Unpaid-for Tax Cuts: the Gulf Between Promises and Reality
Chye-Ching Huang, Deputy Director, Federal Tax Policy, Center on Budget and Policy Priorities
End Notes
[1] James R. Nunns, “How TPC Distributes the Corporate Tax,” September 13, 2012, http://tpc.io/2wtQLzA; TPC tables T17-0179 and T17-0180, http://tpc.io/2rUNxRC. This section draws from Chye-Ching Huang and Brandon DeBot, “Corporate Tax Cuts Skew to Shareholders and CEOs, Not Workers as Administration Claims: Eventual Spending Cuts or Tax Increases to Pay for Corporate Rate Cuts Could Leave Most Workers Worse Off,” CBPP, August 16, 2017, http://bit.ly/2ue6Czp.
[2] CBO, “The Distribution of Household Income and Federal Taxes, 2008 and 2009,” July 2012, http://bit.ly/2uKeDzs; CBO, “The Distribution of Household Income and Federal Taxes, 2013,” June 2016, http://bit.ly/2vDk0N9; JCT, “Modeling the Distribution of Taxes on Business Income,” JCX-14-13, October 16, 2013, http://bit.ly/2ubvvxh. U.S. Department of the Treasury, Office of Tax Analysis, “Treasury’s Distribution Methodology and Results,” November, 12, 2015, http://bit.ly/2uDAwiT, and Distribution of the Tax Burden, Current Law, 2018, from http://bit.ly/2uE01Ro.
[3] See Laura Power Nunns and Austin Frerick, “Have Excess Returns to Corporations Been Increasing Over Time?” Treasury Office of Tax Analysis Working Paper 111, November 2016 http://bit.ly/2vxCYoJ; Eric Toder and Kim Rueben, “Should We Eliminate Taxation of Capital Income?” in Henry J. Aaron, Leonard Burman, and C. Eugene Steuerle (eds.), Taxing Capital Income, 2007.
[4] The standard assumption is that workers can freely move between businesses that pay the corporate tax and those that do not, so if corporations invest more and pay higher wages, workers will move from non-corporate jobs into corporate jobs until wages equalize between the two types of businesses.
[5] For example, a 2005 JCT analysis of a hypothetical $500 billion corporate tax cut that is not paid for found that over time “[g]rowth effects eventually become negative without offsetting fiscal policy for each of the proposals, because accumulating Federal government debt crowds out private investment.” Long-run impacts on employment were either close to zero or negative, depending on monetary policy assumptions. JCT, “Macroeconomic Analysis of Various Proposals to Provide $500 Billion in Tax Relief,” JCX-4-05, March 1, 2005, p.8, http://bit.ly/2wtn8OL.
[6] This section draws from Chye-Ching Huang, Chuck Marr, and Joel Friedman, “The Fiscal and Economic Risks of Territorial Taxation,” CBPP, January 31, 2013, http://bit.ly/2gtMXFj.
[7] See David Van Den Berg, “Territorial Tax Systems Can Be Beaten, Shay Says,” 223 Tax Notes 7, November 16, 2012. Also see Steven Shay, “Unpacking Territorial”, New York University School of Law, 2012, http://bit.ly/2eQviaK.
[8] Jane G. Gravelle, Senior Specialist in Economic Policy, Congressional Research Service, before the House Ways and Means Committee, May 12, 2011, http://bit.ly/2riMIk3.
[9] See, “Actual U.S. Corporate Tax Rates Are in Line with Comparable Countries,” CBPP, April 25, 2017, http://bit.ly/2wB8bsa.
[10] James R. Nunns et al., “An Analysis of the House GOP Tax Plan,” TPC, September 16, 2016 http://tpc.io/2iyFHHj; “The Implications of What we Know and Don’t Know About President Trump’s Tax Plan,” TPC, July 13, 2017, http://tpc.io/2wxs0km.
[11] CBPP analysis based on Page, “Dynamic Analysis of the House GOP Tax Plan: An Update.” See Isaac Shapiro, Chye-Ching Huang, and Richard Kogan, “House GOP Framework Would Give Millionaires $2.6 Trillion in Tax Cuts, While Cutting Programs for Low- and Moderate-Income People by $3.7 Trillion,” CBPP, September 29, 2016, http://bit.ly/2deCtbe.
[12] Nunns et al. TPC’s macroeconomic analysis of the Trump Administration tax plan also found that it would reduce growth by the end of the decade: see “The Implications of What We Know and Don’t Know about President Trump’s Tax Plan.”
[13] Brandon DeBot, “Harsh Trade-off at Core of GOP Health Bill: Keep Medicaid Expansion or Cut Taxes for Wealthy?,” CBPP, June 21, 2017, http://bit.ly/2w9s1NI; Brandon DeBot, “Wealthy, Corporations Still Win Big Under Senate GOP Health Bill Even With Possible Change,” CBPP, June 30, 2017, http://bit.ly/2uYFLXG.
[14] This section draws from Robert Greenstein, “Harsh House GOP Budget Resolution Asks Most from Those Who Have Least”, CBPP, July 18, 2017, http://bit.ly/2uwt35B.
[15] See CBPP, “Trump Budget’s Radical, Harmful Priorities,” and Joel Friedman, “Black’s Lopsided Budget Is a Dead End for Appropriations,” CBPP, June 26, 2017, http://bit.ly/2u9qKVr.
[16] Jacob Leibenluft, “Trump’s Bait and Switch on Infrastructure,” CBPP, June 7, 2017, http://bit.ly/2tJs5QM.
[17] William G. Gale, Surachai Khitatrakum, and Aaron Krupkin, “Cutting taxes and making future Americans pay for it: How Trump’s tax cuts could hurt many households,” TPC, August 15, 2017, http://brook.gs/2x83DsO. This section draws from Isaac Shapiro and Chye-Ching Huang, “Vast Majority of Americans Would Likely Lose From Trump Tax Cuts, Once They’re Paid For,” CBPP, August 17, 2017, http://bit.ly/2wXMDGr.
[18] For further discussion of the current policy and other gimmicks, see: Chuck Marr, Chye-Ching Huang, and Brendan Duke, “Tax Plans Must Not Lose Revenue and Should Focus on Raising Working-Class Incomes,” CBPP, September 8, 2017 http://bit.ly/2wNEVkR; Seth Hanlon, “Tax Reform Must Be at Least Revenue-Neutral and Avoid Gimmicks,” Center for American Progress, September 22, 2017, http://ampr.gs/2wOUglV.
[19] Chye-Ching Huang and Brandon DeBot, “‘Current Policy’ Baseline Would Hide $439 Billion in Tax Cuts Worth at Least $40,000 a Year for the Top 0.1 Percent,” CBPP, August 16, 2017, http://bit.ly/2fSXoWa.
[20] Paul N. Van de Water, “Budget and Tax Plans Should Not Rely on ‘Dynamic Scoring,’” CBPP, November 17, 2014, http://bit.ly/2vKC4aW.
[21] For examples of timing gimmicks considered in prior tax debates, see: Chye-Ching Huang, Chuck Marr, and Nathaniel Frentz, “Timing Gimmicks Pose Threat to Fiscally Responsible Corporate Tax Reform,” CBPP, January 13, 2014, http://bit.ly/2uPKCP8; Nathaniel Frentz and Chye-Ching Huang, “Four Timing Gimmicks That Could Disguise Fiscally Irresponsible Individual Tax Reform,” CBPP, October 30, 2013, http://bit.ly/2vQylau.
[22] See: Rudolph. G. Penner, “The Attacks on the Congressional Budget Office are Wrong,” June 23, 2017, TaxVox, http://tpc.io/2tcadzN; Aviva Aron-Dine, “CBO Correctly Predicted Historic Coverage Gains Under ACA,” CBPP, May 30, 2017, http://bit.ly/2xA05Cu.
[23] See Alan Rappeport, “In Battle Over Tax Cuts, It’s Republicans vs. Economists,” New York Times, September 22, 2017, http://nyti.ms/2xmSl7C, reporting that “Senator Bob Corker, […] seemed to throw down the gauntlet this week, saying he would push for a pro-growth tax overhaul that pays for itself using “valid models.” He singled out the Joint Committee on Taxation in comments to reporters, suggesting that Republicans would be looking beyond their analysis when assessing the plan’s cost. Mr. Corker […] said that the experience of working with the Congressional Budget Office during Republican efforts to repeal the Affordable Care Act buttressed his view that analyses from economists outside the government should be considered when scoring tax legislation.”
[24] As reported by Alan Rappeport, September 19, 2017, http://bit.ly/2xmvV6r.
[25] Senator Cruz, “Tax Reform Should Focus on Creating More Jobs, Higher Wages, and More Opportunity,” “Talking Tax Reform” hosted by the Tax Foundation, September 13, 2017, http://bit.ly/2f5zqXR.
[26] Huang and DeBot, “Corporate Rate Cuts Skew to Shareholders and CEOs.”
[27] Chad Stone, “Gap Between Trump, CBO Predictions on Economic Growth the Largest on Record, http://bit.ly/2tMwQKL.
[28] Chad Stone and Chye-Ching Huang, “Trump Campaign’s “Dynamic Scoring” of Revised Tax Plan Should Be Taken With More Than a Grain of Salt, Relies on Assumptions Well Outside the Mainstream,” CBPP, September 15, 2016, http://bit.ly/2wJRRZI.
[29] Letter from Former CBO Directors on the Importance of CBO’s Role in the Legislative Process, July 21, 2017, http://bit.ly/2vIvqiQ.
[30] Andrew Soergel, “Mnuchin: ‘Most’ Top Earners Won't Get Tax Cut Under Trump Plan,” U.S. News & World Report, July 31, 2017, http://bit.ly/2wOmk96.