By Toby Eckert | 10/10/2017 10:00 AM EDT
ART OF THE DEAL: First daughter Ivanka Trump is working hard behind the scenes to notch her first policy victory: an expansion of the Child Tax Credit as part of tax reform. Trump has pushed the idea in meetings and phone calls with GOP lawmakers, conservative tax wonks and business groups, among others, Nancy Cook reports. She also plans to host dinners with lawmakers at her Kalorama home on Wednesday and Monday.
Trump latched onto the idea, which has been pushed most notably by Sens. Marco Rubio (R-Fla.) and Mike Lee (R-Utah), after her original pitch for a new tax credit for parents with formal child care arrangements was criticized by the left for primarily benefitting the well-off and the right for ignoring the needs of stay-at-home parents and those with other child-care arrangements. "I don't think anyone would say that she came up with this idea herself," one conservative lobbyist told Nancy. "There is increasing consensus among conservatives in Washington on this issue and significant support among strong voices like Sens. Rubio and Lee. She is viewed as a prominent spokesperson."
Working in Trump's favor is Republicans' vow to make sure tax reform delivers for the middle class. They're already battling bad publicity from a report by the Tax Policy Center that their plan would mostly benefit the wealthy - a conclusion they call unfair since they haven't released the entire thing yet. The framework congressional Republicans and the White House unveiled in late September called for "significantly" increasing the child credit and boosting the income levels at which it begins to phase out. But there were no numbers attached to the proposal, and it's unclear exactly what Trump is pushing.
"That still doesn't mean Trump's pet idea will survive the politics of a potential overhaul of the tax code - if the White House's ambitious plan gets through Congress at all," Nancy cautions. "Expanding the child tax credit does not consume lawmakers, or even President Trump, behind-closed-doors in the same way as lowering tax rates does."
IS THERE A BETTER WAY? Yes, say the folks at the American Enterprise Institute. An analysis by the conservative-leaning think tank found that expanding a different tax credit, the Earned Income Tax Credit, would do more to help middle- and low-income households than doubling the Child Tax Credit to $2,000. "Holding the cost of the expansion constant across the two reforms, the EITC expansion results in a larger after-tax increase in incomes for low-income and middle-class households compared to doubling the CTC," the analysis said . It added that expanding the EITC, an idea not addressed in the GOP tax framework, "can boost labor force participation and supplement wage incomes for those at the bottom of the income distribution. The Child Tax Credit is less targeted at work but can nevertheless boost family income and engagement in the workforce by allowing families to pay for childcare and meet other needs." One major benefit of raising the CTC: the benefits are spread across more income groups, meaning it would likely be more popular and thus more attractive to lawmakers.
WELCOME TO THE WORKING WEEK, if you were off for Columbus Day, that is. If you weren't, well, just think of it as having a day's jump on the competition. Speaking of taking time off, your regular Morning Taxer, Bernie Becker, is taking a much-deserved break. Never fear: he'll be back in time to see you off for the weekend.
In the meantime, you know what to do. Email: firstname.lastname@example.org, email@example.com, firstname.lastname@example.org, email@example.com, firstname.lastname@example.org. Twitter: @berniebecker3, @tobyeckert, @brian_faler, @colinwilhelm, @AaronELorenzo, @POLITICOPro and @Morning_Tax.
CORKER UNCORKED: For a while there, it looked like Sen. Rand Paul (R-Ky.) might be the major impediment to tax reform, after he took to Twitter last week and cited that Tax Policy Center report that said the GOP tax plan, based on the details released so far, would lead to a tax increase for nearly 30 percent of middle-income taxpayers by 2027. And he's still a wild card, as Burgess Everett and Josh Dawsey report. But the weekend Twitter feud between President Donald Trump and Sen. Bob Corker (R-Tenn.) gave tax reform advocates another reason to worry. Corker had already said he wouldn't support a tax plan that didn't reduce the deficit, so to many it made little sense for the president to alienate him. Of course, Trump has harshly criticized and belittled numerous fellow Republicans in the past, and many, if not most, have come around to support him in the end.
Still, with the GOP desperate to avoid a repeat of their Obamacare fiasco, it didn't seem to be the wisest move by Trump. It certainly caught the attention of policy analysts. In a Monday report on tax reform by the global investment bank Nomura, Corker's line in the sand was prominently noted. "During the week of 16 October, the full Senate will vote on its version of the budget resolution," which will be used as a vehicle for the tax package, Nomura's economists wrote. "At this point, it remains unclear if the bill can get the minimum 50 votes needed to pass. In particular, we will see if, similar to Sen. Corker, other Republican senators express reluctance about increasing deficits."
** A message from the Secure Family Coalition: No one wants to fly without a safety net. That's why 75 million families rely on the products and services that life insurance companies and their financial advisers provide. Protect the financial safety net as part of tax reform. Learn more at www.securefamily.org. **
POWER POLITICS: Republicans are sure to be scouring the tax code for loopholes, deductions and credits they can reduce or eliminate to help fund some of the tax cuts they want to deliver, especially since one of their biggest pay-fors, border adjustability, was sidelined. So some companies might want to take note of a recent Des Moines Register investigation of the "179D" tax credit for adding energy efficient systems to buildings. The Register's reporters said they found numerous problems with the program, including applications that come after a job is finished, lax oversight and no national tracking to show how much the credit is costing the federal treasury. Even the sponsor of the 2005 law, Sen. Chuck Grassley (R-Iowa), appears to be reconsidering. "It may be that the energy efficient buildings provision has outlived its usefulness and isn't working as intended, so it could be a candidate for reform or termination," he told the newspaper.
On a related note: EPA Administrator Scott Pruitt told the Kentucky Farm Bureau on Monday that, if he had his way, he'd let wind- and solar-power tax credits expire as planned in 2019, saying the industries should "stand on their own and compete against coal and natural gas and other sources."
ABE VS. KOIKE: Tax policy will be a key part of the election showdown this month between Japan's Liberal Democratic Party, headed by Prime Minister Shinzo Abe's Liberal Democratic Party, and Yuriko Koike's Party of Hope, Bloomberg reports. One focus will be Abe's controversial sales tax increase. "Abe, who can point to an economic recovery that's already notched up six quarters of growth, looks set to emphasize prudence on going ahead with a sales-tax hike and foresight in funneling a big chunk of the revenue into education," Bloomberg says. "Koike can counter that the last increase in the levy pushed Japan into recession and that it should be postponed again."
GOING FLAT: Cook County, Ill., commissioners are expected to put the county's highly unpopular soda tax on ice today. (Pun intended.) The penny-per-ounce tax on sugar-sweetened and artificially sweetened beverages was supposed to raise $200 million for the cash-strapped county, which includes Chicago. But after a strong consumer backlash, enough commissioners turned against the tax that it will likely be repealed over the objections of board President Toni Preckwinkle, the Ag team's Helena Bottemiller Evich reported. "A repeal in Chicago would be a big win for the beverage industry, which has long argued such taxes are deeply unpopular and unlikely to make a dent in the obesity epidemic," Helena noted.
ONE LAST PUSH: Florida lawmakers want to give Gov. Rick Scott a going-away present by raising the exemption for the state's corporate income tax. Scott had wanted to abolish the 5.5 percent tax altogether, but had to settle for boosts in the exemption, which now stands at $50,000. Efforts to raise it to $75,000 have hit roadblocks, but legislators want to give it another try, POLITICO Florida's Matt Dixon reported. "With the two-term governor facing term limits, the 2018 legislative session represents his last chance to whack the state's corporate income tax," Matt wrote. "If the $75,000 exemption passes, it means fewer than 20 percent of Florida businesses would be left paying the tax."
John Harwood takes a look at who would benefit from cutting the tax on pass-throughs.
Former Treasury Secretary Larry Summers says what he thinks of the GOP tax plan.
Goldman Sachs gives tax reform a 65 percent chance of passing - in 2018.
DID YOU KNOW?
Tom Petty is widely credited with changing the American music industry - by declaring bankruptcy. In the first of two celebrated acts of defiance toward record label MCA, Petty filed for bankruptcy in 1979 as a tactic to get out of a contract he considered grossly unfair. The move worked and is widely credited with shifting the balance of power more toward musicians in contract negotiations. (The second showdown, another win, came when Petty refused to release "Hard Promises" until the label rescinded a price increase for the album.)
** A message from the Secure Family Coalition: American life insurance companies and their financial advisers offer innovative products and services that help 75 million families plan for the future and maintain their peace of mind. These include life insurance, individual annuities, employer-based retirement plans and other long-term financial vehicles like long-term care and disability income insurance. Tax reform should protect the important private sector financial safety net. Learn more at www.securefamily.org. **
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