What doesn’t kill us makes us stronger. No need to worry about a trade war with China, says President Trump. The Chinese government threatened tariffs of its own after Trump announced tariffs on aluminum, steel and dozens of other Chinese products. Trump one-upped them, saying he’d like to see $100 billion in additional imported Chinese goods subject to tariffs. “I'm not saying there's not gonna be any pain… We're gonna be much stronger for it,” assured Trump. The stock market didn’t seem so sure. The Dow Jones lost 532 points, or 2.3 percent, after the president doubled-down on his threat.
On the Hill this week. The House Ways & Means Committee will hold a hearing Thursday morning on the effects of tariff increases on the US economy. The panel’s Subcommittee on Human Resources will hold a hearing that afternoon to examine the community impact of local employers’ demand for workers.
CBO updates it budget outlook. The Congressional Budget Office is expected to release its annual budget and economic outlook today. It is likely to show trillion-dollar deficits as far as the eye can see, even before the temporary tax cuts in the Tax Cuts and Jobs Act are extended. But will it also forecast steady 3 percent economic growth as the Trump Administration predicts?
If not tax cuts, then what’s a winning GOP message in November? Vox reviews the state of play for GOP lawmakers seeking to ride the coattails of the TCJA to electoral wins in November. It’s becoming harder, largely because major legislative accomplishments since November 2016 are few and far between. Exacerbating that problem, says Vox: “In the Trump era of Republican politics, the backup plan to an ineffective economic message has been to wage a culture war.”
An ode to common ground. TPC’s Gene Steuerle reflects on lessons offered by Pete Peterson, who passed away last month. Steuerle notes one especially relevant to current events: “We could reduce our current political chaos by shifting more political resources toward efforts to find sensible, consensus solutions to policy challenges.”
How low will taxpayers go? TPC’s Howard Gleckman estimates how the TCJA will transform tax filing. “Faced with a high level of uncertainty and a natural desire to minimize their tax liability, many taxpayers will be tempted to take the most aggressive advice they can find—even if that counsel carries them beyond defensible interpretations of the law.” Bad timing, perhaps, as the IRS audit rate is plummeting, too. Gleckman says, “In the post-Tax Cuts and Jobs Act world, compliance patterns may get more complicated. Many taxpayers will have much less opportunity to dodge taxes but some will have more.”
A tax on plastic grocery bags: Why don’t we all carry that weight? This month’s Tax Hound considers a proposal in Memphis, Tennessee, that would levy a 7-cent-per-bag tax on single-use plastic bags. Is a tax like this a good idea—especially if it disproportionately affects low-income shoppers?
Will Kentucky Governor Matt Bevin sign state tax changes? The state legislature passed major tax cut that creates a flat 5 percent corporate and personal income tax rate. Kentucky's corporate tax rate ranges between 4 and 6 percent and its personal income tax rate ranges from 2 to 6 percent. To make up for the lost revenue, the bill doubles the cigarette tax and levies sales taxes on 17 additional services. As a result, the bill significantly cuts for taxes for the wealthy, but raises taxes on 95 percent of state residents. The governor has until April 13 to decide whether to sign the measure.
Scotland’s new tax rates take effect. The new Scottish system breaks from the rest of the United Kingdom, which taxes income at three rates: 20-40-45 percent. Scotland—which is surely not Kentucky-- has added a 19 percent "starter" rate for those with low incomes and a 21 percent rate for those who earn the median salary. It also raises top rates to 41 percent and 46 percent.
About Don Lubick. TPC will hold its third annual Lubick Symposium today. For the occasion, Gene Steuerle considers Don’s four decades helping develop tax policy. You can watch the event webcast at 9:30 here.
If you’d like to tell us about a new research paper or have any comments about the Daily Deduction, TPC’s summary of the day’s tax news, write Renu Zaretsky at firstname.lastname@example.org. You can sign up here to receive the Daily Deduction as an email newsletter every weekday morning (Mondays only when Congress is in recess) at 8:00 am.
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.