Only morons pay the estate tax.–attributed to Gary Cohn
On the personal side, we have protected the three big deductions — charitable, mortgage and retirement saving. We want to raise the standard deduction caps and get rid of many of the other personal deductions. We want to get rid of death taxes and estate taxes. On the business side, we are proposing to get rid of many of the deductions that companies can take right now to lower taxable income.–Gary Cohn
Congress and the Trump administration are said to be hard at work creating a tax bill, aiming for a signature economic policy achievement in the months ahead. As they do so, there is a fundamental tension they will have to resolve: Is this tax legislation about the past, or about the future?–Neil Irwin
Based on a “Financial Times” interview with Gary Cohn, chief economic adviser to President Donald Trump, conducted on August 24 2017.
- On the personal side, raise the standard deduction and eliminate many personal deductions.
- Repeal estate taxes.
- On the business side, eliminate many of the deductions that companies take to lower taxable income.
- American companies won’t have to pay an additional tax when they bring foreign profits back home.
- Make the business tax rate as low as possible so that businesses want to create jobs here.
- Retain a preferred rate for capital gains to encourage investment.
Raising the standard deduction would help lower-income taxpayers. If rates are cut, that would greatly benefit the wealthy. Eliminating some deductions would adversely affect some middle class taxpayers. Eliminating the estate tax and retaining a low rate for capital gains, would benefit wealthy families. Cohn didn’t mention it, but Congress would also likely repeal the Alternative Minimum Tax to the benefit of those who might continue to avoid taxes under new laws.
Lower rates in exchange for the loss of some deductions would benefit businesses, as would any measure to reward hiding profits overseas.
In summary I would say this represents more for the rich and less for the rest.
Neil Irwin, writing in the NY Times raises an interesting question: should tax law changes reward past behavior or influence future behavior?
- If lower rates are retroactive, that could affect the 2018 elections but could not affect past economic behavior.
- Should corporations benefit from past decisions to hide profits overseas, or should they be compelled to pay up?
- Should corporations get tax credit for investments already made, or only for those made in the future?
There is still a great deal unknown about what type of tax legislation Congress will take up, with negotiations between House and Senate tax-writers and the Trump administration taking place behind closed doors. But once it is revealed, the questions to ask aren’t just whether it would benefit the rich or the middle class, or what it would mean for the deficit. Another big one is whether it is more about the economic future, or the economic past.
Based on how Congress has operated recently, I’ll bet that they will make changes retroactive thus putting self-interest first.
In the past Rep. Tom Reed has been very supportive of many tax loopholes for businesses. Will he now vote to eliminate them? He has been a deficit hawk; will he vote for budget busting changes?