On November 17, The Bernard L. Schwartz Rediscovering Government Initiative at the Century Foundation co-sponsored the “Paying for Progress: A Tax Reform Agenda for the Next President conference on tax reform with the Economic Policy Institute (EPI). Held at the Westin DC City Center Hotel, the conference gathered experts, policymakers, and the general public to assess the tax reform options possible in a Trump administration.
The conference consisted of three panels, as well as a keynote by Representative Sandy Levin of (D-MI). The panels delved into issues of fiscal policy, international tax reform, and new taxes that could promote a progressive agenda in the medium-to-long term.
Representative Levin Rallies Progressive Thinkers to Monitor Trump’s Infrastructure and Fiscal Policies
Rep. Levin provided cautionary remarks on the incoming Trump administration. In particular, the Trump infrastructure plan invites skepticism. Between the public-private partnerships and the substantial tax breaks for investors, the details of how the infrastructure plan is implemented are what is important.
Connecting with the public around the drawbacks of plans like this will be essential. From worsening inequality to the inefficient use of resources, it is the task of those in the opposition to connect with a broader audience in defending progressive ideals in a time where they are in jeopardy. “We are going to rely on those on the outside to pitch in and to help us make sense of [tax reform]…and also describe it in a way that connects with the public, that really gets us away from the kind of stereotypical approaches to tax reform and its impact…[and moves] to describe the likely impact is on the lives of so many people if this [reform] is in the wrong place.” This includes holding the line on some of the proposals around block granting Medicaid or reforming Medicare.
Levin pleaded with the researchers and organizations in the room to assist policymakers in analyzing the policy options that will be proposed in the next administration. While ideology is a main driver of Trumpism, and the incoming administration’s programs will undoubtedly benefit the 1 percent, their policy proposals will need to be prudently analyzed for both the public and legislators to defend progressive social policy. See Rep. Levin’s comments below:
International Tax Reform Will Be Front and Center in 2017
The panel on international tax reform ran the gamut of viable options for reform in the next administration and the 115th Congress. The panel featured Reuven Avi-Yonah of the University of Michigan Law School, David Borris of the Main Street Alliance, Eric Toder of the Tax Policy Center, and Matt Gardner of Citizens for Tax Justice and the Institute on Taxation and Economic Policy. Moderated by Andrew Stettner, senior fellow at The Century Foundation, the speakers estimated the paths to international tax reform in the next administration.
While some on the panel argued that a destination-based tax (where a corporation is taxed based on where they sell their goods and services) is the best way to collect taxes on corporate income, and that lowering the rates and broadening the base is the general mantra of corporate tax reformers in Washington, Trump’s repatriation plans were at the center of the discussion.
According to Avi-Yonah, the author of a special report released at the conference, the 10 percent one-time repatriation scheme on corporate income sitting offshore that is included in the Trump plan would be an egregious misstep. This tax on $2.5 trillion sitting offshore represents a tax on past profits, and would create the wrong incentives by encouraging further offshoring, profit shifting, inversions and expansions of tax havens. If corporations know they can eventually bring back foreign income every few years with a ultra-low tax holiday repatriation rate, they have little incentive to change their ways.
It is also problematic to assume the trillions sitting in offshore tax havens were earned in territories such as the Cayman Islands, where Jane Gravelle pointed out that offshore money kept in places like the Cayman Islands dwarfs the GDP of those tax havens. In fact, most of this income can be attributed to intellectual property originating in the United States, and as such ought to be subject to U.S. tax rates in a deemed repatriation system. A higher rate would also provide more revenue for investments that Americans sorely need.
In Life and in the Economy, “Trump Is Born on Third Base Thinking He Hit a Triple”
The panel on fiscal issues, featuring Josh Bivens of the Economic Policy Institute (EPI), Dean Baker of the Center for Economic and Policy Research, and Jane Gravelle of the Congressional Research Service, dealt with the fiscal realities and possibilities of a Trump administration. Moderated by Christian Dorsey of EPI, the speakers discussed the potentials and pitfalls of a Trump economic plan. According to Baker, the Trump “stimulus” could create jobs and growth, but the public-private partnerships in the infrastructure plan could invite graft. There may also be attempts to evade wage standards for contractors and subcontractors working on federal projects, which could erode standards among good paying union jobs in the building trades.
Meanwhile, Bivens argued that the three main fiscal challenges of (1) full employment, (2) paying for Medicare/Medicaid in the future, and (3) using fiscal policy to fight inequality. On the first count, as with many facets of his life, Trump was born on third thinking he hit a triple, as the American economy is currently near full employment. The second is an issue that can be mitigated through the stabilization of Medicare and Medicaid costs seen since the implementation of the Affordable Care Act (ACA), but Republicans are likely to continue to float ideas around block-granting Medicaid. The third is a dead letter, as the new Congress and the incoming Trump administration’s plans will in all likelihood worsen inequality.
Looking to the Future: Sound Approaches For Revenue Generation
The large tax cuts and possible infrastructure tax credits could lead to large deficits and the need for revenue increases in the next several years. A progressive approach to these revenue strategies will increase and advance national priorities. The panel on revenue generation, moderated by Alexandra Thornton of the Center for American Progress (CEPR), featured Frank Ackerman of Synapse Energy Economics discussing the carbon tax, Kathleen Romig of the Center on Budget and Policy Priorities presenting her paper’s findings on raising revenue for Social Security, Thomas Hungerford discussing the applicability of a value added tax in the United States, and Dean Baker of CEPR presented the potential of financial transactions taxes as outlined in a paper he authored for the Century Foundation this summer.
Frank Ackerman noted the need for a carbon tax as a broader agenda to fight climate change. A carbon tax of $40 per ton of carbon dioxide could raise 6 to 7 percent of current federal revenues ($190–$250 billion) and could be used to fund green technology, sent back to citizens to reduce regressivity, all while transforming the energy sourcing of the electrical grid. Despite the slim chances of this agenda being implemented with climate denial in the White House, states could develop their own policies to maintain their commitments to the Paris climate agreements.
Kathleen Romig outlined the many ways to fund Social Security into the future. Some combination of raising or eliminating the cap on payroll taxes or a slight increase in payroll taxes would maintain solvency for a program that is essential for seniors. The task at present is to defend programs such as Social Security until these progressive measures become more politically feasible.