Caps, Cuts, and Billions

Taxes

Budget deal, debt limit talks continue. Senate Majority Leader Mitch McConnell hosted a meeting between Treasury Secretary Steven Mnuchin, White House Chief of Staff Mick Mulvaney, Senate Appropriations Chair Richard Shelby, and chairs of that panel’s key subcommittees on Wednesday. After the meeting, Shelby said of a potential deal: “Did we crystalize it? No…  We’re going to have to be looking at spending caps or sequestration.” Mnuchin said “Our preference is if we reach a caps deal, [increasing] the debt ceiling has to be included.” Stay tuned: Mnuchin and Mulvaney plan to give President Trump a proposal soon.

For corporations, trade war’s tariffs trump TCJA tax cuts. At a Business Roundtable meeting, a group of Fortune 500 companies warned that current trade war tensions threaten the global economy, and some corporations are suffering more than others. Indiana engine-maker Cummins has lost all gains from the Tax Cuts and Jobs Act’s reduction in the corporate rate to the extra tariffs it must now pay—$150 million annually. CEO Tom Linebarger said “Our net taxes are higher now.”

Colorado’s pot tax revenue tops $1 billion. The state legalized recreational marijuana in 2014, and with over $6.5 billion in subsequent sales, marijuana tax, license and fee revenue has totaled $1.02 billion. The pot tax revenue supports youth and public health programs in Colorado at state and local levels.

No graduated income tax in Massachusetts, for now. Lawmakers advanced a constitutional amendment that would impose a 4 percent surtax on the amount of an individual’s annual income exceeding $1 million. The amendment needs another favorable vote in the next two-year legislative session before it could be ratified by voters in 2022. Just prior to debate on the amendment, some lawmakers removed language that would have allowed the state to establish a graduated income tax.

IRS releases fiscal year tax return projections for 2019-2026. The semiannual publication is available here. Altogether, 254 individual and business income tax returns were filed in FY 2018. After FY 2018, the IRS projects that  income tax return filings will grow at an average annual rate of 0.8 percent, reaching 269.7 million by FY 2026.

You can have an ambitious domestic policy agenda and a balanced budget. You just have to be a think tank and not running for public office. TPC’s Howard Gleckman takes a look at that bottom line from the Peter G. Peterson Foundation’s annual fiscal policy summit held this week. The foundation asked seven policy shops across the ideological spectrum to figure out how to put the US on a more sustainable fiscal path. Only one got the budget to balance by 2049. But most got deficits down to 2.2 percent of GDP or less by mid-century. And all—even the two that would maintain deficits at about 4.5 percent of GDP—avoid the explosion in the national debt that will occur without changes in the law.

Martin Feldstein: An economics giant and good man. TPC’s Bill Gale reflects on the passing of Marty Feldstein. “He was a supply-sider in the good sense of the word—namely, that economists need to pay attention to the impact of taxes on the supply of factors of production, not just on aggregate demand. But he was not afraid to call it like he saw it.” 

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