Two Ways Justice Kennedy’s Retirement Affects GOP Tax Plans

Plus, corporate taxes hit a record low By Yuval Rosenberg and Michael Rainey Two Ways Justice Kennedy’s Retirement Could Affect the GOP's Tax Plans Supreme Court Justice Anthony Kennedy’s decision to retire is roiling Washington, with its potential implications for a [wide range of issues]( from abortion to voting rights. But Kennedy’s exit could also have an effect on tax law, at least in the near term, as the Senate gears up for what could be a brutal confirmation fight that pushes both a technical corrections bill and a second round of tax cuts to the sidelines. [Politico’s Morning Tax]( notes that partisan battles over the vacated spot on the court could delay fixes to glitches in the Republican tax law passed late last year: “Republicans will need help from Senate Democrats to move any legislation addressing snafus in their recent tax overhaul, which will probably be a lot less likely if lawmakers are at each other's throats over filling Supreme Court Justice Anthony Kennedy's seat. ‘This throws the Senate into a partisan tizzy,’ said one tax lobbyist. That could sink efforts to address technical problems with the Tax Cuts and Jobs Act, along with hopes of attaching unrelated tax provisions to a must-pass airline bill.” And the [Tax Policy Center’s Daily Deduction]( says that the coming confirmation hearing for President Trump’s nominee to replace Kennedy “almost surely kills what was already a long-shot: a second tax bill this year.” [Share this story →]( Corporate Taxes Hit a Record Low The economy grew a little slower in the first quarter of 2018 than previously estimated, the Commerce Department announced Thursday, with the [latest estimate]( for GDP growth coming in at 2 percent, a downward revision from the 2.2 percent estimate produced a month ago. The growth in corporate profits, on the other hand, was revised higher. “The income side of the growth ledger was boosted by after-tax corporate profits, which surged at an 8.7 percent rate last quarter rather than the 5.9 percent pace reported in May,” Reuters [said](. The Wall Street Journal [suggested]( that the strong growth in profits “could signal the newly lowered federal corporate tax rate, which was cut to 21% from 35%, and other tax-law changes may have affected businesses’ bottom lines substantially.” Jared Bernstein, a fellow at the Center on Budget and Policy Priorities and a former economic adviser to Vice President Joe Biden, [notes]( that corporate taxes as a share of profits have fallen to the lowest level since records began in 1947. The odd thing, Bernstein says, is that the sharp drop in taxes relative to profits is happening during an economic boom rather than during a recession, which is more typically the case (previous sharp drops in the chart above tend to occur in the shaded areas marking recessions). And while the reduction in the corporate tax burden may make wealthy business owners happy, the trend only exacerbates one of the central fiscal challenges facing the country – namely, sustaining Social Security, Medicare and the rest of the social safety net at a time of soaring economic inequality. [Share this story →]( Trump Properties Are Raking In Millions in Political and Taxpayer Money The Trump campaign, Republican organizations and government agencies have spent at least $16.1 million at hotels, golf courses and restaurants managed or branded by the Trump Organization since President Trump first announced he was running for president, a [new analysis by ProPublica]( finds. At least $13.5 million of the total came from the Trump campaign. Federal agencies have spent about $340,000, though that figure only covers a few agencies over a few months. Other agencies have fought disclosing the information, ProPublica says. “Trump appears to be commandeering federal resources in order to maximize revenues at Trump properties, and he does this by visiting properties close to the White House,” Kathleen Clark, a law professor at Washington University in St. Louis and an expert in legal ethics, told ProPublica. “And when he travels to the golf courses in Florida, Virginia and New Jersey, other agencies that are involved in supporting the president end up spending money.” You can dig in to an interactive graphic detailing the data [here](. [Share this story →]( Column of the Day At the Financial Times, columnist Janen Ganesh looks at [“How America learnt to love the budget deficit,”]( or what he describes as “the collapse of fiscal conservatism that is being normalised with a shrug and a yawn.” The real problem — the biggest obstacle to fiscal fixes — “is national insouciance about the deficit,” Ganesh says: "The public’s appetite for the hard work of budget-balancing is unrecognisably lower than a generation ago, and falling. To stand against this trend would take a farther-sighted class of politician than the US has seen for a while." Send your tips or feedback to yrosenberg@thefiscaltimes.com. Connect with us on Twitter: [@yuvalrosenberg]( [@mdrainey]( and [@TheFiscalTimes](. And have your friends [sign up here]( to get their own copy of this newsletter! Is Trump Threatening to Use the IRS for Political Purposes? President Trump has made it clear that he doesn’t like the idea of Harley-Davidson moving some production facilities to Europe in the wake of new tariffs imposed on American-made goods. Trump threatened the iconic, Wisconsin-based motorcycle company — which, despite Trump’s claims, already has several [manufacturing plants overseas]( — with what sounded like retribution in the form of higher taxes, tweeting, “The Aura will be gone and they will be taxed like never before!” While it’s impossible to know exactly what Trump meant in his reference to taxes, Howard Gleckman of the Tax Policy Center says that none of the possible interpretations are very appealing. At best, Trump could be hinting at legislation that changes the way American firms that move facilities overseas are taxed. At worst, Trump could be threatening to use the IRS to crack down on Harley-Davidson — a tactic infamously used by Richard Nixon against his enemies. While it’s possible that Trump was simply blowing off steam, the suggestion that the executive branch would be involved in punishing specific firms is not to be taken lightly. “Trump’s tweet was inappropriate at best and dangerous at worst,” Gleckman concludes. Read Gleckman’s [full analysis here](. 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