The price of a low tax rate on pass-throughs. Both President Trump and the House Republican leadership have proposed cutting the tax rate on partnerships, sole proprietorships, and other pass-through businesses. In a new report, TPC analyzed several variations on a 15 percent rate, which Trump proposed, and a 25 percent rate, favored by the House GOP leadership. Our conclusion: A 15 percent rate on a very broad definition of income could add $2 trillion to the debt over 10 years, with three-quarters of the benefits going to the top 1 percent of households. TPC’s Howard Gleckman summarizes the report here.
“How low can you go?” ask lobbyists. They represent technology, drug, and other manufacturers, and want an even deeper tax cut for corporations that repatriate profits currently held offshore. Candidate Trump suggested a reduction from 35 percent to 10 percent. Lobbyists are pushing for the version proposed last June by the House GOP leadership, 8.75 percent on cash and 3.5 percent on other assets. Corporations hold an estimated $2.6 trillion in profits overseas.
Another fight brews over the deduction for interest expense. Politico dives into the details. Ending the business deduction for interest expense could boost revenues by $1 trillion, and House Republicans want the money to fund expensing of capital investment and cuts in corporate tax rates. It’s their second-largest “pay-for” after the border-adjustable tax. But farmers, private equity, utilities, real estate, manufacturers and others who rely on borrowed money could be hit hard—and they’re already pushing back. Maybe they’ll write an op ed.
Tax reform in Louisiana: Thanks, but no thanks. A Task Force on Structural Changes in Budget and Tax Policy recommended several tax overhaul ideas to end the state’s boom-and-bust budget cycles. They included lower tax rates, a broader base, and fewer complicated tax breaks. But lawmakers—including many on the conservative House Ways & Means Committee—are rejecting most of the concepts. Few suggestions advanced beyond initial hearings.
In Kansas: It’s the Senate’s turn. Yesterday the House passed a small expansion of the state’s 6.5 percent sales tax to include some services such as towing and pet boarding. The measure would raise $115 million over two years. Kansas faces an estimated budget shortfall of $887 million through June 2019.
Thursday on the Hill. The Senate Banking Committee will hear from Treasury Secretary Steven Mnuchin, who will provide a domestic and international policy update. The House Ways & Means Committee will hold hearing to examine how tax reform will “grow our economy and create jobs.”
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