Should they stay or should they go? Republican lawmakers on the Hill face a stark choice: Do they keep some or all of $1 trillion in Affordable Care Act tax in order to fund its replacement, or repeal them? These taxes include the net investment income tax, the Medicare surtax, the “Cadillac” tax on high-cost insurance plans, the medical device tax, the health insurance tax, the prescription drug tax and the tanning tax. Senate Finance Committee Chair Orrin Hatch and Ways & Means Chair Kevin Brady both say they need to go, but not all their colleagues agree.
Speaking of paying for plans… TPC’s Howard Gleckman lays out the stakes in the Great Fiscal Policy Debate of 2017 as described in a new analysis by TPC’s Bill Gale and UC Berkeley’s Alan Auerbach: “While Trump and many congressional Republicans are proposing massive tax cuts, Gale and Auerbach project the US will need a combination of large tax increases and spending cuts to help bring the federal budget back to a sustainable path.”
Clear as mud. Top Trump Administration aides continue to send conflicting signals about whether the President would back a border-adjustable tax. Here is National Economic Council director Gary Cohn on CNBC: “It is one of the options that's on the table. You should not take it from me that that's the option we're going with, but I'm not going to exclude that option. At this point we are exploring every and all options to get our US corporate tax rate down to the lowest possible level we can get it.” Got it?
Replacing revenue matters: Consider Alabama’s painful, shameful tax legacy. Until the mid-1850s, Alabama collected most its revenue from slave taxes: 25 cents for every slave younger than 10, and a dollar for others. Land taxes were low, ranging between $2 and $8 an acre. After slavery’s abolition, legislators blocked efforts to replace the slave tax with higher property taxes, but failed to find sufficient sources of other revenue. The Montgomery Advertiser explains that this “set in place decades-long policies that, to this day, make it difficult and sometimes impossible for Alabama to generate enough revenue to pay for its state services.”
Who would benefit from a state income tax cut? In Nebraska, a median income household would see no increase in its after-tax income from GOP Governor Pete Ricketts’ proposal. The Lincoln Journal Star calculates that the plan would boost after-tax income only for couples who earn at least $84,000 a year. That couple would save $100. The plan would cut taxes by as much as $1,510 for couples earning $250,000.
And what’s a medical necessity worth? Michigan’s Democratic lawmakers think feminine hygiene products are medically necessary and should be exempt from the state’s sales and use tax. Eight other states prohibit the taxation of these items. California’s legislature passed a bill to keep the state from taxing them, but Democratic Governor Jerry Brown vetoed it since the move would have cost the state $20 million in in revenue.
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