Tax Archives - Page 6 of 16 - Progressive Policy Institute

Senate Democrats’ Deficit-Neutral Infrastructure Plan Clarifies the Cost of Tax Cuts

Posted on March 8, 2018September 18, 2024 by The Progressive Policy Institute

Senate Democrats yesterday unveiled an ambitious $1 trillion infrastructure proposal that would invest in everything from roads and railways to hospitals and high-speed broadband. And in sharp contrast to recent proposals by the Trump administration, this new Democratic proposal includes a plan to fully pay for itself.

The proposal calls for repealing three elements of the recently-enacted Republican tax bill that almost exclusively benefit the wealthiest taxpayers, as well as closing the “carried interest loophole” that allows certain earnings on Wall Street to be taxed at a lower rate than other compensation. It would also raise the top corporate tax rate from 21 percent to 25 percent – the average rate among OECD countries and the level originally proposed by House Ways and Means Chairman David Camp (R-MI) back in 2014.

Spending in the new proposal is broken down into 19 different categories, each with its own budget and parameters for implementation. The package as a whole includes additional guidelines, such as encouraging the adoption of innovative technologies and long-term financing mechanisms, to accompany proposed spending. If fully implemented, the proposal’s authors believe it would create 15 million good-paying jobs.

Compare that to the proposal offered last month by the Trump administration, which claims to increase infrastructure investment by $1.5 trillion even though the administration’s budget provided no additional funding for it. The Trump proposal would also privatize a wide variety of physical assets, such as waterways and interstate highways, that the Democratic proposal would retain for public use.

Another advantage of the Democratic proposal is that it makes clear to voters the true cost of the Republican tax cut enacted last year – something PPI has been urging Democrats to do since before passage of the bill. For less than half the cost of this terrible tax cut, voters could have gotten a robust 21^st century infrastructure that would benefit our economy for generations to come. That message could be a powerful one heading into the midterm elections, especially if paired with a credible and comprehensive Democratic framework for “repealing and replacing” the GOP tax bill.

Senate Democrats should be commended for including suggested funding mechanisms in their proposal. Whereas Republicans added over $2 trillion of tax cuts to the national debt, the Democrats’ infrastructure proposal would be fully funded and deficit-neutral. If implemented in a timely and cost-effective way, their proposal might even reduce budget deficits because of the high economic returns on well-targeted infrastructure investment. The stark contrast between these two approaches to fiscal policy is just further evidence that only one of the two political parties in Washington is making any attempt to pay for its proposed policies.

But when they find themselves in a position to implement these policies, Democrats should keep in mind that simply paying for their new proposals isn’t sufficient.

The federal government is now spending $1 trillion more than it raises in revenue every year – a gap that is projected to more than double over the next decade. It will be impossible to sustain social programs as they’re currently structured, let alone fund new ones, without major reforms to both existing spending and the tax code. The government cannot afford to commit every dollar of additional revenue to new promises until it finds a way to pay for the ones we’ve already made.

For these reasons, Democrats would be wise to use yesterday’s proposal as merely the starting point for crafting a complete fiscal policy: one that sustainably finances both public investments and a strong social safety net without placing an undue burden on young Americans. A fiscally responsible public agenda along these lines is what the Democratic Party needs, and it’s what our country deserves.

New Analysis Highlights Dire Fiscal Situation

Posted on March 5, 2018September 18, 2024 by The Progressive Policy Institute

New projections from the non-partisan Committee for a Responsible Federal Budget show that Donald Trump and the Republican-controlled Congress have plunged the United States back into trillion-dollar deficits at a time when most economists believe we should be whittling them down.

According to CRFB’s estimates, which are based on a methodology similar to the one used by official scorekeepers at the Congressional Budget Office, the policy changes made since last fall will likely result in $6 trillion being added to the national debt over the next decade if they’re allowed to remain in place. This is in addition to $10 trillion of new debt that was already projected to accumulate under the law as it was previously written.

If the government continues on this trajectory, our national debt will be more than double the level it was when Donald Trump took office by the end of the decade. Annual budget deficits will triple. Annual spending on interest payments will quadruple. And economic growth won’t be able to keep up with any of it.

Many of the fiscal challenges facing the United States predate the current administration. But whereas CBO previously projected annual budget deficits to exceed $1 trillion beginning in 2022, CRFB’s analysis warns that we now face trillion-dollar deficits this year. By 2028, the budget deficit will swell to 2.4 trillion, which would be over 8 percent of gross domestic product – a level not seen outside of the Great Recession since World War II.

The primary contributors to this deteriorating fiscal situation are the Republican tax bill (formerly known as the Tax Cuts and Jobs Act) and the February budget deal (the Bipartisan Budget Act of 2018), which together account for over half of the additional borrowing expected over the coming decade. Funding for disaster relief, overseas military engagements, and other “emergencies,” as well as policies that were supposed to expire last year but were nonetheless extended without being offset, were expected to add another trillion dollars to the debt. Finally, Republican efforts to undermine the Affordable Care Act by defunding cost-sharing reductions would further grow government debt by increasing the cost of health care.

The CRFB report notes that when President Obama left office, “paying for new legislation and securing the solvency of various trust funds would have been sufficient to prevent debt from rising rapidly as a share of GDP.” Since then, legislation spearheaded by Republicans has “turned a dismal fiscal situation into a dire one.”

Most of the blame belongs to the GOP, but Democrats are not completely innocent either. Many supported the February budget deal that not only reversed harmful sequestration but also busted through less restrictive spending caps originally intended to be a down payment on fiscal discipline, as well as some of the other policy changes mentioned above that were adopted without offsets. Both parties now have their hands on the shovel being used to dig our fiscal hole deeper and, as this new analysis makes clear, they need to put it down.

Bledsoe for The Hill, “Solar case shows climate protection requires globalized economy”

Posted on February 20, 2018 by The Progressive Policy Institute

Responses to President Trump’s imposition of tariffs on Chinese solar panels fall into two general camps.

One holds that Chinese solar manufacturing subsidies are so egregious as to require U.S. tariffs to deter additional subsidies by Beijing. Others believe the action is really just free-trade political posturing by Trump, and in practice, amounts only to a self-inflicted wound on the rapidly growing U.S. solar installation sector.

Neither perspective accounts, however, for the recent history of U.S. and Chinese solar subsidies, or indeed new subsidies for carbon capture and other clean energy sources that became law in the recent budget agreement.

Continue reading at The Hill.

Six Charts That Reveal the Absurdity of the Trump Budget

Posted on February 14, 2018September 18, 2024 by The Progressive Policy Institute

The president’s budget proposal – the official document that lays out his administration’s tax and spending wish list – usually contains a mix of dubious economic assumptions and ambitious policy ideas that are dead on arrival in Congress. But while the president’s budget is usually somewhat estranged from reality, Donald Trump’s Fiscal Year 2019 Budget is utterly divorced from it. The budget proposal also guts critical public investments such as infrastructure and scientific research, slashes the social safety net, and – even under the most charitable economic assumptions – still proposes to run budget deficits significantly larger than they would have been under President Obama’s final budget proposal.

Gutting Public Investment

The delusion starts with a proposal for discretionary spending levels far below those in the budget deal passed just last week. That deal set spending caps for non-defense (domestic) discretionary programs to $579 billion in FY2018, which is just under 2.9 percent of gross domestic product. This represented a significant increase over the caps imposed by the Budget Control Act of 2011 but would still result in domestic spending below its historical average.

The Trump budget, by contrast, would radically lower these caps at a time when Congress seems more inclined to increase them. As this chart shows, the domestic discretionary caps proposed in the Trump budget would fall to less than half the levels – both in dollars and as a share of the economy – that they would be if Congress continued growing spending at the rate they did in last week’s deal. While Trump’s budget did include an addendum to reflect the higher spending levels, it is still noteworthy that he would have proposed a budget so divorced from the political realities in Congress – especially when that Congress is controlled by members of his own party.

Trump’s desire for sharp cuts to domestic discretionary spending are deeply problematic when one considers the programs it funds. Discretionary spending is the part of the budget that Congress has the flexibility to appropriate annually, and the non-defense portion includes critical public investments such as infrastructure and scientific research that contribute to the long-term health of our economy. The next chart depicts the Trump budget’s steep cuts to these investments, slashing the share of spending for non-military research to just over half its historical average by 2023.

It is not surprising that the Trump administration – the most anti-science in recent memory – would propose deep cuts to scientific research. What should be surprising, however, is that even the kinds of domestic public investment that Trump ostensibly supports would suffer under his budget proposal.

Trump’s budget was accompanied by a “$1.5 trillion” proposal to boost investment in infrastructure over the next ten years. The details, however, reveal that this “plan” amounts to little more than empty Trump bluster. The administration suggested using $200 billion in federal investment to somehow leverage an additional $1.3 trillion from cash-strapped state and local governments, as well as the private sector. But where exactly would this $200 billion come from? Cuts to existing infrastructure programs.

Transportation spending, for example, would fall under the Trump budget over the next 5 years. And to be clear: the issue isn’t just that it would fall as a percentage of the economy, or that it wouldn’t keep up with inflation – the following chart shows that the Trump budget actually proposes a reduction in nominal dollars spent on transportation infrastructure. The expectation that billions of dollars in hard cuts to federal investment will spur trillions of dollars in outside spending is outlandish.

These cuts to domestic discretionary spending should be considered in the context of what the budget proposes for mandatory spending as well. Mandatory spending is the part of the budget that that grows on autopilot because spending is determined by previously established formulas. Unlike discretionary spending, some mandatory programs are projected to grow much faster than the economy under current law and are greatly in need of reform if they are going to be sustainable over the long-term. Unfortunately, most of the reforms proposed in the Trump budget are precisely the wrong ones.

Slashing the Safety Net While Deepening Deficits

The two largest – and fastest growing – mandatory spending programs are Social Security and Medicare. Demographic pressures caused by the aging of the baby boomer generation are resulting in program spending that grows faster than the dedicated revenue needed to finance it. There have been many proposals with bipartisan support to curb the growth of these programs without impacting vulnerable beneficiaries who depend on them most. Unfortunately, the Trump administration eschewed any major Social Security reforms and included only modest proposals to rein in the growth of Medicare.

The mandatory reforms the Trump budget did propose take the form of deep cuts to vital safety net programs that serve the most vulnerable in our society. Spending on the Temporary Assistance for Needy Families and Supplemental Nutrition Assistance Programs would be cut by 13 and 31 percent, respectively. Other programs, including many that assist lower- and middle-income Americans with housing costs, are eliminated entirely. Altogether, the Trump budget proposes to cut spending on safety net programs by over $1 trillion throughout the next decade – at least two-thirds of which would come from cuts to Medicaid and the Affordable Care Act that Congress rejected several times last year.

Trump’s approach is particularly wrong-headed given that mandatory spending outside of Social Security and Medicare is growing at roughly the same rate as the economy under current law. The Trump administration is avoiding addressing the real drivers of our deficit – demographic changes and his administration’s reckless tax cuts – and instead using it as a pretext for deep cuts in critical public investments and vital safety net programs. The result is that Trump’s latest budget, in his own OMB’s assessment, leads to significantly larger budget deficits over the next five years than those proposed in President Obama’s final budget over the same period (2019-2023).

This comparison, however, assumes OMB’s economic projections are correct. The final, and perhaps most, absurd aspect of the Trump budget is its economic assumptions. The budget projects real economic growth that is nearly 50% higher than those of other independent experts. Unreasonably high growth projections mask deficits by depicting higher tax revenues, lower spending on safety net programs, and a bigger GDP estimate that makes the deficit look smaller as a percentage.

OMB also understates the impact of deficits under the Trump budget proposal with its interest rate projections. OMB estimates the average interest rate on a 10-year Treasury Note in 2018 will be 2.6 percent. But the rate on this form of government debt already exceeds 2.9 percent and is continuing to rise rapidly following the passage of Trump’s budget-busting tax bill. This is exactly what economists would expect in a healthy economy such as the one we face today, as large budget deficits force the government to increasingly compete with the private sector for capital.

Under more realistic assumptions, the budget deficits in Republican Donald Trump’s budget proposal could be more than double those in the final one offered by Democratic President Barack Obama. When that budget was released, Republicans including House Speaker Paul Ryan rejected it while saying: “We need to tackle our fiscal problems before they tackle us.” Two years later, the only thing this absurd Trump budget tackles is any pretense that those concerns were sincere.

Billy Stampfl contributed to this post. This post has been edited to remove an extrapolation based on recent interest rate spikes.

Don’t Help GOP Budget Busters

Posted on February 8, 2018September 18, 2024 by The Progressive Policy Institute

The Republican Party, led by self-proclaimed “King of Debt” Donald Trump, is embracing fiscal profligacy on an epic scale. First, the Trump Republicans broke their promise of “revenue-neutral tax reform” and instead rammed through a bill that will grow deficits by at least $1.5 trillion last December. Now they’ve struck a deal with Senate Democrats that, combined with the tax bill, would add more than $3 trillion to the deficit over the next decade. It’s a one-two gut punch to fiscal responsibility.

It’s regrettable that Senate Democrats have made themselves complicit in the Republican raid on the U.S. Treasury. Yes, this deal would avoid a federal shutdown, which is a good thing. But the pricetag is simply too steep. We support funding disaster relief, health care programs and other critical public investments, and we support adequate defense spending as well. But we’re against unnecessary borrowing to pay for it, which represents an abdication of Congress’s core Constitutional responsibility: paying for government without passing the bill to the next generation.

From the Brownback debacle in Kansas to the tax bill and this latest budget deal, Republicans are proving to be the most reckless and incompetent managers of public finances. All their fiscal posturing and brinksmanship during the Obama years stands exposed as rank hypocrisy. But Democrats can’t effectively make that case to voters if they join in a bipartisan conspiracy against fiscal discipline in Washington.

It would be one thing if this budget deal merely repealed the sequester, which was never meant to take effect and has hamstrung important investments in both defense and domestic initiatives. The Senate budget deal, however, would raise spending above the original levels agreed to by both parties in the Budget Control Act of 2011. It would also cut taxes for corporations by an additional $17 billion and repeal important cost-control measures imposed by the Affordable Care Act – all without paying for them.

If policymakers are going to abandon the BCA, they need to replace it with another plan for controlling America’s massive public debt. The Senate deal places America on the fast track to trillion-dollar deficits as far as the eye can see. That’s the opposite of the fiscal policy our country needs today. When the economy is expanding, we should be unwinding the debt, not using the threat of a government shutdown to make it worse. Otherwise, young Americans will face higher tax and debt payment burdens, and the federal government will have little “fiscal reserve” to tap the next time the economy goes into recession.

Marshall for The Hill, “The GOP’s pyrrhic tax victory”

Posted on December 26, 2017 by The Progressive Policy Institute

“Another such victory and we are lost,” King Pyrrhus of Epirus lamented after suffering staggering losses in defeating the Romans in 279 B.C. This bit of ancient history seems relevant now as President Trump and the Republicans celebrate a pyrrhic victory of their own on taxes.

In ramming through Congress a huge package of tax cuts the Trump Republicans finally racked up their first and only major legislative “win” of 2017. But at what a cost: the betrayal of their professed principles and political commitments, all to achieve a result likely to be fleeting because Republicans spurned every opportunity to anchor tax changes in solid, bipartisan support.

With this sorry excuse for a tax bill, Trump might as well be slapping working Americans in the face. Wall Street, on the other hand, should be purring contentedly since Republicans couldn’t even bring themselves to close the egregious “carried interest” loophole for hedge fund and private equity investors. There’s no way to reconcile Trump’s populist rhetoric with a bill that lavishes the lion’s share of its benefits on the rich and powerful.

Continue reading at The Hill.

Happy Holidays from PPI

Posted on December 19, 2017September 18, 2024 by The Progressive Policy Institute

It’s been a surreal political year, but PPI has much to celebrate this holiday season. Throughout 2017, we expanded our productive capacity and the scope of our political and media outreach significantly. For example, PPI organized 150 meetings with prominent elected officials; visited 10 state capitals and 10 foreign capitals, published an influential book and more than 40 original research papers, and hosted nearly 30 private salon dinners on a variety of topical issues.

Best of all, we saw PPI’s research, analysis, and innovative ideas breaking through the political static and changing the way people think about some critical issues, including how to revive U.S. economic dynamism, spread innovation and jobs to people and places left behind by economic growth, and modernize the ways we prepare young people for work and citizenship.

Let me give you some highlights:

This fall, David Osborne’s new book, Reinventing America’s Schools, was published on the 25th anniversary of the nation’s first charter school in Minnesota. David, who heads PPI’s Reinventing America’s Schools project, documents the emergence of a new “21^st Century” model for organizing and modernizing our public school system around the principles of school autonomy, accountability, choice, and diversity. David is just winding up a remarkable 20-city book tour that drew wide attention from education, political, and civic leaders, as well as the media. Because David is a great storyteller, as well as analyst, it’s a highly readable book that offers a cogent picture of a K-12 school system geared to the demands of the knowledge economy. It makes a great holiday gift!

Dr. Michael Mandel’s pioneering research on e-commerce and job creation also upended conventional wisdom and caught the attention of top economic commentators. Dr. Mandel, PPI’s chief economic strategist, found that online commerce has actually created more jobs in retail than it destroys, and that these new jobs (many in fulfillment centers in outlying areas) pay considerably better than traditional ones. His research buttresses the main premise of PPI’s progressive pro-growth agenda: that spreading digital innovation to the physical economy will create new jobs and businesses, raise labor productivity, and reduce inequality.

PPI challenged the dubious panacea of “free college” and proposed a progressive alternative – a robust system of post-secondary learning and credentials for the roughly 70 percent of young Americans who don’t get college degrees. PPI Senior Fellow Harry Holzer developed a creative menu of ways to create more “hybrid learning” opportunities combining work-based and classroom instruction. And PPI Senior Fellow Anne Kim highlighted the inequity of current government policies that subsidize college-bound youth (e.g., Pell Grants), but provide no help for people earning credentials certifying skills that employers value.

Building on last year’s opening of a PPI office in Brussels, we expanded our overseas work considerably in 2017. In January, I endeavored to explain the outcome of the U.S. election to shell-shocked audiences in London, Brussels, and Berlin. In April, we led our annual Congressional senior staff delegation to Paris, Brussels, and Berlin to engage European policymakers on the French presidential election and other U.S-E.U. issues, including international taxation, competition policy, and trade. PPI also took its message of data-driven innovation and growth to Australia, Brazil, Japan and a number of other countries.

Other 2017 highlights included a strategy retreat in February with two dozen top elected leaders to explore ideas for a new, radically pragmatic agenda for progressives; a Washington conference with our longtime friend Janet Napolitano (now President of the University of California system) on how to update and preserve NAFTA; public forums in Washington on pricing carbon, infrastructure, tax reform, and other pressing issues; creative policy reports on varied subjects; and a robust output of articles, op-eds, blogs, and social media activity.

I’m also happy to report many terrific additions to PPI in 2017. Rob Keast joined to manage our external relations and new policy development; Paul Bledsoe assumed a new role as Strategic Adviser as well as guiding our work on energy and climate policy; and Emily Langhorne joined as Education Policy Analyst. We will also be adding a fiscal project next year.

All this leaves us poised for a high-impact year in 2018. In this midterm-election year, our top priority will be crafting and building support for a new progressive platform — a radically pragmatic alternative to the political tribalism throttling America’s progress. That starts with new and better ideas for solving peoples’ problems that look forward, not backward, and that speak to their hopes and aspirations, not their anger and mistrust.

It’s a tall order, and we cannot succeed without your help and support. Thanks for all you have done over past years, and we look forward to working with you in 2018.

Happy holidays and New Year!

Marshall & Bledsoe in LA Times, “Democrats need to put forward a tax plan too”

Posted on September 28, 2017 by The Progressive Policy Institute

Goaded by President Trump, Republican leaders outlined a tax-reform plan this week that is marginally less generous to the wealthy than many conservatives would like. As the GOP struggles to cobble together an actual bill that can unite their fractious party, it’s tempting for Democrats to sit back and enjoy the show. When your opponents are fighting each other, why interfere? In fact, Democratic leaders in Congress are reportedly discouraging their colleagues from outlining their ideas for reform.

But that’s shortsighted. How can Democrats steer Congress toward constructive reform without a proposal of their own? And how can the Democratic Party rebuild its own credibility on economic issues if it has no vision on tax policy?

For Americans, and for the viability of their own party, Democrats need to offer a progressive road map for tax reform that clearly spells out what they would change in our existing tax laws, and why. The party is going to need a coherent and principled basis for judging and improving the package that Republicans come up with, which, based on the vague outline released this week, will explode the debt while delivering the biggest tax cuts to the nation’s wealthiest families.

Continue reading at Los Angeles Times.