The USMCA deal: Some details, some dissent. The White House and House Democrats announced yesterday that they reached a deal to revise the North American Free Trade Agreement, now called the United States-Mexico-Canada agreement (USMCA). It includes stronger labor enforcement rules requested by Democrats and excludes a provision that would have given drug companies more time to sell brand-name drugs without competition. But the bill may run into trouble in the Senate. Some Democrats will oppose it and Pennsylvania Republican Pat Toomey warned that a quick vote would be a “huge mistake” since the deal would have little impact on economic growth.
As for the US-China trade deal… The US and China hint the US may delay tariffs scheduled to go into effect on December 15, the original deadline for Phase One of a trade deal between the two nations. Trade representatives continue to work out details.
Hold the SALT for a couple years? The House Ways & Means Committee plans to mark up legislation today to temporarily repeal the $10,000 cap on state and local tax deductions for 2020 and 2021. The bill also would increase the cap to $20,000 for 2019 and raise the top individual income tax rate from 37 percent to 39.6 percent. That rate would kick in at a lower income threshold. The Democratic-led House may pass the bill, but there is no chance it will pass the GOP-controlled Senate.
But repealing the deduction cap would be regressive. Chuck Marr and colleagues at the Center on Budget and Policy Priorities find that repeal itself would mostly help high-income taxpayers and that the proposed income tax rate hike could be better used to pay for other initiatives.
Tax expenditures then and now… TPC’s Eric Toder calculates that the Tax Reform Act of 1986 reduced tax expenditures from about 8 percent of Gross Domestic Product (GDP) in 1985 to about 5.5 percent of GDP in 1990. But he and Daniel Berger find that the Tax Cuts and Jobs Act (TCJA) reduced tax expenditures by much less. Projected tax expenditures between fiscal years 2019 and 2025 declined from 7.7 percent of GDP before TCJA to 6.4 percent. The TCJA’s “combination of cuts and increases in tax preferences did not reflect the traditional tax reform paradigm of broadening the base and lowering rates to reduce how much the tax system interferes with private economic decisions.”
Which Americans are self-employed, and what does that mean for tax compliance? A new TPC paper by H. Elizabeth Peters, Elaine Maag, and Breno Braga sheds new light on the population fueling the gig economy. Tax compliance is no simple feat for the self-employed, since the workers must track and report their earnings without the benefit of employer record-keeping. Men are a little more likely to be self-employed than women, and married women are more likely to be self-employed than single women.
Denmark’s tax agency wants transaction information from cryptocurrency traders. The agency asks traders to provide information about profits and losses for fiscal years 2016 to 2018, assuming that all goods are sold or used in the same chronological order in which they are purchased. Filing may be difficult, according to Robin Singh, founder of a cryptocurrency startup Koinly: “…Crypto traders usually hold several exchange accounts and wallets and freely transfer crypto between them, so there’s no easy way to figure out what the capital gains are for any particular trade.”
For the latest tax news, subscribe to the Tax Policy Center’s Daily Deduction. Sign up here to have it delivered to your inbox weekdays at 8:00 am (Mondays only when Congress is in recess). We welcome tips on new research or other news. Email Renu Zaretsky at firstname.lastname@example.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, 2020.