By Adam Looney – Although it has now been killed by the Republican congressional leadership and the White House, it’s worth understanding why it would be better for the U.S. economy and American workers than any available alternative.
If the goal is to disincentivize firms from inverting—moving their residence abroad—or shifting profits and activities to lower-tax countries, reforms must address why firms move abroad or start overseas to begin with. Firms don’t move abroad to pay lower taxes on foreign-source income—after all, they don’t pay that much now—but to reduce the taxes they owe on their domestic profits.
The BAT addresses the fundamental problem: as long as there is a lower-tax country out there, there is always going to be a tax incentive to produce abroad and sell it in America, rather than to make it in America in the first place.
Under the BAT (border adjustment tax), all companies would pay tax if they sold to Americans, no matter where the goods and services were produced or where the company makes its headquarters. If firms don’t sell to Americans, they don’t pay U.S. tax. And if something is produced in America and consumed abroad, that’s tax free too. In this world, the U.S. tax rate or tax burden no longer matters for the firm’s decision on where to locate. more> https://goo.gl/Vwcocw
Posted in Business, CONGRESS WATCH, Economic development, Economy, History, Leadership, Regulations
Tagged BAT, border adjustment tax, Investment, Tax inversion, Taxes
By Isabel V. Sawhill – Republicans have become trapped in their own rhetoric, crafted during years of being in opposition. As Ross Douthat noted in a recent New York Times column, drawing on new analysis in a report by Lee Drutman, that rhetoric is now well to the right of the beliefs held by the broader Republican electorate.
Republican leaders have failed to recognize the fact that the economic views of those who voted Republican in 2016 “lean only slightly to the right.”
Republicans could have used the Trump election to effect a political realignment—one that would have combined a more moderate set of economic policies than the Republican elite currently supports with a more moderate set of cultural positions than those espoused by leading Democrats.
Instead, the Republican elites are now out-of-step with their followers and could pay a big political price if they continue down their current path. more> https://goo.gl/AXQ7x3
Capital Without Borders, Author: Brooke Harrington.
By Aamna Mohdin – In researching the book, Harrington traveled to 18 countries, interviewed 65 wealth managers, and even trained as one herself to better understand how tax avoidance works. In an interview last week with the Nation, she said although tax evasion would exist even without wealth managers, they have massively accelerated the trend. Tax dodging couldn’t happen “on the grand scale that we are seeing today without expert intervention,” she said.
“There’s a certain group of well-to-do people who don’t want to be subject to the laws that bind the rest of us,” she said. “With the help of wealth managers, they put themselves above the nation-state system by changing passports at will, having multiple residences, and bouncing around strategically to ensure that no national laws apply to them.” more> https://goo.gl/fzaAqJ
The Pew Charitable Trusts – Twenty-three state legislatures considered proposals this year to impose taxes on at least some services. But so far, none has made it into law intact — and most died outright. And in several states, new taxes on services that took effect this year are so complicated that tax offices are writing clarifying memos, like the one in North Carolina to distinguish between roof repair (taxable) and roof replacement (not taxable).
Trying to define exactly what services should be subject to a new tax can be tricky, with proposals to tax specific businesses usually drawing opposition from those who would be affected. And proposals to tax all services prompt demands for exceptions from businesses that maintain they are “essential” (like funeral services) and should not be subject to tax.
“The services that get pulled into these plans … are not necessarily the ones that bring in the most revenue, but the ones that are more politically viable,” said Meg Wiehe, deputy director of the Institute on Taxation and Economic Policy, a study group that looks at the distributional effects of tax policy. more> https://goo.gl/XNJKS5
By Alex Altman – The proposal, which the White House promised would be the “the biggest individual and corporate tax cut in American history,” was strikingly short on details, from how much the goodies President Donald Trump is dangling would cost to how his Administration plans to patch the hole it would blow in the budget.
That’s an especially pressing question given how zealous many Republican lawmakers have been in the recent past about keeping legislation revenue-neutral.
The Committee for a Responsible Federal Budget estimated the plan could cost between $3 trillion and $7 trillion. Its base-case estimate, $5.5 trillion, would be 20% of U.S. GDP. “Even if tax cuts could generate more growth than estimated,” the group wrote, “no plausible amount of economic growth would be able to pay for a substantial portion of the tax plan.”
Even if a true tax-reform package isn’t in the offing anytime soon—the last reform of the tax code took place more than 30 years ago—Trump’s party has the power to simply slash rates this year.
That would juice the U.S. economy as Republicans head into a difficult election cycle in 2018. Which, to Trump, may be as good a goal as any. more> https://goo.gl/PRuvyB
Why countries should tax couples as individuals
By Vanessa Sumo – When low-earning people tend to marry each other, a policy that links their incomes and tax rates becomes expensive because it results in a high level of government subsidies.
When one low earner loses some income, the spouse faces a higher tax rate and a disincentive to work.
That combination makes the partners poorer and may make them eligible for a higher level of government subsidies, creating an additional cost for taxpayers. more> http://tinyurl.com/qeuxz9r