28 October 2016

ACR News 10.28.16 – Three Visions for Tax Reform

>> Federal: Washington Roundup
>> Federal: Dynamic Analysis of Presidential Tax Plans
>> Federal: Election Update
>> Federal: Charitable Giving Coalition Letter to Candidates
>> Consider This: Three Visions for Tax Reform
>> Top ReadsNonprofits Call on Next President to Protect Charitable Deduction


Washington Roundup

The House and Senate remain out of session through the November 8 election. Upon their return, lawmakers will have to pass legislation – likely one massive bill – to fund the government by December 9. House Speaker Paul Ryan (R-WI) has expressed his desire to use “mini-buses,” or smaller spending bills, in favor of a larger omnibus plan. House Minority Leader Nancy Pelosi (D-CA) said Democrats have no plan to support that approach.


Dynamic Analysis of Presidential Tax Plans 

You may recall from our last newsletter that the Tax Policy Center (TPC) recently came out with static scores of Donald Trump’s and Hillary Clinton’s tax reform proposals. Then last week, the group released the dynamic scores of the candidates’ economic proposals, which take into account the macroeconomic effects of the policies. Their findings under dynamic scoring weren’t much different from static – Clinton’s proposals would increase revenue by $1.4 trillion on a static basis and $1.3 trillion on a dynamic basis, and Trump’s proposals would cause revenues to fall by $6.2 trillion on a static basis and just $6 trillion on a dynamic basis.

Speaking of economic plans, the Committee for a Responsible Federal Budget released an analysis on Monday on the impact the candidates’ plans would have on economic growth. The group’s analysis found Clinton’s tax increases would eventually boost fiscal health, adding 0.5 points to GDP by 2036, but would also increase the national debt by $200 billion over 10 years. They also found that Trump’s plan would add 1.7 points to the GDP in 2017, but would cut growth by 4 points by 2036.


Election Update 

The third and final presidential debate was Wednesday, October 19. The candidates discussed several issues, including the economy, immigration, and fitness to be president, among others. Hillary Clinton mentioned that her economic plan would not raise taxes on anyone making less than $250,000 and said the plan wouldn’t “add a penny” to the national debt, a claim that has drawn skepticism from economists. Donald Trump said his plan to cut taxes on everyone would increase economic growth to as much as 6 percent – a number that hasn’t been backed up by any economists. The debate included clashes about the Clinton Foundation as well.

Trump refused to pledge that he would accept the results of the November 8 election should he lose.


Charitable Giving Coalition Letter to Candidates 

You may have seen in our newsletter last week that the Charitable Giving Coalition, of which ACR is a member, sent identical letters to the major party nominees for President, urging them to support the full preservation of the charitable deduction and other giving incentives. Donald Trump’s most recent tax reform plan included the charitable deduction in an itemized deduction cap, and Hillary Clinton’s campaign has said the charitable deduction is carved out of her cap. Click the following links to view the letters to Donald Trump and Hillary Clinton.


Consider This – Three Visions for Tax Reform

We are writing this roughly two weeks before election day on November 8, and our worldview can best be summed up by a Huffington Post story this week titled, “Divided America Agrees: Enough Already!”

Enough already indeed!  At the same time, we’ve spent so much time noodling and obsessing about this election, we haven’t really thought too much about what comes next. So what should we be keeping an eye on?

We know that both Hillary Clinton and Donald Trump are anxious to do something about crumbling infrastructure. But how to pay for that? Tax increases? Spending cuts? Some combination of both?

Regardless of which candidate will be the next occupant of the White House, we expect both the House and Senate to take a keen interest in tax reform. Here’s the rub, though: the visions of tax reform from all three groups may very well diverge, complicating any tax reform effort.

As of this writing, control of the Senate hangs in the balance. Even if Democrats win control, they will face tough sledding in 2018. Twenty-three Senate Democrats and two independent Senators who caucus with Democrats will be up for election in 2018, compared to just eight Republicans. Among those 25 up for election are eight of the 12 Democrats on the Senate Finance Committee. That group of eight is surely going to want to exert their influence over tax policy in the near term. Expect to see them push for tax policy aimed at low and moderate income earners.

In the House, it appears that Democrats won’t gain the thirty seats they need to flip control.  While that could change, it seems unlikely as of today. What we do expect, though, are a number of moderate Republicans to lose their seats. This hollowing-out of that wing of the Republican party will have the effect of shifting the Republican caucus to the right. That will make it even harder for House Republicans to work with the Senate and across party lines.

As we’ve previously written, much of the above will likely lead the next occupant of the White House to do what they can by bypassing Congress through executive orders. We can also expect all of the negative press about the Trump and Clinton Foundations to lead to at least some House and/or Senate examinations (through hearings and the like) of our sector.

But first, the election. We’ll uncover our eyes when it’s all over.


Top Reads


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