have to have a tsunami of corporate capital coming into the United States — we’ve never seen that." For tax geeks, here is a critical analysis that raises serious questions about the research that supports the CEA paper. And here is another from Treasury’s Office of Tax Analysis.
Beyond that rate cut, who knows? National Economic Advisers Chair Gary Cohn says that except for cutting the corporate rate to 20 percent and reducing taxes on the middle class, President Trump is "very flexible on everything else.” Cohn also suggested that pass-through entities should be exempt from any curbs on corporate interest deductions. This would be a big benefit to, for example, real estate partnerships.
Would the United Framework make the mortgage interest deduction largely irrelevant? The Big Six Unified Framework retains the mortgage interest deduction but nearly doubles the standard deduction. The Wall Street Journal considers (paywall) the tradeoff for taxpayers who currently itemize. For most, the standard deduction would be the better option. Only the highest income households would continue to itemize, and only few of them would take the mortgage interest deduction, which applies to mortgage loans up to $1 million.
A Senate budget vote this week leaves no room for GOP error. The Senate GOP needs a 51-vote majority to pass its budget resolution that would allow tax overhaul efforts to advance. Senate Appropriations Committee Chair Thad Cochran has been ill and is unlikely to vote. That leaves the GOP with little room for defections. One bit of good news for party leaders. Maine’s Susan Collins says she will vote for the fiscal framework.
To know if tax reform is on the right track, check this list. TPC’s Gene Steuerle offers eight lessons from the 1986 tax reform that 2017 reformers should consider. To track the odds of tax reform today, “Simply ask yourself whether those in charge are addressing the items on this checklist.”
No tax returns necessary to be on California’s presidential ballot. Governor Jerry Brown vetoed a bill that would have required presidential candidates to disclose their personal income tax returns. Senate Bill 149 would have likely been overturned in the courts, said Brown, or could open the door to future litmus tests: “What would be next? Five years of health records? A certified birth certificate? High school report cards? And will these requirements vary depending on which political party is in power?"
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