I believe that the current US tax code imposes drag on US economic growth and alternatives to the current system could result in an increase in the capital stock, a boost in worker productivity, and thus an increase in wages. This positive economic result would occur slowly over time as new investment is deployed and workers adopt to new opportunities.
The prospect of major tax reform that broadens the tax base and lowers tax rates has the residential housing industry in panic mode. The National Association of Realtors recently called the House tax bill “an outright assault on homeownership in America.” Separately, a study commissioned by the Realtors warns that comprehensive tax reform would result in an average drop in home values of 10%. But the reality is that the housing market will be fine if the House Republican tax plan is enacted.
On a bipartisan and bicameral basis, lawmakers have proposed legislation to allow (not require) states to collect sales tax on goods purchased from out-of-state sellers. The legislation is not a new tax but rather facilitates the collection of taxes already due.
The SALT deduction is the largest itemized deduction and one of the largest tax expenditures in the entire tax code. I estimate that its repeal would raise $1.4 trillion in new revenue over a decade. In the piece for The Hill, I calculated how to “recycle” that $1.4 trillion in a distributionally neutral manner by lowering tax rates and increasing the standard deduction.
The latest Republican tax reform framework promises to lower statutory rates and repeal scores of tax preferences. The centerpiece of the reform of the individual income tax is the repeal of the largest itemized deduction, which is for for state and local taxes. Repealing this deduction alone can finance a cut in the top tax rate to 35 percent and a reduction in other rates, preserve the tax code’s progressivity, substantially increase the number of taxpayers on the standard deduction, and cut taxes for half of all filers.
Hurricane Harvey hit Southeast Texas last month with tremendous winds and poured an overwhelming amount of rain over thousands of square miles of land. More than 185,000 homes have been damaged or destroyed in Texas, and property damage estimates start at $50 billion. More than 80 people lost their lives, and thousands of families will forever be affected by the storm’s devastation.
Last week, I had the privilege of being one of four witnesses invited to testify at the Senate Finance Committee’s wide-ranging hearing on reforms to the individual income tax. Sitting down the witness table from me was AEI visiting fellow Ramesh Ponnuru. Our testimonies approached tax reform from different vantage points. Ponnuru homed in on one tax policy — what he calls the “parent tax” — and made a clear case for the expansion of the child tax credit as a remedy. I gave a broader view of tax reform principles and the importance of broadening the tax base (that is, limiting deductions, exclusions, and credits).
In recent years, internet sales have grown by nearly 15 percent per year, compared to 4 percent per year for brick-and-mortar retail sales. Although e-commerce represents less than 9 percent of total retail sales, this shift in where we shop is eroding states’ sales tax base. Under the Supreme Court’s 1992 decision in Quill Corp. v. North Dakota, sellers without a physical presence in a state cannot be required to collect and remit that state’s sales tax. As a result, online sellers have an artificial competitive advantage over local brick-and-mortar sellers, who must collect sales tax from their customers. Congress needs to end this unfair tax advantage.
In a recent JAMA Pediatrics article on the correlation between e-cigarette use and subsequent cigarette smoking among adolescents and young adults, Dartmouth demographer Samir Soneji and his co-authors find that the probability of cigarette smoking at follow-up is significantly higher among all e-cigarette users than among individuals who never used a nicotine product. Based on this finding, they conclude that “strong e-cigarette regulation” by the federal, state, and local governments are needed to minimize the potential “future population-level burden of tobacco.” This conclusion is unwarranted based on the nature of their results.
Saturday marks the first birthday of the House GOP’s tax reform blueprint, “A Better Way: Our Vision for a Confident America.” Happy birthday, Tax Plan. To be honest, little man, when you were born you only got modest attention from those outside your immediate family. It was a busy time for the rest of us. We were watching Donald Trump clear the field of his fellow Republican candidates and were speculating about the likely fiscal agenda of Hillary Clinton.