WHO, WHAT, WHERE CONT’D: So with all that, it’s understandable why Democrats would think that JCT’s finding that the 16,000 richest families in America pay an effective tax rate of around 34 percent is damaging to their case. In fact, key Democratic senators criticized JCT far more sharply than is the norm for congressional tax writers, with Finance Chair Ron Wyden (D-Ore.) — who has his own proposal aimed at the held assets of the very rich — calling the report full of “junk math.” And to be fair, they have gotten some backing from the expert community in recent days. — For instance, Marty Sullivan, the chief economist at Tax Analysts, essentially said that JCT goofed by not counting unrealized gains as income, something he argued was the prevailing thought for “most economists and many regular people.” To be fair, Sullivan acknowledged that it’s difficult to nail down figures like effective tax rates, and he said that he preferred any tax aimed at unrealized gains to be aimed at a smaller group of exceptionally rich households than Biden’s plan. And yet: “We strongly suggest that the JCT’s estimated 34 percent rate isn’t evidence of a truly progressive tax system,” Sullivan wrote in Tax Notes. — Elsewhere, Steve Rosenthal of the Urban-Brookings Tax Policy Center maintained there is a middle ground between JCT’s figures and what the Biden administration has claimed in recent years — that the very wealthy pay an average effective rate of just 8 percent. The White House’s 8 percent statistic does count unrealized gains as income, and progressives like to point to an approach known as “buy, borrow, die” — in which the super rich escape taxes by taking loans against their assets — as a big factor in why that upper echelon arguably doesn’t pay enough to the IRS. But like Sullivan, Rosenthal made the case that the largest problem when it comes to taxing the very, very wealthy is that they get big tax advantages when passing down unrealized assets when they die. (This is something Democrats tried to change during the Biden administration, before dropping the idea over concerns that it might affect family farms.) “Rather than argue about tax rates of the super-rich, policymakers would do well to focus on how best to collect taxes on the trillions of dollars that escape income taxation permanently,” Rosenthal wrote. The view from the right: Not surprisingly, Republicans quickly brandished the JCT figures as further proof that the U.S. already has a rather progressive tax system. Adam Michel of the libertarian Cato Institute noted that the Organization for Economic Cooperation and Development has found that the U.S. has a fairly progressive tax system, even when accounting for state and local taxes. The U.S. also has comparatively high income inequality and comparatively low tax collections, according to the OECD. But Michel and others on the right argue that it would be impractical for the U.S. to try fund a larger social safety net solely through new revenues from the rich. “Whatever you think the size of government should be, I think we should be more honest with people that bigger government requires higher taxes on everyone, not just the rich,” Michel told Weekly Tax. IT IS THAT SEASON: Former President Donald Trump certainly seems to have been seeking targeted political gains with his tax proposals this campaign — he announced “no tax on tips” in Nevada, after all. But as our Ally Mutnick and Sarah Ferris noted, Trump’s flip-flop on capping the deduction for state and local taxes looks to be less of a play to win himself votes in November, and more of an effort to preserve a Republican-run House for what he hopes will be the first half of his second term. Several GOP lawmakers in marginal districts in states like California and New York personally lobbied Trump to essentially disavow the $10,000 cap on state and local deductions that he signed into law in his signature tax cuts. As it happens, the SALT limits are also set to expire at the end of 2025 — a rare revenue-raiser that will be on the table next year, along with sizable amounts of tax cuts for individuals and certain kinds of businesses. To put that another way, offering SALT relief would raise the price tag on a potential agreement next year, at a time when key members in both parties have sounded the alarm about how much extra red ink might come with such a deal. It’s also not clear how much of a priority SALT might be in next year’s talks, precisely because the current cap isn’t much of an issue outside of a handful of high-tax states like California, New Jersey and New York. (Recall, for instance, that Democrats didn’t do anything on the issue when they had control of Congress and the White House in Biden’s first two years in office.)
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