Lots of breathless speculation about Trump’s tax announcement. What will the president say? Various news organizations predict he’ll renew his campaign call for a 15 percent tax rate on all businesses, including pass-throughs; and call for a new child care tax credit, a higher standard deduction, and some funding for infrastructure. He might also call for a 10 percent tax on $2.6 billion in earnings held by corporations offshore. Others report it will not include the House GOP’s border adjustable tax. Still not clear what the president’s favored individual tax rate will be. We’ll all find out today.
Opening the door to new tax shelters? President Trump wants to sell his plan to slash the business income tax rate to 15 percent as a job creator. But TPC’s Len Burman says it could open the door to huge tax shelter opportunities. And TPC’s Bob Williams notes that the cost of cutting business rates to 15 percent is “a big number. The kind of changes you’d need… to claw that much money back are not consistent with the kinds of things Trump has talked about,” Williams said. “They’d have to do something that raises taxes elsewhere.”
TPC’s new podcast series may help clarify the tax debate. TPC has a new podcast series, Taxology, and its first topic is the controversial and complex destination-based cash flow tax. The DBCFT could make US corporations more competitive and boost the economy or it could cripple businesses and punish consumers. Which is it? It depends on your perspective. You can gain some here, with host Kathy Schalch.
Of course, a DBCFT could also anger some countries. Mexico, for one, vows to take legal steps against any US tax changes that violate World Trade Organization rules. Some argue that a destination-based cash flow tax would do exactly that.
Canada’s not happy about a new US tariff. Trump slapped a 20 percent tariff on softwood lumber imports from Canada and Commerce Secretary Wilbur Ross says the retroactive tariff will boost the cost of that lumber by $5 billion annually. The Canadian government called the levy “unfair and punitive” and predicted American consumers would pay the price for the tariff.
How do states invest to encourage job and wage growth? A new Urban Institute paper by TPC’s Norton Francis and Megan Randall shows how. States invest in the marketplace, the workforce, and the community, but governments could do a better job unifying strategies, tracking results, and better targeting resources to achieve desired outcomes.
Ohio Governor John Kasich’s tax plans: Rebuked by Republicans. State GOP lawmakers nixed Kasich’s proposed income tax cuts and other tax increases to help balance the state budget. They cut spending instead, though they kept Kasich’s proposed increases in education spending by shifting funds from schools with declining populations.
How might tax reform and the private sector strengthen charities? TPC’s Gene Steuerle proposes both a public and private sector initiative for boosting charities: “First, make tax subsidies more effective and efficient. Second, improve the way charities market themselves. Neither Congress nor the charitable sector has ever approached either task in a comprehensive way.” Doing so could increase charitable giving of income, wealth, and time.
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- © Urban Institute, Brookings Institution, and individual authors, 2016.