Gary Cohn: Here's What We Want From Tax Reform

Cohn Says Tax Reform Can Get Done in 2017 Gary Cohn, President Trump’s top economic adviser, told the Financial Times Friday that the White House will begin a sustained push on tax reform starting next week. The president will hit the road to sell the American public on the need for a tax overhaul, beginning with a speech in Missouri on Thursday. This would be a significant change for President Trump, who has been [notably missing]( from the effort so far. In an [interview with the FT]( Cohn highlighted some of the changes the White House is looking for: Personal Taxes - Protect three popular deductions — charitable, mortgage and retirement saving. - Raise the standard deduction while eliminating other personal deductions. - Eliminate “death taxes” and estate taxes. Business Taxes - Switch to a territorial system, with taxes that encourage the repatriation of corporate profits currently held overseas. - Eliminate many deductions companies use to lower taxable income. The goal is to get more companies paying taxes, though at a lower rate. Cohn described this as a “base-broadening exercise.” Cohn recognized that cutting taxes will mean less revenue for the government, even in the “medium term.” But he stuck with the supply-side faith, saying that once the economy starts growing in the wake of the tax cuts, government revenue will “explode.” While the White House says it knows what it wants from tax reform, the administration wants Congress to fill in the details of the legislation. An administration official told [Axios]( "We need the Ways and Means Committee to own it.” Cohn seemed confident that tax reform could happen this year, despite doubts that such a complicated undertaking can be accomplished in such a short timeframe, especially given the many other issues coming to a boil, including the need to raise the debt ceiling and fund the government. But Cohen said it would take only a matter of weeks to fill in the tax reform outline already [agreed upon by the major players]( who have been holding hearings on taxes “for years.” Even so, [Politico]( points out that the ambitious end-of-the-year deadline for tax reform amounts to moving the goalposts once again: “Treasury Secretary Steven Mnuchin said tax reform would be done and signed into law by the August recess. Then Marc Short, Trump’s top Hill liaison, said Trump would like a bill by Thanksgiving. This is another punt.” [Share]( [Tweet]( [Forward]( Trump Wants to Eliminate the Estate Tax. Here’s Who Would Benefit Since the elimination of the estate tax was on Cohn's list, let's look at who pays the estate tax. The short answer, [from the Tax Policy Center]( “The top 10 percent of income earners pays nearly 90 percent of the tax, with over one-fourth paid by the richest 0.1 percent. Few farms or family businesses pay the tax.” The tax group estimates that roughly 11,000 people who die this year will leave estates large enough — with a gross value of $5.49 million or more — to require a federal estate tax return. About 5,500 estates will actually owe tax, with more than two-thirds of them being in the top 10 percent of income earners. In all, the Tax Policy Center estimates that estate tax liability for the year will total nearly $20 billion, and the top 10 percent of income earners will pay 88 percent of that total. The top 0.1 percent will pay 27 percent of it. Some on the left are already pushing back on the idea of eliminating the estate tax. Gene Sperling, economic adviser to Presidents Clinton and Obama, tweeted out this: [Next time you hear GOP on 'middle class' remember: their estate tax repeal is $269B - ALL goes to top .2 of top 1%] Sperling’s tweet linked back to his [piece for The Atlantic]( from earlier this year making a political and economic argument for the estate tax to be raised, including: “After years of looking, estate-tax repealers have not been able to come forward with [even a handful of farms]( that, due to the estate tax, were forcibly sold off. And the notion that the estate tax somehow inhibits middle-class Americans from passing down savings to their heirs now, more than ever, falls somewhere between a hoax and a joke: The estate tax today kicks in at about $5.5 million for an individual, or $11 million for a couple. That means that there is a zero percent estate tax for every family estate under $11 million. A married couple that managed to save and leave $10.9 million to their children would not pay a single penny.” Nevertheless, repealing the estate tax is near and dear to hearts of many Republicans. Much of their opposition seems to be based on a sense that taxing the dead is just plain wrong – “un-American,” as House Ways and Means Committee Chairman Kevin Brady [called it recently](. "You work your whole life to build up a nest egg or a family-owned business or family farm. Then you pass away. ... Uncle Sam can swoop in and take over 40% of everything you've earned over a certain amount. It's just wrong." What Brady didn't say is that very few Americans will ever actually pay that tax. [Share]( [Tweet]( [Forward]( Fiscal Fact Check: Most Big US Companies Pay Less Than 35% Republican leaders in Congress have been visiting major corporations around the country this week as part of a [big PR push on tax reform](. House Ways and Means Committee Chairman Kevin Brady (R-TX) gave pep talks at UPS in Kentucky and AT&T in Texas, while House Speaker Paul Ryan visited Intel in Oregon and Boeing in Washington, working with corporate executives to build some excitement for tax reform among their employees, customers and political representatives – and ultimately, they hope, the American public. Both politicians frequently cite the top corporate tax rate of 35 percent as a serious problem for U.S. businesses. Speaking at Boeing, Ryan [said]( "We have the worst, the least competitive tax system in the industrialized world. What does that mean? Well clearly and very specifically for Boeing, it means that we are taxing this business, these planes, your jobs in this country at a much higher tax rate than our foreign competitors tax theirs." Critics have been lighting up the internet pointing out that Boeing isn’t the ideal poster child for corporate tax reform since it and many other major corporations don’t pay anything like a 35 percent tax rate. Matthew Gardner of the left-leaning Institute on Taxation and Economic Policy [points out]( that according to ITEP’s [analysis]( Boeing has paid an effective tax rate of 5.4 percent over the last eight years, while AT&T has paid 8.1 percent. Ben Spielberg of the Center of Budget and Policy Priorities made the same point, slicing the data a different way. He [tweeted]( “Paul Ryan just complained that Boeing faces a 35% tax rate. In reality, they paid 23% in 2016 & an average of only 3% for the past 15 years.” Critics at ITEP and elsewhere worry that Republicans in Congress will use the claim that U.S. corporations pay heavy taxes to roll back the top tax rate — to as low as 20 or even 15 percent — while failing to eliminate the multitude of tax breaks and loopholes that allow giants like Boeing and AT&T to pay very low taxes under the current rules. [Share]( [Tweet]( [Forward]( Why a Government Shutdown Is More Likely in December Than October President Trump may be willing to shut down the government to get Congress to pay for his border wall with Mexico, but that fiscal fight could be delayed until December. When Congress returns after Labor Day, it will have much to do — lift the debt ceiling, pass a spending bill to keep the lights on at federal agencies, fund children’s health insurance, reauthorize a federal flood insurance program — and little time to do it all. Pushing off any battle over border wall funding could make it easier to focus on increasing the government’s borrowing authority and averting a debt default. House Speaker Paul Ryan said this week that a short-term spending bill, called a continuing resolution, would likely be necessary to fund the government after September 30 and allow Congress time it needs to work through the appropriations process. “Therefore,” analysts Brian Gardner and Michael Michaud of Keefe, Bruyette & Woods wrote in a [note to clients]( Friday, “we think the likely strategy will be to increase the debt ceiling and then pass a temporary spending bill that will buy Congress more time to finish spending bills for the remainder of the fiscal year (through September 30, 2018) “ One wildcard in that scenario: President Trump could nix any short-term bill if he insists on getting funding for the wall right away or decides to force Congress to override his veto. Still, the analysts put the odds of a government shutdown at the beginning of October at less than 50 percent — but December is another story. “We think a short-term spending bill (aka continuing resolution or CR) to keep the government open will pass but any CR will kick the can down the road until near the end of the calendar year and that is when, in our view, the prospects for a government shutdown become more likely.” Rep. Jim Jordan, a leader of the conservative House Freedom Caucus, told Bloomberg Friday that he’d be fine putting off the budget fight until later in the year — but sounded eager for a shutdown showdown. “I’m willing to do it whenever it makes sense,” he said. 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