This week (August 15-19)

Congress out: The House and Senate are out of session until September 6.

Last week (August 8-12)

Candidates' dueling economic speeches: The presidential candidates delivered speeches in Michigan seeking to highlight aspects of their economic plans and to draw contrasts with one another, particularly on tax issues. During his August 8 speech in Detroit, Republican nominee Donald Trump said, "Hillary Clinton — who has spent her career voting for tax increases — plans another massive job-killing $1.3 trillion-dollar tax increase. Her plan would tax many small businesses by almost fifty percent." In her August 11 speech that was viewed as a rebuttal, Democratic nominee Hillary Clinton said it is a myth that Trump will act to "stick it" to the rich and powerful. "He would give trillions in tax cuts to big corporations, millionaires and Wall Street money managers," she said. "That would explode our national debt and eventually lead to massive cuts in priorities like education, healthcare, and environmental protection."

Trump announces revisions: In his August 8 speech, Trump announced revisions to move his tax plan closer to the House Republican tax reform Blueprint released June 24, embracing the Blueprint's proposed individual income tax rates of 12%, 25%, and 33% and saying he would work with lawmakers to advance the plan. Trump had previously proposed individual income tax rates of 10%, 20%, and 25%. He also announced support for immediate expensing for new business investments. In conjunction with expensing, House Republicans have called for eliminating the deductibility of net interest expense. Trump previously proposed an unspecified "reasonable cap" on the deductibility of business interest expense but made no mention of it in the speech. Otherwise, Trump highlighted previously announced elements of his tax plan, including a 15% corporate income tax rate and a matching 15% business income tax rate within the personal income tax system for pass-through entities. He highlighted a one-time deemed repatriation tax of 10% on accumulated foreign earnings. He also restated his desire to eliminate the preferential tax treatment of carried interest and to repeal the estate tax.

Questions about pass-through rate: In her August 11 speech, Clinton called Trump's proposed 15% tax rate on pass-through entities the "Trump loophole" and said it would allow him to pay less than half the current tax rate on income from many of his companies, and a lower rate than millions of middle-class families. The Trump campaign signaled that they are considering approaches to prevent taxpayers from taking advantage of the disparity between the proposed 33% top individual income tax rate and the 15% pass-through rate. "We are absolutely dedicated to making sure the 15% is for legitimate businesses," adviser Stephen Moore of The Heritage Foundation told Bloomberg in an interview. Asked on CNBC August 11 about the potential for wealthy individuals to "funnel their earnings" through pass-through entities to pay the 15% tax rate, Trump said that he would have additional details within two weeks and may call for ending many of the "loopholes" that are currently being used. On whether it was fair to say he would take steps to prevent individuals from benefiting from the pass-through entity tax rate, Trump said, "We are looking at that very strongly. It's going to be reported on within two weeks."

Clinton on fair share, 'patriotic' tax code: During her speech, Clinton largely highlighted previously stated tax positions rather than announcing new proposals. She promised that she would be the candidate to ensure that "those at the top pay their fair share of taxes," including through: the "Buffett Rule" proposal that calls for an effective tax rate of 30% on those making more than $1 million per year; a new tax on multimillionaires (a 4% "Fair Share Surcharge" on Americans who make more than $5 million per year); and eliminating the preferential tax treatment of carried interest. Clinton called for a "more progressive, more patriotic tax code that puts American jobs first," including by: ending the ability of corporations to write off the cost of outsourcing of jobs and production; clawing back the US tax benefits received by outsourcing companies; and establishing an exit tax for inverting companies. More generally, she called for cracking down on "tax gaming by corporations." Clinton said she would work with both parties on an infrastructure plan to put Americans to work building and modernizing roads, bridges, railways, ports, and airports. She has called for increasing infrastructure funding by $275 billion over five years, paid for through business tax reform, but has not provided details. A Clinton adviser has expressed doubt that the candidate would support a corporate tax rate cut as part of such a deal.

Reforms to the taxation of capital: On August 10, David Kamin, an adviser to Hillary Clinton, issued a report through the Washington Center for Equitable Growth that proposed reforms to the taxation of capital, including taxing capital gains on a mark-to-market basis, at least when it comes to publicly-traded assets, and charging asset holders for the benefit of deferring gains on property. The report, "Taxing capital: Paths to a fairer and broader U.S. tax system," called for other reforms that include changing how the location of profits is determined by switching from a system focused on the "source" of the product or service that generates profits to the "destination" of the product or service. Kamin, a former special assistant for economic policy to President Obama now a professor at the NYU School of Law, told Politico that he was not speaking for the Clinton campaign, only as an independent academic analyst.

Quote of the Week

"My plan will reduce the current number of brackets from 7 to 3, and dramatically streamline the process. We will work with House Republicans on this plan, using the same brackets they have proposed: 12, 25 and 33 percent. For many American workers, their tax rate will be zero. While we will develop our own set of assumptions and policies, agreeing in some areas but not in others, we will be focused on the same shared goals and guided by the same shared principles: jobs, growth and opportunity. These reforms will offer the biggest tax revolution since the Reagan Tax Reform, which unleashed years of continued economic growth and job creation." — Donald Trump, August 8

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