During a recent speech at the Detroit Economic Club, former President Donald Trump proposed partially renewing a tax policy in effect prior to the Tax Reform Act of 1986 that allowed taxpayers to fully deduct interest expense on auto loans.
Earlier this week, Vice President Kamala Harris, campaigning in Nevada, endorsed exempting tips from the individual income tax. This follows former President Donald Trump’s proposal last month to do the same.
Former President Trump trotted through Washington last week leaving a trail of policy proposals behind him. Two revenue proposals are worth noting.
The Senate Finance Committee held an important subcommittee hearing this week, “Closing the Tax Gap: Lost Revenue from Noncompliance and the Role of Offshore Tax Evasion.” The “tax gap,” which is the difference between the amount of tax rightfully owed by US taxpayers and the amount of tax actually paid, is not small.
President Biden’s first signature legislative accomplishment, the American Rescue Plan Act (ARPA), is now law. Nearly $1.2 trillion in fiscal aid will pour into the economy before October, and another $700 billion will be doled out over the next four years. As one of us has written previously, $1.9 trillion is a significant underestimate of the plan’s total cost if temporary expansions of several tax credits are permanently extended. The largest of these temporary policies is the expanded child tax credit (CTC), touted by Democrats as a boon to low- and middle-income households. In addition to being costlier than the sticker price, a permanent CTC expansion, a goal expressed by many Democratic lawmakers, would have the unintended consequence of reducing employment.
