Trolling for Tax Reform

By Yuval Rosenberg and Michael Rainey Will There Be Any Drama in the Senate Budget Vote-a-rama? The Senate formally kicked off what’s known as a [vote-a-rama]( on Thursday — hours of theatrics intended to lead up to approval of the 2018 budget resolution needed to enact the GOP tax plan without fear of a Democratic filibuster. “The only thing about this that matters is preparation for the tax reform,” Sen. Bob Corker (R-TN) [said]( about the budget, adding that he’d dismantle the Senate Budget Committee if he headed it. "Unless we create a real budget process, which this is not, our country’s fiscal situation will continue to go down the tube, and we have no mechanism to control real spending, 70 percent of which is mandatory, that’s not even covered by this.” But the vote-a-rama that Corker called a “hoax” carries at least some political significance. “Prepare for a smorgasbord of symbolic tax amendments crafted for messaging and trolling purposes,” Bloomberg’s Sahil Kapur [tweeted](. One example: The Senate rejected a Democratic amendment aimed at keeping the deduction for state and local taxes, but it adopted a Republican measure that would allow that deduction to be reduced. Democrats sought to narrow their proposed amendments to four issues, all tax-related, Senate Minority Leader Chuck Schumer [said]( “One, tax breaks aimed at the very wealthy; two, no tax increases for the middle class; three, no cuts to Medicare and Medicaid; and four, deficit neutral.” The Bottom Line: By late Thursday or early Friday, Senate Republicans are likely to have their budget passed. Next Up: The House and Senate will turn next week to reconciling their [very different]( budgets and settle on something that both chambers can accept as a start to tax reform. [Share]( [Tweet]( [Forward]( Quote of the Day Medicaid Enrollment Leveling Off After Obamacare Surge, but Spending Is Headed Higher Medicaid enrollment growth nationwide slowed to 2.7 percent in fiscal 2017, down from 3.9 percent in 2016 and 13.2 percent in 2015, after the implementation of Medicaid expansion under Obamacare, according to [a new report]( from the Kaiser Family Foundation. Enrollment growth is expected to slow further, to 1.5 percent, in 2018. At the same time, total Medicaid spending grew by 3.9 percent in fiscal 2017, a slight acceleration from 3.5 percent growth the prior year, though slower than the 10.5 percent growth in 2015. The annual survey of Medicaid directors around the country also finds that states project total Medicaid spending will grow 5.2 percent in 2018. “Major drivers of spending growth include rising costs of prescription drugs and long-term care services and supports, and increases in payment rates for most provider groups,” the report says. And states will have to cover more of those costs themselves. Their share of Medicaid spending grew 3.5 percent in 2017 but is expected to grow 6 percent next year, in part because the 31 states (plus D.C.) that expanded Medicaid under Obamacare are now footing part of the bill after years in which the federal government covered all the expansion costs. “In addition,” a Kaiser [press release]( says, “some states are experiencing a decrease in the formula-driven federal match rate for the traditional Medicaid population that can result in faster state spending growth.” States also signaled some concerns about potential budget crunches ahead, given that phasing out of federal contributions for expanded Medicaid programs as well as Congress’ failure thus far to reauthorize the Children’s Health Insurance Program and the uncertainty about Medicaid funding levels created by the GOP push to repeal and replace Obamacare. Medicaid provides coverage to about one in five Americans, or roughly 74 million people, and accounts for a sixth of all health care spending in the U.S. [Share]( [Tweet]( [Forward]( Fiscal Flashes Where Trump Will Compromise on Tax Reform: White House officials tell [USA Today’s Heidi Przybyla]( that President Trump will include a number of compromises to limit his tax plan’s benefits for the wealthy when he promotes the blueprint next month. “The compromises will include ending a 23.8% preferential tax rate for hedge-fund managers, or the so-called carried interest rate, White House legislative affairs director Marc Short told USA TODAY. … Retaining parts of a state and local tax deduction that benefits many middle-class families in blue states is also an area where Trump is expecting compromise.” Trump campaigned on raising the carried interest rate, saying its beneficiaries are “getting away with murder.” But changes to the carried interest rate may run into opposition from House Republicans, and the tweaks appear unlikely to win any Democratic support. Can Trump Bring Democrats Along on Taxes? Speaking of compromise … while Republicans are prepared to go it alone on tax reform, President Trump suggested creating a bipartisan working group on the topic during a Wednesday meeting with senators from both parties. Some senators were open to the idea, but it doesn’t look like Republicans have much interest in slowing down the process with in-depth negotiations. “I don’t really personally see the benefit of creating additional structure. I think we’ve got all the tools we need,” said Sen. John Cornyn (R-TX), who attended the meeting, according to [Politico](. Democrats appear skeptical, too. Sen. Ron Wyden (D-OR) said he told Trump that the distance between what Republicans were saying about their plan and what it actually does is a serious problem. IRS Releases 2018 Tax Brackets: The Internal Revenue Service announced the inflation adjustments to the tax tables for the calendar year beginning January 1, 2018. These are the numbers you’ll use to do your 2018 taxes in 2019. [Forbes]( has a complete rundown. Head-Spinner of the Week: In a report released on Monday, the White House’s Council of Economic Advisers said that cutting the corporate tax rate from 35 percent to 20 percent would increase average household incomes by $4,000 a year on average, and potentially by as much as $9,000. But Mihir Desai, a Harvard economist whose work was cited in the CEA paper, pushed back on the report, saying it misapplied his research and that the boost to incomes would be around $800, Jim Tankersley of [The New York Times reported](. “Mr. Trump’s economic team disagreed — saying Mr. Desai had erred in interpreting his own paper,” Tankersley adds. Send Us Your Tips, Feedback and World Series Predictions: Email Yuval Rosenberg at yrosenberg@thefiscaltimes.com and follow me on Twitter [@yuvalrosenberg](. Follow The Fiscal Times on Twitter [@TheFiscalTimes](. Tax Foundation Ranks the Best and Worst States on Taxes The Tax Foundation released its annual [analysis of state tax systems]( this week. The conservative think tank ranks the states in an index that weighs five taxes (individual, sales, corporate, property and unemployment insurance). The lower the taxes and the simpler the rules, the higher the ranking of a given state. The ranking is designed to shed light on the “business tax climate” around the country, which the Tax Foundation says plays a critical role in the economic health of each state, especially as the states compete with each other for capital and labor. The top states have something in common, according to the report: “The absence of a major tax” — meaning corporate, individual or sales taxes — “is a common factor among many of the top 10 states.” The top 10 states in the [2018 ranking]( are Wyoming, South Dakota, Alaska, Florida, Nevada, Montana, New Hampshire, Utah, Indiana and Oregon. The lowest-ranked states are Rhode Island, Louisiana, Maryland, Connecticut, Ohio, Minnesota, Vermont, California, New York and New Jersey, which has ranked last since 2015. But the analysis is not without its critics. Carl Davis, research director at the liberal Institute on Taxation and Economic Policy, says the ranking is a “problematic wishlist” that does little to predict economic performance and simply reflects “the Tax Foundation’s policy recommendations.” Peter Fisher, an economist at the University of Iowa and a long-standing critic of the report, [says]( “the Tax Foundation provides no evidence that its index actually predicts growth and research has generally found that it does not.” What We're Reading - [George W. Bush Just Laid a Major Smackdown on Trumpism]( – Chris Cillizza, CNN - [GOP to Trump: Stop Flip-Flopping on Obamacare Deal]( – Politico - [Bipartisan Health Proposal Is Too Late for 2018, but a Salve for 2019]( – New York Times - [GOP Tax Framework Looks Much Like Kansas’ Failed Tax Cut Package]( – Chye-Ching Huang, CBPP - [Trump’s False Claim That Insurance Companies ‘Have Made a Fortune’ From Obamacare]( – Glenn Kessler, Washington Post - [Republican’s Decision to Retire Seen as Sign of Growing Frustration in Washington]( – The Hill - [America Needs Higher Wages, Not Lower Taxes]( – Jonathan Tasini, CNN - [Most Voters in Poll Back Trump’s Health Care Order but Are Divided Over Impact]( – Morning Consult - [Hardly Any Federal Employees Are Fired for Poor Performance. A Good Sign?]( – Washington Post - [How Money Became the Measure of Everything]( – The Atlantic - [This Nobel-Winning Economist Says a Black Monday Crash Can Happen Again]( – Fortune Copyright © 2017 The Fiscal Times, All rights reserved. You are receiving this newsletter because you subscribed at our website, thefiscaltimes.com. Our mailing address is: The Fiscal Times 712 Fifth AvenueNew York, NY 10019 [Add us to your address book](//thefiscaltimes.us1.list-manage.com/vcard?u=40d2c5373681f5cd830b6d823&id=714147a9cf) If someone has forwarded this email to you, consider signing up for The Fiscal Times emails on our [website](. Want to change how you receive these emails? You can [update your preferences]( or [unsubscribe from this list](