The Trump administration has released its first full budget plan and it is indeed radical by Washington standards. For starters, it increases spending, but not as fast as the spendthrifts in D.C. would like. Naturally no one is happy. Dan Mitchell, a scholar at the Cato Institute and a friend of mine, has written a piece at International Liberty on "The Five Most Important Takeaways from Trump’s Budget." Here's a summary of his five main points: First, the budget isn’t being cut. Indeed, Trump is proposing that federal spending increase from $4.06 trillion this year to $5.71 trillion … [Read more...]

Is there anything better than a snow storm back home while you’re in sunny Florida, Arizona or St. Somewhere? How great is it looking at your iPhone weather app in flip-flops at cocktail hour smiling at the arctic blast settling in back home? Life is good, right? Makes one want to send a postcard home. On your way to the post office, you could also mail your tax-returns. In a perfect world--and yours is pretty good in this story--your taxes would be one flat rate; a postcard sized filing, simple enough that your big problem that morning is beating the piss out of your opponents in pickle … [Read more...]

The centerpiece of the House Republican tax reform plan is a border-adjustment tax (BAT) that would tax all imports and exempt all exports. The revenue generated from this new tax would be used to fund a reduction in the corporate income tax. Supporters of the BAT tax contend that it levels the playing since many countries already exempt their own exports and tax import via the value-added tax, but Dan Mitchell and Veronique de Rugy dispel that myth in a recent Wall Street Journal piece. The plan calls for dropping the top corporate tax rate to 20% from 35%, while exempting exports and … [Read more...]

Implementing a flat tax would allow America to end distortive double taxation schemes like the Death Tax, capital gains taxes, dividend taxes and more. Cato Institute Senior Fellow Dan Mitchell writes that without double taxation America's tax code would no longer "discourage capital formation by imposing a higher effective tax rate on income that is saved and invested (compared to the tax rate on income that is consumed)." Dan writes: Why would the economy grow faster if we got fundamental reform such as the flat tax? In part, because there would be one low tax rate instead of the … [Read more...]

With the epic failure of Paul Ryan's healthcare reform bill in the House , can the GOP get it together enough to pass tax reform? The editors of The Wall Street Journal write that prospects for a tax bill have gotten much harder. President Trump campaigned on breaking Washington gridlock, increasing economic growth and lifting American incomes. The health collapse undermines those pledges. The legislative failure is obvious, but less appreciated is that House Speaker Paul Ryan’s reform included a pro-growth tax cut and major improvements in work incentives. The 3.8-percentage-point cut in … [Read more...]

With resistance growing to the GOP’s border adjustment tax, The Wall Street Journal reports on a truly heinous plan B to fund a corporate tax cut. This half-baked plan comes courtesy of the American Enterprise Institute. The AEI plan would cut corporate taxes to 15% and pay for the reduction by taxing dividends and capital gains at ordinary income rates (that’s 39.6% pre-Obamacare taxes and over 43% post). Capital gains would be paid on a mark-to-market basis. If you bought a stock for $100 and it appreciated to $200 at the end of the year, but you held onto it, you would still owe $40 in … [Read more...]

America desperately needs a tax overhaul to fix a system that has become unwieldy and difficult for business. Reforms could boost the economy, and even the thought of tax reforms has sent markets soaring. Here, from Fidelity, are fourteen tax changes that could show up in any potential reform package. Tax rates: The Trump plan and the House plan would both cut the top rate to 33 percent from 39.6 percent, raise the lowest rate to 12 percent from 10 percent, and collapse the number of brackets — different tax rates at different income levels — to three from seven. The Senate leadership has … [Read more...]

Cato Institute's Dan Mitchell details the results of a European Policy Information Center study on how non-income based taxes, like consumption taxes and payroll taxes, affect high income earners. He begins: Back in 2014, I shared some data from the Tax Foundation that measured the degree to which various developed nations punished high-income earners. This measure of relative “progressivity” focused on personal income taxes. And that’s important because that levy often is the most onerous for highly productive residents of a nation. But there are other taxes that also create a gap … [Read more...]

There is a lot of uncertainty surrounding the proposed "border adjustment tax." Retail businesses are organizing to fight a tax that could make every imported good Americans buy 20% more expensive. CNBC's Krystina Gustafson writes: The NRF's forecast comes as retailers are eyeing the potential impacts of a border adjustment tax, a GOP proposal that threatens to slap a 20 percent tax on goods they import and sell in the U.S. The industry has banded together to fight the tax, which they argue could wipe out their earnings and raise prices for consumers. A recent analysis by Ernst and Young, … [Read more...]

The Wall Street Journal outlines President Trump’s plan for reducing the trade deficit and boldly slashing income tax rates: The Trump administration took a step toward a House Republican tax plan Thursday when it tentatively endorsed a proposal to tax U.S. imports and exempt exports from taxation, an idea known as “border adjustment.” House Republicans are banking on the idea to help pay for deep cuts in corporate and individual income-tax rates. “This president is looking at a very bold tax reform approach,” Rep. Kevin Brady (R., Texas) told Fox News. “Our competitors are already … [Read more...]