Will Republicans present that they’ll get incorrect on tax coverage?

0
26
Will Republicans show that they can get wrong on tax policy?

During his campaign, President-elect Joe Biden talked more than any other candidate in recent years about raising taxes on rich people – and he won. Beating an incumbent president is rare, but Biden has done it and appears to be the first incumbent challenger to the president to have won 51 percent or more of the vote since Franklin Roosevelt’s victory in 1932.

Difficult as his race was, his demanding higher taxes on the rich and corporations likely helped him. For years, pollers have told Gallup that the rich and corporate should pay more taxes. Polls conducted over the past three years show the public opposed the 2017 GOP tax cut, the Trump administration’s only major legislative achievement.

The presidency and every seat in the House of Representatives were on the 2020 ballot, and most voters chose Democrats. Control of the Senate will depend on the outcome of the two special elections in Georgia (a narrowly won state of Biden), but the chamber will still be tightly divided.

This puts Republicans in Congress in a difficult position on tax policy, as their views do not agree with most of the electorate. President-elect Biden’s obstruction in relation to the tax policies that most Americans support could be dangerous to them.

We don’t know what Biden will focus on when he takes office, but his tax agenda may have three components: tax law, tax rules, and IRS funds.

The first possible part of that agenda, tax legislation, includes the proposals that Biden discussed on the campaign trail that are not particularly radical. He suggests capping Trump’s tax cuts for those with annual incomes greater than $ 400,000. The Institute of Taxes and Economic Policy found that only 1.9 percent of Americans would see their income or payroll taxes rise under its plan. For those with incomes in excess of $ 1 million, Biden’s plan would end existing rules that tax certain capital gains (stock dividends and gains from the sale of assets) at lower rates than income from labor. Republicans would find it difficult to explain to the public why millionaires should pay lower tax rates on their investment income than workers on their income.

Biden also wants to reverse many of the corporate tax cuts in the 2017 law, but would set the corporate tax rate lower than it was before the 2017 law. Additionally, his plan would reduce the tax breaks companies currently receive for making profits offshore rather than here in the US. That would be a difficult proposition for Republicans too.

The second possible part of that agenda is tax regulations, which the Biden government can pursue without input from Congress. The Biden administration should first review the regulations Trump’s finance department made to implement the 2017 tax law. Legal scholars have concluded that these regulations give wealthy individuals and businesses greater tax breaks than the 2017 law allows. Congressional Republicans might be tempted to defend Trump’s tax rules, but that could backfire as those rules expand unpopular tax cuts to benefit unpopular interests like banks and Wall Street investors.

For example, part of the 2017 law that provides for a special corporate earnings deduction prohibits this benefit from “financial services,” but the Trump administration ruled that “financial services” does not include companies that raise deposits and lend.

Another provision of the law provides a minimum tax on interest payments made by American companies to affiliated foreign companies. However, the Trump administration has invented a legal exception for certain foreign banks. This exemption adds about $ 50 billion to the cost of the 2017 bill. Incoming administration should reverse this overshoot by Trump’s finance department and limit 2017 tax breaks at least to what is legally allowed.

The third possible part of this tax agenda concerns funding for the Internal Revenue Service. While lawmakers may not agree on what new tax laws to enact and what new tax rules should be in place, they should agree to enforce the tax rules already on the books. This requires full funding of the agency that enforces these rules. It wouldn’t cost anything. In fact, every dollar spent on funding the IRS creates several additional revenues. At a time when Republicans claim we have limited resources to help the unemployed, it would be difficult for them to explain why they choose not to collect taxes owed.

Experts often ask how a new president will come about and work with members of both parties. However, it is also common to assume that a new president will not forego proposals that were at the heart of his election promises, especially if the position of the opposing party on those proposals is extremely unpopular. As a candidate, Biden offered a strong case for increasing taxes on wealthy individuals and companies, and voters liked what they heard. The question is how will Congress Republicans adapt?

Steve Wamhoff is Director of Federal Policy at the Institute for Taxes and Economic Policy

The views expressed in this article are from the author.