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Sept. 27 — Overhauling the U.S. tax code is one way Democratic presidential candidate Hillary Clinton could pay for her proposed increases in spending, the top House Democrat said.
At a Sept. 27 lunch meeting with reporters at the U.S. Capitol, House Democratic Leader Nancy Pelosi (D-Calif.) sounded open to revamping the tax code with Clinton in the White House, though she also embraced Clinton's higher tax rates on the wealthy, which are considered anathema to House Republicans.
After House Speaker Paul Ryan (R-Wis.) recently mentioned major tax changes as one possible area of cooperation between a Democratic White House and Republican Congress in 2017, Pelosi's comments could signal brighter prospects for the often-promised idea of a tax overhaul.
“I do think that we really have to come together in a nonpartisan, bipartisan way to do revenue reform,” Pelosi said. “We have to. I think there's general agreement that we want to lower the corporate rate, we want to close loopholes. We want to do so in a way that grows the economy,” Pelosi said.
Pelosi said she was also open to smaller bite at the tax overhaul apple. “It would be better if we could do it comprehensively, but if we could do it piecemeal—that is to say, repatriation of money with a lower rate coming back to our country with the purpose of investment in infrastructure, a bank to leverage the money or just into infrastructure, initiatives like that.”
Ryan, in an appearance before the Economic Club of New York Sept. 17, said he thought a tax overhaul and changes in poverty programs were potential areas for agreement in 2017, but he said there was a “big gulf” between the parties on taxes (182 DTR G-3, 9/20/16).
Clinton has proposed about $1.65 trillion in new spending over 10 years, according to the bipartisan Committee for a Responsible Federal Budget, partially offset with about $1.50 trillion in new revenues. Some of that would come from increased taxes on the wealthy, Clinton said at a presidential debate Sept. 26. Pelosi said cutting rates on high earners would only increase the deficit.
“The question of estate taxes, or high-end taxes is a debate that we will have. But high-end taxes are the trickle down. I think in the course of the campaign, I think President Clinton-to-be will be making the case that all that does is add to the deficit,” Pelosi said.
Pelosi also said she thinks the fate of expiring tax breaks could be dealt with as part of a year-end omnibus spending bill to be negotiated in the post-election lame-duck session. “We hope to get tax extenders then,” she said.
In the debate, Clinton derided Trump’s tax proposals as reprising failed past tax cuts for wealthy households.
Trump has called for lowering marginal tax rates on wages, investment and business income, as well as reducing the corporate tax rate to 15 percent from 35 percent.
“It would be the most extreme version, the biggest tax cuts for the top percent of the people in this country than we've ever had,” Clinton said during the debate. “I call it trumped-up trickle-down, because that's exactly what it would be. That is not how we grow the economy.”
Multiple scores of Trump’s tax proposals, some new and some updated, show large revenue losses.
One of them, from the left-leaning Citizens for Tax Justice, estimated a $4.8 trillion increase in U.S. debt over 10 years, with 44 percent of Trump’s tax cuts benefiting the top 1 percent of taxpayers.
Those with average annual incomes of $1.7 million would receive an average yearly tax cut of $88,410 under Trump’s plan, according to the analysis. It also showed that Trump’s proposals would trigger higher taxes for some lower-income families.
Other studies, including analysis by the Center for American Progress, another left-leaning group, backed those lower-income tax increase conclusions. At least 7.8 million families with minor children would pay more taxes under Trump’s plan, equal to about 20 percent of households with minor children and more than half of single parents, according to another study from a former Senate Finance Committee chief tax counsel, Lily Batchelder, now a law professor at New York University.
The Citizens for Tax Justice estimate, a static score, doesn’t include a rate reduction for passthrough business income that Trump previously included because he has since been more vague on his plan for passthroughs.
Similar findings have emerged from the more libertarian-leaning Tax Foundation, which scored Trump’s plan as reducing federal revenue by $4.4 trillion to $5.9 trillion over a decade on a static basis. The range relates to whether Trump would tax passthroughs based on individual income tax rates or his proposed corporate rate of 15 percent, which would cost more.
Accounting for economic growth, the analysis found Trump’s plan would cost $2.6 trillion over a decade if passthrough income gets taxed as ordinary individual income or by $3.9 trillion if passthroughs are taxed at 15 percent. The analysis indicated it would result in 1.8 million more jobs or 2.2 million more, depending on those two factors, respectively.
Trump at the debate touted his proposal as more economically beneficial than Clinton’s.
“So we have a very robust set of plans,” he said. “And people have looked at both of our plans, have concluded that mine would create 10 million jobs and yours would lose us 3.5 million jobs, and explode the debt which would have a recession.”
Clinton’s plan would raise about $500 billion in tax revenue over the next decade on a static basis, or $191 billion on a dynamic basis, according to the Tax Foundation. She has proposed capping itemized deductions, altering capital gains taxes and raising marginal tax rates for taxpayers with incomes over $5 million, among other provisions.
Trump’s overall economic proposals would produce about $2.4 trillion in tax receipts over a decade, mostly due to his trade plans, according to an estimate released by two of Trump’s economic advisers, Peter Navarro, a business professor at the University of California at Irvine, and billionaire investor Wilbur Ross.
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Copyright © 2016 The Bureau of National Affairs, Inc. All Rights Reserved.
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