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De Omnibus Dubitandum - Lux Veritas

Saturday, December 16, 2017

Dan Mitchell on Tax Plan

Grading the AiP House-Senate Republican Tax Plan

December 14, 2017 by Dan Mitchell
In early November, I reviewed the House’s tax plan and the Senate’s tax plan.  I was grading on a curve. I wasn’t expecting or hoping for something really bold like a flat tax.  Instead, I simply put forward a wish list of  a few incremental reforms that would make an awful tax system somewhat less punitive.  A few things to make April 15 more bearable.  Some changes that would give the economy a chance to grow faster and create more jobs so that living standards could improve. Is that asking too much? It wasn’t even a long list. Just two primary goals.
And two secondary goals.
Based on those items, I think House and Senate GOPers did a reasonably good job (at least compared to my low expectations earlier in the year).  Now let’s look at the agreement in principle (AiP) that was just announced by House and Senate negotiators and assign grades to the key provisions. And we’ll start by looking at the items on my wish list.  Is there a big reduction in the corporate tax rate?..........To Read More....


What’s the Best Tax Policy for Working Families?

December 15, 2017 by Dan Mitchell
Adopting tax reform (even a watered-down version of tax reform) is not easy.
  • Some critics say it will deprive the federal government of too much money (a strange argument since it will be a net tax increase starting in 2027).
  • Some critics say it will make it more difficult for state and local governments to raise tax rates (they’re right, but that’s a selling point for reform).
  • Some critics say it will make debt less attractive for companies compared to equity (they’re right, though that’s another selling point for reform).
  • Some critics say it will cause capital to shift from residential real estate to business investment (they’re right, but that’s a good thing for the economy).
Now there’s a new obstacle to tax reform. Senator Marco Rubio says he wants some additional tax relief for working families. And he’s willing to impose a higher corporate tax rate to make the numbers work.  That proposal was not warmly received by his GOP colleagues since the 20-percent corporate rate was perceived as their biggest achievement.  But now Republicans are contemplating a 21-percent corporate rate so they have wiggle room to lower the top personal tax rate to 37 percent. Which prompted Senator Rubio to issue a sarcastic tweet about the priorities of his colleagues.
"20.94% Corp. rate to pay for tax cut for working family making $40k was anti-growth but 21% to cut tax for couples making $1million is fine?"
Since tax reform is partly a political exercise, with politicians allocating benefits to various groups of supporters, there’s nothing inherently accurate or inaccurate about Senator Rubio’s observation......To Read More....

 

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