Wealth, Compromise and Regulations

Taxes

The tariff war grinds on. The US began imposing 15 percent import duties on a wide range of Chinese-made consumer goods on Sunday. At the same time, China starting taxing US crude and announced it was filing an anti-tariff case against the US at the World Trade Organization. 

Democrat’s tax proposals increasingly target wealth, not income. The Wall Street Journal reports (paywall) on Democratic presidential candidates’ tax proposals. All reflect the candidates’ shared conviction that today’s income tax is an inadequate revenue source in an era of growing income inequality. Democrats instead want to shift toward taxing the richest Americans’ wealth.

France and the US have drafted a compromise on the French digital tax. President Emanuel Macron said last week that once a new international agreement on digital taxation becomes reality, France will eliminate its 3 percent tax on 30 large US tech companies. The Trump Administration and many in Congress strongly oppose the French levy.

Lowering interest rates and raising the debt add up to a huge policy gamble. TPC’s Gene Steuerle warns that the Federal Reserve, Congress, and the President are taking a massive financial gamble by trying to boost the economy with ever-lower interest rates and ever-more government borrowing during a period of relatively full employment.

What happens when a state is slow to conform to federal tax changes. Minnesota was slow to adjust its state tax code to the changes in the Tax Cuts and Jobs Act. As a result, say TPC’s Erin Huffer and Max Grozovsky, tax filing in 2018 was a nightmare for many state residents.   

Deutsche Bank has somebody’s tax returns… guess whose. The bank has admitted that it has returns sought by the House Financial Services and Intelligence committees. Those returns likely belong to President Trump or members of his family.

Do plastic bag taxes or bans curb waste? Vox reviews the efforts of cities and states to use tax policy or regulation to reduce plastic bag use. While a straightforward ban may seem the most effective way to stop people from using plastic, Vox reports that a tax on all non-reusable bags, perhaps combined with an outright ban on some plastic, may be a better solution.

Oregon’s big kicker.  The state’s taxpayers will get a jaw-dropping $1.6 billion tax rebate next year. An unexpected surge in personal income tax revenue in the past few months increased the state’s initial estimated rebate of $1.4 billion. But state economists also warned that Oregon’s long-term outlook shows “cracks” due to risks of slowing growth from the ongoing US trade war with China and other countries.

Alaska’s marijuana industry worries about taxes. Marijuana prices have fallen, making it hard for producers to pay the state’s $50 per ounce cannabis tax. Of states that legalized recreational marijuana, Alaska is the only one that relies solely on a fixed dollar tax on growers.

September 10—Law and Macroeconomics: Using Regulation to Combat Recessions. At next week’s TPC event at the Brookings Institution, Yale Law School Professor Yair Listokin will argue that regulation can respond rapidly to the next economic crisis Listokin will present the key findings of his research, and panelists will address how the law stimulates aggregate demand, and how it can complement traditional fiscal and monetary policy during an economic downturn. Register here

Congress is not in session. The Daily Deduction will return to its regular schedule on Monday, September 9. 

For the latest tax news, subscribe to the Tax Policy Center’s Daily Deduction. Sign up here to have it delivered to your inbox weekdays at 8:00 am (Mondays only when Congress is in recess). We welcome tips on new research or other news. Email Renu Zaretsky at dailydeduction@taxpolicycenter.org.

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