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.
