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Who will benefit from a TCJA economic boost? The Congressional Budget Office (among others) estimates that the US economy will benefit, at least in the short run, from the Tax Cuts and Jobs Act. But TPC’s Ben Page and Bill Gale note that much of that benefit will end up in the pockets of foreign investors. If you look at the effect of the tax cuts on Net National Product (which measures the impact only on US incomes) instead of the more popular Gross Domestic Product (which measures total output), the net benefit of the TCJA is roughly zero.
Indexing capital gains for inflation. The idea keeps bubbling up in the Trump Administration, but TPC’s Len Burman says it continues to be a bad idea. In theory, Len says, taking inflation into account when imposing a tax makes sense. But in practice, the idea falls apart.
Oregon Governor Kate Brown continues pushing her tax cut. She may not have the votes, but she’s wants state lawmakers to convene on May 21. After next week’s state primary, a legislative joint committee plans to hold hearings on the governor’s plan. It would expand to sole proprietorships an existing tax break for other pass-through businesses such as partnerships and S corporations. The proposal could cut taxes for sole proprietorships by $11 million annually.
Will San Francisco voters raise taxes to fund schools? The city holds an election on June 5, and among the issues is Proposition G, an education parcel tax. The measure would allow the city to collect an annual levy of $298 per parcel of land for the next 20 years. Revenues would fund wage and benefit increases for teachers and education staffers, support more staff at high-needs schools, and finance investment in technology and digital learning. The tax may be too steep a price to bear for residential property owners, however, given the soaring cost of living in San Francisco.
More on Seattle’s head tax. The plan would raise $75 million from over 500 companies in the city. Firms with gross annual revenue of $20 million would pay an average of $500 for each full-time employee, with the money going for affordable housing and to battle homelessness. . Seattle Mayor Jenny Durkan opposes the plan: “We cannot tax our way out of this problem, we won’t have a big enough population to do it.” Other cities have tried much smaller head taxes with mixed results. From 1973-2014 Chicago taxed businesses with more than 50 employees at $48 per worker but Mayor Rahm Emanuel secured its repeal, calling the tax a “job killer.” Denver imposes a $48 levy for each worker who earns at least $500 a month.
On May 23 at TPC: Will the TCJA boost growth, or was it a missed opportunity? There is little agreement on the merits of the Tax Cuts and Jobs Act. Proponents claim it will substantially boost business investment and economic growth. Opponents claim it will raise the level of federal debt and is poorly designed to stimulate new private-sector investment. Almost five months into the new year, how do the predictions made last fall about the TCJA’s effects look? And how can Congress improve the tax code to promote economic growth? Join the TPC and the Kellogg School of Management for an in-depth discussion about the early evidence on economic growth and the prospects for growth from the new law. Register here or watch a live webcast.
If you’d like to tell us about a new research paper or have any comments about the Daily Deduction, TPC’s summary of the day’s tax news, write Renu Zaretsky at [email protected]. You can sign up here to receive the Daily Deduction as an email newsletter every weekday morning (Mondays only when Congress is in recess) at 8:00 am.