Reactions to the Trump Tax Plan

As noted in yesterday’s summary, the basic outline of the Trump Administration’s tax plan is largely similar to the Trump campaign proposals, with fewer details and with one notable shift toward the House Blueprint’s approach – the move toward territoriality. The table below shows how this latest plan compares to the House Blueprint and the Trump 2016 campaign plan.

In the press conference to announce the “broad-strokes” plan, both Treasury Secretary Mnuchin and National Economic Council Director Cohn said that they were in agreement with members of Congress over the four driving goals of tax reform – grow the economy and create millions of jobs, simplify the tax code, provide tax relief to American families, especially middle-income families and lower the business tax rate from one of the highest in the world to one of the lowest. Continue Reading

Update: Trump Administration Officially Announces “Massive Tax Cuts” in One Page Proposal

Treasury Secretary Steve Mnuchin and National Economic Council Director Gary Cohn announced the Trump Administration’s tax plan in “broad-strokes” at a White House press conference this afternoon. The proposal is in line with what we predicted earlier today, with a handful of changes and a bit of additional detail. A more detailed comparison between what was announced, Trump’s campaign proposals and the House Blueprint will follow.  For now, here is a brief summary of what we heard:

Business Taxes

  • Corporate tax rate reduced to 15%
  • Pass-through business income also taxed at 15% (with rules to prevent individuals from flowing personal income through pass-throughs to secure the lower rate)
  • Repeal the corporate AMT?
Continue Reading

President Trump To Announce Tax Reform Principles

The Trump Administration is expected to announce its tax reform plan during a 1:30 PM press conference at the White House today. The Administration is boasting that the tax plan will be “the biggest tax cut and the largest tax reform in the history of our country.” We will be covering the press conference, so stay tuned for our summary and analysis of what is proposed. In the meantime, here are our predictions for what we may see:

  • Corporate tax rate reduced to 15%
  • Pass-through business income also taxed at 15%
  • Repeal the corporate AMT
  • Deemed repatriation of accumulated offshore earnings taxed at 10%
  • No destination-based cash flow tax
  • Shift toward territoriality?
Continue Reading

Tax Reform and Revenue Raisers

One of the biggest challenges facing lawmakers in the current tax reform process is finding a way to reduce headline tax rates in a revenue neutral way. Some revenue raisers (like eliminating itemized deductions) would raise significant revenue and simplify the tax code. Other revenue raisers come at the cost of increased complexity, at least in the short term (e.g., implementing a federal VAT or a new carbon tax). Closer inspection of ideas on the table reveals that politically popular reforms are not necessarily the largest revenue raisers. For example, there seems to be bipartisan support for taxing carried interest as ordinary income (more on that here), a relatively small revenue raiser. Continue Reading

Mnuchin: Tax Reform Timing Likely to Slip and Other Hints at the Administration’s Thinking

Treasury Secretary Steven Mnuchin told the Financial Times yesterday to expect tax reform to slip past the August recess, stating that the previously announced timeline was “highly aggressive to not realistic at this point.” Mr. Mnuchin’s interview touched on other areas of tax reform as well, confirming that the Administration has not ruled out the DBCFT (and the ~$1 trillion of revenue it would purportedly raise) while implying that the Administration is also considering alternative revenue raisers.  When asked how the Administration would ensure tax reforms were deficit-neutral, Mr. Mnuchin also stressed the importance of economic growth in generating revenue, implying that the Administration may lean on dynamic scoring to meet the reconciliation process’s budget neutrality requirements. Continue Reading

A Future for FATCA?

Certain aspects of the Foreign Account Tax Compliance Act (“FATCA”), the revenue-raising portion of the 2010 stimulus bill known as the HIRE Act, have been a continuing source of controversy since its inception. A spate of recent criticism and introduced legislation raises the question whether FATCA will survive if any tax reform proposals are enacted. For example, on April 5, Senator Rand Paul (R-KY) and Representative Mark Meadows (R-NC 11th) sent an open letter to the Treasury Secretary and the Director of OMB outlining administrative steps that the Trump administration could take to halt, or at least severely slow, the enforcement of the law. Continue Reading

NY State RETT Expansion Not Included in Final New York Budget

Last month we wrote about a proposal included in New York State Governor Andrew Cuomo’s 2017-2018 budget that would have expanded the New York State Real Estate Transfer Tax (“NY State RETT”) to cover transfers of minority interests in certain entities. Late last week New York lawmakers reached a final deal on the budget that excludes this provision. The final revenue bill can be found here (see part JJ – what was once the proposed NY State RETT expansion is now “Intentionally Omitted”). It passed the Senate and Assembly over the weekend and is expected to be signed by the Governor today. Continue Reading

The DBCFT, Anti-Avoidance Rules and a Cartoon about Sandwiches

Earlier this week, Kyle Pomerleau of the Tax Foundation published an article highlighting the effects of the destination-based cash flow tax on the number and complexity of anti-avoidance rules otherwise required to prevent base erosion in a territorial system.  You can read the article here. On a less serious note, Vox came out with an article that explains the impact of a destination-based cash flow tax with a cartoon about sandwiches. We enjoyed both articles and thought you might too. Continue Reading

Sanders/Schatz Tax Reform Bill: A Recent Data Point from the Democrats

While House Republicans could use the budget reconciliation process to pass tax reform without the need for Democratic support, leaders in the Senate have indicated a desire for bipartisan reform. White House press secretary Sean Spicer’s statement earlier this week on the tax reform process also suggests that input from the Democrats may be relevant.

With that in mind, we thought it would be useful to highlight a bill introduced in the Senate by Senators Bernie Sanders (I-VT) and Brian Schatz (D-HI) – the “Corporate Tax Dodging Prevention Act of 2017.” A companion bill was introduced in the House of Representatives by Representative Jan Schakowsky (D-IL). Continue Reading

It’s Not Just Us – State Governments are Waiting for the Details of Tax Reform Too

Yesterday New York State Governor Andrew Cuomo floated the possibility that New York State will pass its budget in two parts this year – with an initial extender of last year’s budget, followed by a full budget later this year once the impact of Trump’s proposed spending cuts on state revenues become more clear. This serves as a reminder that although the focus right now is on the federal budget and federal tax reform, state budgets and state tax systems are inextricably linked with the federal system.  Notably, and as the Tax Foundation highlighted in a recent publication, most states piggy back their tax code to the federal tax code, so any changes made to federal definitions (such as the definition of adjusted gross income) would influence the revenue that states collect. Continue Reading