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Tuesday, August 8, 2017

Good News On Taxes

According to reports in Politico, the Trump White House has been meeting with some House Democrats to gain their support for the tax reform bill to be introduced soon in that chamber.  There are, at most, 30 Democrats who are open to cooperating on the tax bill, but their participation would be important to say the least.  If a new tax bill gets the support of just 20 Democrats in the House, it takes much of the veto power away from the more extreme members of the GOP caucus because Speaker Ryan will not need nearly every Republican vote to pass the bill.  The result could be a measure with a wider political acceptance.

The same move is supposedly underway in the Senate.  In that body, there is less hope for gaining Democrat votes, but the attempt is not futile.  Forty-five Senate Democrats signed a letter pledging to oppose any tax bill that increases the deficit or that lowers any tax on the highest 1% of taxpayers.  That's basically a position that makes compromise with the GOP impossible.  Any effective tax measure will greatly reduce the tax on corporate profits earned abroad.  Right now, those profits are taxed at 35% at the time when the money is brought back into the USA.  As a result of that timing provision, American companies have close to 2.5 trillion dollars held offshore (and therefore not yet subject to tax.)  In their ridiculous "logic", the CBO counts future taxation on this 2.5 trillion dollars as federal revenue when it figures future deficits even though the chances of the companies bring much of that cash back to the USA are slim at most.  The new tax bill will cut the rate to something like 10% on a one time basis.  That might entice two trillion dollars back into the country and gain some 200 billion in additional revenue as well as a massive investment in our economy.  The CBO, however, would not see this as a revenue gain.  NO, the CBO would see this as a loss of 25% on the two trillion dollars which means an increase in the future deficit of half a trillion dollars.  That view is completely unrealistic, but it is the one that the CBO will take nevertheless.  Since there is no way the any tax bill will raise an additional half trillion dollars, the Democrats will not support it based on "opposition" to increasing the deficit.

There are three Democrat senators who did not sign the letter.  Those three might be ones who would be willing to work with the GOP to get a realistic tax bill.  It's worth the effort, and I'm glad the White House is moving on this front.  The addition of those three votes would pretty much guarantee that a tax reform bill could pass.

The economy needs the boost.  Let's hope there are a few brave Democrats who are willing to put the success of the country ahead of their party.

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