This week (October 10-14)

Congress out: The House and Senate are out of session until after the elections.

Ryan and Trump: House Speaker Paul Ryan (R-WI) is slated to make a campaign appearance with Donald Trump on October 8 at the Annual Fall Fest in Walworth County, Wisconsin.

Second debate: On October 9, Trump and Clinton will face off in the second presidential debate, which will take the form of a town meeting.

Last week (October 3-7)

Report on Trump taxes: An October 1 New York Times report that a $916 million loss declared by Donald Trump on his 1995 tax returns could have allowed the Republican presidential candidate to avoid taxes for several years drew attention to concerns about the tax system and who should fix it. At an October 3 campaign rally in in Pueblo, Colorado, Trump said, "Fixing our broken tax code is one of the main reasons I'm running for President," and went on to label the current system as overly complex and unfair. "I understand the tax laws better than almost anyone, which is why I am the one who can truly fix them," he said, adding that he used the tax laws to his benefit as a businessman and as a real estate developer. Trump said that in addition to improving fairness in the tax system, "we want money brought in, and we want money to be spent when it goes out because they spend our tax dollars so unfairly and unwisely." Trump began his speech promising that "Hillary Clinton is going to increase your taxes very, very substantially, and she admits it."

Speaking in Harrisburg, Pennsylvania October 4, Democratic candidate Clinton said of her opponent, "This is a man who we now know paid no taxes. That's what we suspected, but until some of his tax returns were made public we couldn't prove it." She countered Trump's assertion that minimizing his tax liability means he is smart, saying, "That makes all the rest of us dumb. We have done our duty." Clinton asserted that tax fairness would be a fixture of her presidency, saying "we are not going to put up with the kind of gaming that the super-wealthy and corporations have done in the tax system. We are going to raise taxes on the wealthy and close loopholes for corporations, to make investments in growing our economy." She said she would push back against companies that outsource jobs to low-wage economies.

Lew cites support for minimum tax: Appearing at a Peterson Institute For International Economics discussion on the economy October 6, Treasury Secretary Jack Lew was asked whether there is a contradiction between the Administration's disdain for tax havens and its opposition to the European Commission's State aid decisions against US companies receiving favorable tax arrangements from other nations. Lew said the Administration and the European Commission agree that multinational corporations "should not be able to game the international tax system to avoid paying taxes anywhere" or to pay an offensively low rate. "What we don't agree on is having — one sovereign entity reaching into another sovereign entity's tax base and change tax laws retroactively, which is what we believe the State Aid decision did," he said. The most recent decision, involving Apple, was announced on August 30. The solution is to fix the US tax code, Lew said: "We actually have built a fair amount of bipartisan support for the idea that you know, U.S. income, whether it comes home or not should be subject to a minimum tax." He described a "broken business tax system" — marked by a high statutory rate, average effective rate, and abundant loopholes and deductions — that competes with other nations' low tax rates that act as magnets for companies. Asked about disagreements among policymakers about how to address repatriation of $2 trillion in accumulated foreign earnings, Lew said: "You know, I actually think, amongst the tax writers, there is a broad sense that there ought to be a minimum tax on income overseas," but an inability to compromise on what the rate should be. "This has not been an opportune moment to see bipartisan agreements on big policy issues," Lew said, also noting that there are different views on whether to use tax revenue associated with repatriation for infrastructure investment. "I think the combination of Europe moving pretty aggressively on the State aid issue, and the I think bipartisan desire to find a way to pay for more infrastructure, creates perhaps the perfect storm where you can overcome the inertia of inaction, where you can overcome an environment where making political compromises hasn't always been the popular thing in the last few years, and maybe even overcome the special interests that don't want to change the status quo because everything that's one person's loophole is another person's treasure," Secretary Lew said. "It's not easy to do business tax reform, but it can be done. I actually believe if you put the senior tax writers in a room with the instruction to come out in a week with a bill, you've got the intellectual work and the kind of moving towards consensus to do that. It could happen early in a new administration."

Ways and Means Republicans on 385: An October 5 letter from Republican Members of the House Ways and Means Committee to Treasury Secretary Jacob Lew and OMB Director Shaun Donovan reiterated their concern about plans to move forward to finalize Section 385 regulations without providing an opportunity for a dialogue with stakeholders. "We understand that final regulations under Internal Revenue Code Section 385 have been delivered by the Treasury Department to the Office of Management and Budget for review by the Office of Information and Regulatory Affairs … " the members wrote. "We believe these rules if finalized would have a significant adverse impact on the American economy, discouraging investment and hurting American jobs and workers. We want to reiterate our view that it would be ill-advised to issue final regulations at this time." The letter urged the Administration not to finalize the Section 385 regulations "in haste," saying any revised rules should be issued as proposed regulations only. The final regulations were listed as being under White House Office of Information and Regulatory Affairs (OIRA) review on September 30, and subsequently reclassified as economically significant and as having international impacts. OIRA has up to 90 days to review the regulations, but could move more quickly, and could ask Treasury to make changes to the regulations during its review. Meanwhile, Tax Notes reported October 7 that Ways and Means members Reps. Pat Tiberi (R-OH) and Richard Neal (D-MA) are seeking member support for a letter asking OMB's Donovan to make "common-sense" reforms, though it is not certain that the letter will be sent.

Tax havens report: An October 4 report, "Offshore Shell Games 2016," by Citizens for Tax Justice and other groups said most of America's largest corporations maintain subsidiaries in offshore tax havens, which are used to avoid an estimated $100 billion in federal income taxes each year. The report said the 58 Fortune 500 companies that disclose what they would expect to pay in US taxes if accumulated profits were not held offshore would owe $212 billion in additional federal taxes. The average tax rate that they have collectively paid to foreign countries on these profits is a 6.2%, the groups said. "If we assume that average tax rate of 6.2% applies to all 298 Fortune 500 companies with offshore earnings, they would owe a 28.8% rate upon repatriation of these earnings, meaning they would collectively owe $717.8 billion in additional federal taxes if the money were repatriated at once," the report said.

Quote of the Week

"Mr. Trump knows the tax code far better than anyone who has ever run for President and he is the only one that knows how to fix it." — Trump campaign statement, October 1

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