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Dec 02, 2017
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WHAT are Republican lawmakers in politics to achieve? Not many years ago, at the peak of their outrage over Barack Obama's economic stimulus package, "balanced budgets" might have featured in the answer. But the frenzied passage of the Tax Cuts and Jobs Act through Congress has revealed the insincerity of the party's fiscal moralising. Republicans in Congress do not oppose government borrowing when it suits them. Rather, the overarching policy objective that unifies them is cutting taxes—and damn the fiscal consequences. Following the passage of the tax bill through the Senate in the early hours of December 2nd, Republicans are on the brink of achieving their goal.On November 30th budget scorekeepers unveiled a forecast for how much extra economic growth the tax bill might spark: enough to pay for about one third of its $1.5trn cost. Previously, Republicans might have viewed this projection as a triumph. They have long pressed for budget forecasts to include such "dynamic" effects (see blog). But the score briefly seemed to imperil the bill. It undermined the absurd claim, made by the Republican leadership and the Trump administration, that tax cuts would pay for themselves in full. No serious economist ever thought this credible. Yet the official score seemed to blow Republicans' ...
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Dec 01, 2017
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THEY have been at this a long time. In 1994 Republicans, newly in charge of Congress, held hearings on what would come to be called "dynamic scoring". Bills, they said, should be evaluated using the predictive power of macroeconomic models. If the model predicts more GDP growth, then it could be inferred that the growth would produce more tax revenue. During the hearings, however, came an awkward moment. Alan Greenspan, then in charge of the Federal Reserve, told Congress that macroeconomic models were "deficient". That is, their predictive power, though interesting, was not good enough to rely on. Last year, after the election of Donald Trump, your blogger contacted Mr Greenspan to see whether the models were good enough yet. Mr Greenspan, his office responded, had not yet changed his opinion.Neither have Republicans. Over the past two decades, in and out of control of Congress, the party has nudged dynamic scoring successively closer to the official policy process until we arrived, yesterday evening, at as dramatic a moment as macroeconomic analysis ever gets. The Joint Committee on Taxation, the nonpartisan Congressional body responsible for evaluating tax proposals, hurried its study (PDF) out on a Thursday afternoon as the Senate was preparing to approve a tax cut. That cut, ...
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Nov 30, 2017
Print section
Print Rubric:
Bosses are under increasing pressure to take a stance on social issues. How should they respond?
Print Headline:
Chief activist officer
Print Fly Title:
Business and society
UK Only Article:
standard article
Issue:
How—and why—to end the war in Yemen
Fly Title:
Chief activist officer
IT OUGHT to be a love-in. American companies support tax cuts and deregulation. As The Economist went to press, President Donald Trump was pushing the Senate to pass a sweeping, business-friendly tax reform. Instead, CEOs have reason to feel uneasy. In the first year of his presidency, executives have found themselves embroiled in public disputes with Mr Trump on everything from immigration to climate change. His advisory councils of business leaders have disbanded. The second year of his presidency is unlikely to be much smoother.
Some of these spats between the Oval Office and the corner office reflect Mr Trump's ...
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Nov 23, 2017
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Print Rubric:
How America does, and does not, redistribute income
Print Headline:
For richer, for poorer
Print Fly Title:
Redistribution
UK Only Article:
standard article
Issue:
A hated tax but a fair one
Fly Title:
For richer, for poorer
Location:
WASHINGTON, DC
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AMERICANS are not known for their love of income redistribution. Asked to rank, on a scale of one to ten, how important it is for democracies to reduce inequality, they say only six; Europeans say eight. Yet the country is hardly indifferent to who gets which slice of the economic pie. Three in five Americans say that income and wealth should be spread around more. The most potent charge laid against the unpopular Republican tax plan making its way through Congress is that it is a ...
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Nov 22, 2017
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Print Rubric:
Inheritance taxes have fallen out of favour around the world
Print Headline:
Death of the death tax
Print Fly Title:
Taxing inheritances
UK Only Article:
standard article
Issue:
A hated tax but a fair one
Fly Title:
Death of the death tax
Location:
STOCKHOLM AND TOKYO
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THE marks left by inheritance tax are apparent all around Japan. Bookshops are filled with tomes on how to avoid a hefty bill when a loved one dies. Near the ancient Shimogamo shrine in Kyoto, a lady shows off her old house, which will soon be bulldozed. With her parents getting on, she needs to ready herself to pay an inheritance-tax bill. To reduce it, she is splitting the plot and selling one part, which means destroying the family home and building a smaller ...
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Nov 16, 2017
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IN THE annals of modern American economic policymaking, among the most revered pieces of legislation is the Tax Reform Act of 1986. During the three decades since its passage, Democrats and Republicans alike have hailed the law not only for overhauling the country's tax system, which Jimmy Carter famously called "a disgrace to the human race", but also for doing so with bipartisan support in both houses of Congress. As Republicans embark on yet another sweeping rewrite of the tax code, many point to the 1986 effort as a model to emulate. It was "really something special", Donald Trump said in August. However, admirers of America's last comprehensive revision of its tax code should be disappointed with the GOP's current attempts.The bill that passed in 1986 took a long, arduous path to President Ronald Reagan's desk. Originating out of a three-volume report by the Treasury department, it faced numerous brushes with death, and took more than two years to wind its way through Congress. The process included full committee hearings, markups and deliberations. The final bill eliminated many deductions, credits and exemptions that favoured some taxpayers over others. This generated new revenues, which were then used to reduce tax rates, mainly for low and middle-income individuals. The bill did ...
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Nov 16, 2017
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Print Rubric:
So-called pass through firms may soon get a big tax cut
Print Headline:
Pass whos?
Print Fly Title:
Business taxes
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standard article
Issue:
The army sidelines Robert Mugabe, Africa's great dictator
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Pass whos?
Location:
WASHINGTON, DC
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PRESIDENT DONALD TRUMP broke with convention by not releasing his tax returns during his campaign for office. One reason might be his involvement in around 500 "pass-through" firms. The profits (and losses) of such businesses, unlike those of traditional corporations, flow directly onto the tax returns of their owners. So Mr Trump has good reason to pay attention as Republicans in Congress try to decide how such firms should be treated.
Rich countries typically allow sole ...
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Nov 16, 2017
Print section
Print Rubric:
There are better motivations for tax reform than boosting growth
Print Headline:
The grow-nothings
Print Fly Title:
Free exchange
UK Only Article:
standard article
Issue:
The army sidelines Robert Mugabe, Africa's great dictator
Fly Title:
Free exchange
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IF MAKING America great again is the aim, you could do worse than bring back the economic growth rates of the late 1990s. President Donald Trump's team reckons that the Republican tax plan making its way through Congress will do just that. "We are creating a model that creates economic growth in this country," says Gary Cohn, the director of Mr Trump's National Economic Council. Kevin Hassett, who runs the Council of Economic Advisers, reckons the bill should push growth above 4% per year.
Such heights are not beyond the realm of possibility, but ...
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Nov 09, 2017
Print section
Print Rubric:
How to make the Republican tax plan work
Print Headline:
Reform the reform
Print Fly Title:
American taxes
UK Only Article:
standard article
Issue:
America's global influence has dwindled under Donald Trump
Fly Title:
Reform the reform
Main image:
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THE last time Republicans controlled both the White House and Congress, under President George W. Bush, they passed a package of temporary tax cuts. This time they are displaying more ambition. The tax bill unveiled in the House of Representatives on November 2nd can properly be called a reform. It would slash deductions that distort the economy: for debt and mortgage interest, state taxes and manufacturers. The savings would go towards reducing most marginal tax rates.
The principle of scrapping deductions in order to lower rates is exactly the right one. But ...
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Nov 09, 2017
Print section
Print Rubric:
Business reaction to the Republicans' big tax-reform plan is mixed
Print Headline:
Give and take
Print Fly Title:
American business and tax
UK Only Article:
standard article
Issue:
America's global influence has dwindled under Donald Trump
Fly Title:
Give and take
Location:
NEW YORK
"CUT, cut, cut!" That is what President Donald Trump wanted to name an eagerly awaited Republican proposal for reforming America's tax code. He vows that slashing the rate of corporate tax will create millions of jobs. In the end, on November 2nd, Republican leaders in the House of Representatives unveiled the modestly named Tax Cuts and Jobs Act.
Some business leaders cheered. The US Chamber of Commerce called it a "once-in-a-generation opportunity to fix the problem". The National Association of Manufacturers declared the plan "a grand slam for ...
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