Category: TaxJusticeBlog

Keep an eye on state estate and inheritance tax debates in 2017. Our newly updated policy brief explains the mechanics, history, and current status of state estate and inheritance taxes, and how states can adapt or improve them.

Debates over estate and inheritance taxes in the states will be important barometers of at least three major questions:

Are state legislators committed to promoting equality of opportunity? Estate and inheritance taxes are two of the most progressive revenue options available to states, applying only to the very wealthiest estates while protecting family farms and small businesses. As such, they are an important tool for states that wish to equalize opportunities and build broad prosperity for all their residents. Unfortunately, the most recent state developments have worked in the opposite direction. New Jersey legislators, for example, voted just this year to phase out their estate tax entirely by 2018 as part of a regressive tax package skewed to the benefit of wealthy families.

Will states step up to the challenge of taking on more responsibility in an era of likely federal retrenchment, or allow the whims of Congress to determine their fates? State and federal estate tax laws worked in harmony for about 75 years, as most states designed their estate taxes to match a federal credit so that the revenue from breaking up the country’s largest fortunes was shared between them. When federal lawmakers phased out that credit between 2001 and 2005, however, states had to decide whether they wanted to continue playing a part in that effort. Most states declined to act, resulting in only 18 states currently having estate or inheritance taxes, many of which are still tied to federal statute in some way. If Congress moves to further weaken or repeal the federal estate tax, the responsibility will fall even more on states. With possible major federal budget cuts also likely harming states, estate tax fights could set the tone for whether states will passively accept such harmful federal changes or make an effort to take matters into their own hands.

Will our communities be strengthened by increased investments in education, health care, and public safety made possible through this progressive revenue source, or weakened by single-minded devotion to tax cuts that undermine those investments? States play a crucial role in paying for the education, health care, public safety, and infrastructure that build strong communities and economies. Estate and inheritance taxes are rarely major portions of state budgets, but nonetheless represent significant revenue streams that promote these values. States that wish to protect and strengthen their communities and economies will have the opportunity to show it as these estate and inheritance tax debates proceed.

Whether you’re looking for connection with loved ones over the winter holidays, escapism during trying times, or gift ideas for policy wonks and others in your life, the ITEP list has something for you! Please see below for what our staff members are into this year:

Read Predictably Irrational: The Hidden Forces That Shape Our Decisions by Dan Ariely
Who isn’t in the mood for some behavioral economics this holiday season? This year I’m revisiting Ariely’s work that in an entertaining, accessible manner explores human motivation–which, as he finds, is often irrational. – Aidan Russell Davis

Watch The West Wing and Listen to The West Wing Weekly Podcast
For those not keen on the incoming administration, watching The West Wing may provide a needed escape into a world of a more humorous and progressive presidential administration. If you want to dig deeper into the show, there is a new weekly podcast that provides thoughtful commentary on each episode and includes guest appearances by people who worked on the show and in politics. You might also find it interesting to skip to Season 2 Episode 20 in the TV show, where the West Wing staff run into trouble with the organization Americans for Tax Justice, a group inspired by a certain real life tax advocacy group you may be familiar with. – Richard Phillips

Watch 13TH
If you haven’t watched it already, take an hour and a half over your winter break to watch Ava Duvernay’s 13TH (a reference to the 13th Amendment of the U.S. Constitution, which outlawed slavery), a documentary film that explores mass incarceration in the United States, and its disproportionate and pernicious effect on the African American community. The film traces how the U.S. prison population exploded over the last century while simultaneously showing how federal policy funneled billions of dollars to the prison industrial complex, creating financial incentive for the U.S. to have the world’s largest prison population. For-profit prisons continue to find ways to profit from the penal system, including GPS home-based incarceration and detention centers (a euphemism for prisons) for undocumented immigrants. 13TH is available to stream on Netflix. – Jenice R. Robinson 

Listen to the 99% Invisible Podcast with Roman Mars
No matter your interests, you should be able to find at least a few episodes of this podcast about “all the thought that goes into the things we don’t think about” that you’d enjoy. One of my favorites is titled U.T.B.A.P.H. – which is all about new uses for buildings that Used To Be a Pizza Hut. Other memorable episodes explore topics such as the invention of elevators, the I Heart NY trademark, and the art of naming. But I’ve always been particularly impressed by how the podcast manages to keep my attention even when exploring topics that I never thought I was interested in, like barcodes – Carl Davis

Listen to the Invisibilia Podcast with Lulu Miller, Hanna Rosin, and Alix Spiegel
Carl and I are apparently on parallel podcast wavelengths these days! Fans of accessible and fascinating science stories like those in Radiolab will enjoy NPR’s podcast Invisibilia if they’re not already doing so. It focuses on “the invisible forces that control human behavior – ideas, beliefs, assumptions and emotions” – and is delightfully hosted by three women (Lulu Miller, Hanna Rosin, and Alix Spiegel), who even include a dance party at the end of many episodes. Season 1 was excellent and after a long break, Season 2 was even better this year. – Dylan Grundman

Gather Wisdom from Elder Social Justice Advocates at The Veterans of Hope Project
Vincent Harding was a scholar, historian, and activist working to build an America that lived up to its own vision of itself. Among his work, he cofounded The Veterans for Hope Project — a collection of interviews with educators, religious leaders, community activists, and artists who have worked for decades to advance freedom, peace, and human rights in the U.S. and abroad. Their perspectives and wisdom can be very grounding at a time of political uncertainty.  – Lisa Christensen Gee

Read Mothership: Tales from Afrofuturism and Beyond, edited by Bill Campbell and Edward Austin Hall
Engage in some productive escapism with this collection of science fiction stories featuring minority authors, characters, and issues. Short science fiction is a genre I hadn’t explored before and turned out to be just the ticket for these times. These stories challenge the reader to think flexibly in order to adjust to a wildly different setting and context for each story, a helpful exercise for those of us feeling disoriented in these trying times. With entries by Junot Diaz and many others, and a wide range from pulpy action stories to intellectual thought experiments, some of these stories are sure to stick with you well after reading. – Dylan Grundman

Listen to A Tribe Called Quest’s new album, We Got it From Here… Thank You 4 Your Service
Somehow simultaneously nostalgic and prescient, Tribe’s first (and last) new album in 18 years is excellent and timely. – Dylan Grundman

Listen to The Uncertain Hour, podcast from the producers of NPRs Marketplace
This six episode docupod series (one story told over many episodes, think Serial) is produced by the folks at Marketplace’s Wealth and Poverty Desk. Reporter Krissy Clark takes an in-depth look at “welfare as we don’t know it.” In post-fact America, a podcast that is driven by the idea that we know the least about the things we feel most strongly about seems especially appropriate. Listen in order. – Misha Hill

Listen to 2 Dope Queens, podcast from comediennes Phoebe Robinson and Jessica Williams
If you want to escape from reality, but not go too far, this stand-up style podcast is for you. Phoebe and Jessica invite a rotating cast of diverse comics to perform in front of a live audience. They talk about everything from the obsession with dad bod to frustration with white people asking to touch their hair. While the range and style of comedy is broad, most of the comics manage to be socially conscious, politically aware, body positive, gender inclusive, and hilarious. But it’s definitely not safe for kids. It’s heavy on adult content and language. – Misha Hill

Listen to the Death, Sex and Money Podcast with Anna Sale
This podcast deals with “the big questions and hard choices that are often left out of polite conversation.” You never know what to expect from week to week topic-wise, but you can always count on a thought provoking conversation that will leave you with fodder for your next dinner party conversation. It also fosters an unexpected sense of community via listener generated lists such as a google doc with favorite short stories and an “Anthems of Change” playlist and through encouraging listener input on topics and feedback on shows. – Meg Wiehe

Happy Holidays! If you enjoy any of our selections let us know! Write to jenice@itep.org or find us on twitter at @iteptweets

This week we are bringing you good cheer about several states taking the taxation of online sales into their own hands, budget tidings from Oklahoma, Alaska, and Virginia, and the gift of new taxes in Philadelphia and DC.

Enjoy the Rundown? Please consider supporting ITEP’s work with a donation.

– Meg Wiehe, ITEP State Policy Director, @megwiehe

• States have long been waiting for Congress to act on the Marketplace Fairness Act, which would allow them to collect sales taxes that are already legally due on online purchases from multi-state retailers such as Amazon.com. With no progress on that front, states such as Colorado have attempted to take action by requiring retailers to collect and remit – or at least report to the consumer – taxes due. These state-based efforts received a boost recently when the U.S. Supreme Court opted not to hear a challenge to Colorado’s law. The momentum may continue to grow. A rule in Tennessee is moving closer to implementation; Virginia‘s Gov. McAuliffe is pushing for such a measure to help plug that state’s revenue shortfall, and Alabama is looking to mimick the Colorado approach. Other states, including Nebraska and South Dakota, may follow suit as revenue experts identify uncollected online sales taxes as a contributing factor to those state’s revenue woes as well.

• Oklahoma‘s state finance secretary announced that the state did not experience enough revenue growth to trigger another income tax rate cut (this time from 5 to 4.85 percent). The possibility of triggering yet another rate cut, despite a projected budget gap exceeding half a billion dollars, rightly worried many Oklahomans.

• Alaska Gov. Bill Walker released his FY 2018 budget without any broad-based revenue options. Rather, it includes a gas tax increase, suggested restructuring of the state’s Permanent Fund, and an $890 million revenue gap. Walker anticipates working with the legislature to fill the remaining revenue shortfall.

• Virginia Gov. McAuliffe’s budget amendments use a variety of means to start addressing the state’s $1.5 billion shortfall but rely heavily on the state’s rainy day fund, which could put the state in a worse bind when the next recession hits.

• Soda purchasers in Philadelphia, Penn., will ring in the New Year with a new tax. A city judge dismissed the beverage industry’s attempt to block the city’s planned tax on sugary and sweetened beverages, despite claims that the tax is unconstitutional on the grounds of duplicate taxation.

• An audit of Tax Increment Financing (TIF) projects in Nebraska is strengthening calls for reform of how localities are using the tax break, which is intended to spur local economic development but is carried out with “remarkably little monitoring and oversight” and can push property taxes upward.

• The push continues, largely from conservation groups, to raise Iowa‘s state sales tax 3/8ths of a cent to support water quality improvements.

• One legislator in Tennessee is advocating for diverting sales tax revenue to local governments to help them deal with budget woes. The state could consider instead cancelling its decision from earlier this year to phase out the Hall Tax on dividend and interest income for high-income Tennesseans, which is shared with local governments and is one of the few progressive pieces of the state’s tax code.

• The District of Columbia City Council has passed a paid family and medical leave policy that allows all workers in the district access to time off for illness, child-bearing, and assistance with family medical issues. The system will be funded much like unemployment insurance, via a payroll tax that goes into a district-wide pool.

What We’re Reading…

• CBPP’s new report, How State Tax Policies Can Stop Increasing Inequality and Start Reducing It, explains how income disparity has reduced opportunity and weakened the overall economy, and the steps policymakers can take to reverse that trend.

• In a new report the Pennsylvania Budget and Policy Center proposes a “Fair Share Tax Plan” that explores ways in which the state can raise revenue while sparing most Pennsylvanians.

If you like what you are seeing in the Rundown (or even if you don’t) please send any feedback or tips for future posts to Meg Wiehe at meg@itep.org. Click here to sign up to receive the Rundown via email.

In the Tax Justice Digest we recap the latest reports, blog posts, and analyses from the Institute on Taxation and Economic Policy (ITEP). Here’s a rundown of what we’ve been working on lately. 

But first, please consider supporting our work with a donation to ITEP this year.  It is more critical than ever for our research to inform tax policy debates in Washington, DC and in statehouses across the country next year.

Defending the Estate Tax
Both President-elect Trump and congressional Republicans have proposed major tax cut plans, and one of the many areas where the two plans agree is repealing the estate tax. Such legislation would widen wealth inequality and persistent deficits. Read ITEP’s new report: The Federal Estate Tax: A Critical and Highly Progressive Revenue Source to understand the importance of the estate tax or read our summary blog post if you are short on time.

ICYMI: 3 Lessons about Tax Policy from the Star Wars Universe
Even in the universe of Jedi, Death Stars and Ewoks, tax policy plays a surprisingly important role in driving the events of the day. In anticipation of the release of the newest Star Wars movie, we just wanted to share once again some of the little-known tax policy lessons from the Star Wars universe. Read the full blog post.

STATE TAX NEWS

Rise Up Kansas Coalition Calls for Comprehensive Tax Policy Reform
The “Rise Up Kansas” coalition includes advocacy organizations representing educators, transportation contractors, state employees, early childhood providers, and tax policy experts who want to see an end to the state’s budget crises and tax policies that benefit the few at the expense of critical public investments. To read more on the coalition efforts check out ITEP’s Lisa Christensen Gee’s blog post.

State Rundown: An Upheld “Amazon tax” Law and an Emphasis on Revenue
This week we are bringing you news about the U.S. Supreme Court’s decision on Colorado’s “Amazon tax” law, another look at a vehicle miles traveled tax in Massachusetts, possible tax reform proposals in New Hampshire and Pennsylvania, and emphasis on the need for tax revenue in Arizona, Ohio, and Wyoming. Read the full Rundown.

If you have any feedback on the Digest or tax stories you’re watching that we should check out too please email me rphillips@itep.org

For frequent updates find us on Twitter (ITEP), Facebook (ITEP), and at the Tax Justice blog.

This week we are bringing you news about the U.S. Supreme Court’s decision on Colorado‘s “Amazon tax” law, another look at a VMT tax in Massachusetts, possible tax reform proposals in New Hampshire and Pennsylvania, and emphasis on the need for tax revenue in Arizona, Ohio, and Wyoming.

If you appreciate the news we bring you each week, please consider a year-end donation to ITEP.

— Meg Wiehe, ITEP State Policy Director, @megwiehe 

• Colorado‘s “Amazon tax,” which requires out-of-state retailers to collect sales taxes for internet purchases or complete more paperwork and remind purchasers that they owe taxes, stands after the U.S. Supreme Court refused to take up a case challenging the law. Don’t be surprised if other states begin to follow suit.

• Despite setbacks, a vehicle miles traveled (VMT) tax remains on the table in Massachusetts as a potential long-run funding source for the state.

• New Hampshire‘s upcoming legislative session will likely see additional business tax cuts and an income tax proposal coupled with property tax elimination and business tax changes.

• Some think that property tax reform will be readdressed in Pennsylvania this session. A collection of activist groups are pushing to increase sales and income taxes while completely eliminating the state’s property tax.

• In Arizona, town hall participants agreed that the bias in favor of tax cuts has gone too far, so much so that it has hurt the state’s economic future. They also concurred that the state could do a better job investing in Arizonans.

• Editorial boards point to the value of tax revenue: Ohio Beacon Journal’s editorial board connects the dots between the state’s financial woes and history of excessive tax cuts. And Wyoming‘s Casper Star Tribune encourages lawmakers to revisit the recommendations for revenue raising and structural tax reform.

What We’re Reading…

• A recent report from NASBO shows that half of the states have experienced revenue shortfalls in the first months of this fiscal year, shaking up plans for upcoming legislative sessions and putting increased pressure on states that have been struggling with budget deficits for some time.

• With illustrations from Kansas, Texas, and California, former U.S. Secretary of Labor Robert Reich explains why the theory of low taxes, low regulations, and low wages doesn’t work.

• Oklahoma Policy Institute’s David Blatt warns that the Legislature may be setting themselves up for another ill-timed income tax cut.

• A new report by the West Virginia Center on Budget and Policy examines the state’s chronic poverty and provides recommendations to address it. 

If you like what you are seeing in the Rundown (or even if you don’t) please send any feedback or tips for future posts to Meg Wiehe at meg@itep.org. Click here to sign up to receive the Rundown via email.

And, don’t forget your favorite tax wonks at ITEP in your year-end giving.  Consider supporting our work with a donation  this year.

A statewide coalition is calling for the end of the Brownback tax experiment in Kansas with the release of its 2017 comprehensive plan for tax reform.

The “Rise Up Kansas” coalition includes advocacy organizations representing educators, transportation contractors, state employees, early childhood providers, and tax policy experts who want to see an end to the state’s budget crises and tax policies that benefit the few at the expense of critical public investments.

The coalition proposes the following: 

• End the “March to Zero,” stopping the eventual elimination of the individual income tax and preventing future budget crises.

• Re-instate the top income bracket of 6.45% for single filers earning $40,000 a year or more ($80,000 for married couples), turning the tax code “right side up” so everyone chips in.

• Close the “LLC loophole,” cleaning up the tax code and ensuring it’s not benefiting a select number of Kansans at the expense of the common good by ending the ability for taxpayers to shield business pass thru income from taxation.

• Hold the Kansas Highway Fund harmless for the first time since Gov. Sam Brownback took office by temporarily diverting the 4/10 of a cent sales tax currently dedicated to the State Highway Fund to the State General Fund for a period of three years while also pairing the sweep with an equivalent increase in the state gas tax of $0.11 per gallon.

• Reduce the state sales tax on food by 1.5 percent, taking the rate from 6.5 percent to five percent.

ITEP analysis shows that the proposal would restore approximately $820 million to the state’s general revenue fund while putting $100 million back into the pockets of Kansas families by reducing taxes on groceries.

Gov. Brownback’s recent proposals for addressing the state’s ongoing budget shortfall have included shifting money from the transportation to the general fund, deepening cuts to higher education, K-12 public schools, and community colleges, not making required pension contributions, and selling tobacco settlement dollars.

In contrast, the Rise Up Kansas coalition is calling for long-term solutions to the address the state’s long-term fiscal woes, cautioning lawmakers that “[t]he only proposal lawmakers should be willing to accept is one that will restore our state’s financial stability and allow us to once again invest in our future.”

This week we are bringing you news about states seeking revenue–Alaska, South Dakota, and Utah all weigh the creation of or increases to state personal income taxes; the need, and in some cases the will, for transportation funding in West Virginia, Indiana, Montana, and Louisiana; and revenue shortfalls in Florida, Ohio, Oregon, and Kansas.

— Meg Wiehe, ITEP State Policy Director, @megwiehe

• As Alaska legislators are gearing up for a challenging session, Gov. Bill Walker works to steer the discussion away from oil taxes and more toward a structural fix that includes broad-based taxes. The Walker administration is working to develop an income tax system less closely linked to the federal tax.
• South Dakota‘s heavy reliance on the sales tax threatens to inhibit the state’s ability to invest in vital state services, as revenues from that tax continue to struggle and other revenue options are limited. One leading businessman is proposing that it is “long past time” to discuss creating an income tax in the state to better diversify its revenue sources.
• A coalition in Utah has announced its plans to pursue a personal income tax increase to fund education on the ballot in 2018.
• West Virginia’s Road Fund is down $49 million over three years due to the state’s annual recalculation of the average wholesale gas price. The latest trigger comes amidst mid-year cuts to K-12 education and a shortfall expected to exceed $400 million.
• Speaking of funding for transportation… it is a top legislative priority for Indiana lawmakers. There is less consensus around the source of new funds. Ideas being considered include new tolls, increasing the cigarette tax, raising the gas tax and indexing to inflation, and reallocating existing state resources. Gas tax increases are also being considered in Montana and Louisiana.
• Revenue shortfalls: Economists in Florida are now projecting a budget shortfall for the upcoming budget cycle that could hit $1 billion. In Ohio, state revenues continue to lag behind estimates. Gov. John Kasich warns that the state is on the verge of a recession.
• With the failure of ballot measure 97, Oregon faces a daunting $1.7 billion deficit. Gov. Kate Brown’s budget released last week relies on deep cuts, funds withheld from many social services and universities, and some new revenue through increased taxes on tobacco, liquor, hospitals, insurers, and some corporation owner’s incomes.
• After revising revenue forecasting in the state, Kansas revenues in November met projections for the first time in months. However, they didn’t make a dent in the $350 million budget gap that still remains.

What We’re Reading…

• The Lincoln Land Institute has a new-and-improved interactive website to learn about Significant Features of The Property Tax in your state and how they compare to other states and the U.S. generally.
• New analysis from economists Piketty, Saez, and Zucman’s shows how an expanding U.S. economy over the past 3.5 decades has left half of all Americans behind.

With united Republican control of the White House and Congress, 2017 may be a year that ushers in huge tax cuts for the wealthy and corporations. Both President-elect Trump and congressional Republicans have released plans for comprehensive tax reform, and one of the many areas where the two plans agree is repealing the estate tax. Such legislation would widen wealth inequality and persistent deficits.

Researchers have estimated that the wealthiest 1 percent of Americans hold 42 percent of the nation’s wealth, up from 28 percent in 1989. The estate tax works to mitigate inequality by ensuring that large accumulations of wealth aren’t passed from generation to generation without being taxed. There is no good reason an inheritance should result in a tax-free windfall to heirs while people who earn their wealth are taxed in full.

Eliminating the estate tax would compromise the government’s ability to make public investments that grow the economy and to fund public programs that combat poverty and inequality. The Joint Committee on Taxation estimated that repealing the estate tax would cost $269 billion over 10 years. The loss of this revenue (especially in combination with the slew of other tax cuts proposed by Trump and House Republicans) would likely mean cuts to programs that largely benefit low- and middle-income households, tax increases for those with lower ability to pay, increased federal deficits, or some combination of the three.

As one of the nation’s most progressive revenue sources, the estate tax affects only the wealthiest estates. ITEP’s new report shows that in 2015, the tax was levied on only 0.2 percent of all estates. This means that of the deaths that occurred in 2014, 99.8 percent resulted in no federal estate tax liability in 2015 (estate taxes are generally paid in the year after death). The report also shows that the portion of estates subject to the federal estate tax in most states was 0.1 to 0.2 percent in 2015, with the highest being 0.4 percent in California. While the tax historically applied to 1 to 2 percent of estates on average (and in some years above 5 percent), legislative actions increasing the exempted amount of an estate’s wealth have led to the tax having a far narrower reach in recent years. Under current law, estates with a value of less than $5.45 million (or $10.9 million for married couples) won’t owe a penny in estate tax for 2016. In contrast, the exemption throughout most of the 1990s was $600,000 per spouse.

Even though the estate tax affects so few people, supporters of its repeal claim that the tax has disastrous effects on the economy and on people inheriting small family farms or businesses. These claims are tenuous at best. There is no consensus among economists that the estate tax harms the economy, very few small farms and businesses are touched by the tax, and the law contains provisions to minimize any hardship on those farms and businesses that do owe tax. The argument that the tax constitutes double taxation (because the deceased owners of estates already paid income and payroll taxes) is also weak, considering that a large portion of the estates subject to the tax is comprised of unrealized capital gains that have never been taxed. Due to a loophole in the income tax code known as “stepped-up basis,” no income tax is ever paid on the increase in value of assets that are held until death. Without the estate tax, large amounts of capital would go completely untaxed.

Instead of repealing the estate tax, it should be strengthened in order to raise additional revenue and prevent further increases in wealth inequality. Both President Obama and Senator Bernie Sanders have put forth proposals to restore the exemption level in effect in 2009 ($3.5 million per spouse) and to increase the top rate. The President’s proposal would raise $161 billion over 10 years, and Senator Sanders’ bill would likely raise more because he proposes graduated rates ranging from 40 to 60 percent, depending on the size of the estate.

In the near term, efforts will likely need to be focused on protecting the current estate tax from complete repeal. Another critical area for reform, especially if the estate tax is repealed, is closing the stepped-up basis loophole. The estate tax serves as a backstop to the income taxes that are avoided because of this rule. In the unfortunate but increasingly likely case that the estate tax is repealed, closing this loophole (by taxing capital gains at death) will become all the more important.

For additional information on the estate tax, see ITEP’s new report “The Federal Estate Tax: A Critical and Highly Progressive Revenue Source” or our related one-page fact sheet “Preserving the Estate Tax.”

In the Tax Justice Digest we recap the latest reports, blog posts, and analyses from Citizens for Tax Justice and the Institute on Taxation and Economic Policy. Here’s a rundown of what we’ve been working on lately.

About President-Elect Trump and Carrier Corp.’s 1,000-Jobs Deal
Where to start with this Carrier Corp. deal? Over a 15-year period, Carrier’s parent company paid an average 10 percent effective federal tax rate: that’s less than one-third of the statutory rate. To boot, the company likely is avoiding taxes on a $29 billion offshore cash hoard. In spite of this, the incoming Trump Administration has decided more tax breaks are a fair ransom for the company’s paper-thin promise to keep 1,000 jobs in the United States. ITEP Senior Fellow Matthew Gardner wrote two recent blog posts about this corporate claptrap.

Beyond the PR Spin: Carrier Corp. Holds American Jobs Hostage to Tax Breaks

A Few Things to Consider Before Giving Away the Store to Carrier Corp.

To learn more about how tax incentives for corporations primarily help corporations and their shareholders, read Tax Incentives: Costly for States, Drag on the Nation

Tax Cuts for the Rich Are the Main Feature, Not a Bug, of the Trump Tax Plan
Incoming Treasury Secretary Steven Mnuchin made waves this week with his announcement that the tax plan proposed by his boss, President-elect Donald Trump, will not cut taxes for the wealthy, promising “no absolute tax cut” for upper-income families. This statement flies in the face of every available analysis of Trump’s tax plan. Read Matt’s blog diving deeper into the details of Mnuchin’s statement and Trump’s tax proposals.

Taxing $2.5 Billion in Offshore Profits: What’s Ahead for Repatriation?
Multinational companies collectively are hoarding $2.5 trillion in profits offshore and avoiding up to $718 billion in U.S. taxes. Lawmakers on both sides of the aisle as well as the incoming Trump Administration view this offshore cash as low-hanging, revenue-producing fruit, and it is likely that lawmakers will come up with a plan this year to incentivize companies to “repatriate” this cash. Problem is that the proposals likely to gain traction are ill-advised, patchwork fixes. Read ITEP analyst Richard Phillips’ blog on repatriation, or if you have a few more minutes, read ITEP’s comprehensive guide to repatriation proposals.

We Count at Least Nine Problems with Trump’s Infrastructure Proposal
In theory, expanded investments in our nation’s infrastructure could generate wide support among the public and within Congress. Yet congressional negotiations on this issue have repeatedly broken down because of disagreements over how to fund those investments. Unfortunately, a flawed proposal for new funding put forth by President-elect Trump fails to offer a realistic path forward. Read ITEP’s new issue brief, Privatization, Waste, and Unfunded Projects: The Problems with Trump’s Infrastructure Proposal or read ITEP research director Carl Davis’s blog for a brief summary.

What Will Tax Reform Ultimately Look Like?
With something called “tax reform” moving full steam ahead in Congress, it not yet clear what exactly lawmakers mean by tax reform. Lawmakers are still struggling over fundamental questions such as whether tax reform should be revenue neutral and  bipartisan, and what the international tax system should look like. Read our blog exploring how these critical decisions might play out.

STATE TAX NEWS

State Tax Breaks for the Elderly Primarily Benefit the Wealthy, Drain State Coffers
No one wants to be poor in their golden years, and this is a likely reason that state tax breaks for the elderly are popular in multiple states. But an updated ITEP research brief finds that all too often, tax breaks for the elderly are poorly targeted and primarily benefit wealthier taxpayers. Read ITEP analyst Aidan Davis’s blog summarizing the brief.

The Road Ahead for State Tax Policy in 2017
While state and local elections didn’t receive as much national media attention as the presidential race, shakeups in statehouses will pave the way for significant tax policy debates in a number of states. In a recent piece, ITEP staff outlines states to watch in 2017

State Rundown: Figuring out How to Fund Roads, Millionaire’s Tax, Etc.
This week’s State Rundown features news about transportation and infrastructure funding in Indiana, California, and South Carolina, next steps for New York‘s millionaire’s tax, moves toward comprehensive tax expenditure review in Ohio, continuation of the income tax reciprocity agreement between New Jersey and Pennsylvania, and efforts for tax change in Nebraska and Arkansas.

If you have any feedback on the Digest or tax stories you’re watching that we should check out too, please email me rphillips@itep.org 

Sign up to receive the Tax Justice Digest 

For frequent updates find us on Twitter (CTJ/ITEP), Facebook (CTJ/ITEP), and at the Tax Justice blog.

Incoming Treasury Secretary Steven Mnuchin made waves this week with his announcement that the tax plan proposed by his boss, President-elect Donald Trump, will not cut taxes for the wealthy, promising “no absolute tax cut” for upper-income families.

This statement flies in the face of every available analysis of Trump’s tax plan, from the truly huge high-end tax cuts Trump proposed during the 2015 primary battle to the trimmed-down high-end tax cuts he proposed earlier this fall. A September 2016 analysis by our partner organization Citizens for Tax Justice found that Trump’s plan would cut taxes for the best-off 1 percent of Americans by an average of over $88,000 if fully implemented in 2016. The CTJ analysis also showed that by any standard measure, the tax cuts going to the top 1 percent under the revised Trump plan would far exceed the cuts going to any other income group: the top group’s tax cut clocked in at 5.1 percent of that group’s personal income, more than double the tax break going to any other group. All of which is to say that giving an “absolute tax cut for the upper class” is the main feature of Trump’s plan—rather than, as Mnuchin implies, a bug to be fixed—and that only a complete rewrite of the Trump tax plan could possibly make Mnuchin’s claim true.

A comment from Trump advisor Stephen Moore suggests (disturbingly) that Mnuchin may have simply misunderstood, or mis-stated, the nuances of the Trump plan. Moore told the Wall Street Journal that Trump’s plan “was designed so that the [itemized] deduction cap offsets the revenue loss from lowering the top tax rate on ordinary income from 39.6% to 33%.” Of course, this seems like a pretty arbitrary goal: why seek to achieve revenue neutrality between two discrete provisions of the Trump plan if you’re then going to lard on an assortment of other high-end giveaways, from estate tax repeal to ending the alternative minimum tax?

Unfortunately for Moore, it turns out that his explanation doesn’t hold water either. A new ITEP microsimulation analysis shows that even if the Trump tax plan was limited to dropping the top tax rate and capping all itemized deductions in the way Trump has proposed, the best-off 1 percent would still see, as a group, tax cuts averaging over $12,400 in 2016. Which means that there is simply no way that Mnuchin’s statement can be seen as anything but a outright falsehood when applied to Trump’s September tax plan.

It is, of course, possible that Mnuchin’s statement reflects Trump’s intention to once again completely rework his tax plan in the runup to the 2017 legislative session. But prior revisions of the Trump plan have only pared back its cost, without meaningfully changing the tax fairness impact of the plan. Trump and his advisers have consistently failed to identify enough loophole-closers to pay for his proposed reductions in the personal and corporate income tax rates. This strategy of enthusiastically answering the easy questions and dodging the hard ones is sadly all too familiar to observers of tax politics.

Unless President-elect Trump is now willing to abandon core features of his plan, such as dropping the top tax rate to 33 percent or repealing the estate tax, Mnuchin’s comments must be seen as either an admission that the next Treasury Secretary has a poor grasp of the nuances of tax policy, or that Mnuchin isn’t especially wedded to the truth.