🧵 (1/8) My new working paper with Maurice Obstfeld, “Tariffs as Fiscal Policy”, was just posted today @PIIE. Within, we evaluate the new role that tariffs are playing in the US economy. (2/8) While tariffs have long been employed for various narrow aims, their use in today’s US economy is far more significant. Tariffs are a tax. In our paper, we evaluate the use of tariffs by broad tax policy criteria: revenue, efficiency, progressivity, and tax administration.

🧵(1/4) As POTUS makes mayhem with unprincipled tariff self-harm, he’s not alone. Congress is preparing its own unprincipled budget resolution. If folks wonder why the dollar fell upon this week’s tariff/budget news, we may be in a regime where the US faces a risk premium.
(2/4) Now would be the ideal time for Congress to show economic responsibility, rather than leaning on budget gimmicks to blow up deficits & debt. The Senate budget resolution up today increases debt by more than $5t; it also makes TCJA costs vanish.
crfb.org/blogs/whats-se…

(1/8) 🧵 New paper! My JEP piece on “US International Corporate Taxation after TCJA” will be published soon and is now posted. Within, I discuss what we’ve learned from TCJA, and the future of US international taxation.
papers.ssrn.com/sol3/papers.cf… (2/8) TCJA enacted huge changes in US corporate tax policy. But TJCA did not resolve age-old dilemmas. Businesses still worry about competitiveness, whereas many others still worry about offshoring, profit shifting, and tax base erosion.

🧵 (1/6) In a just released @PIIE blog, Maurice Obstfeld and I examine the limits of Trump’s desire to replace income taxes with tariffs. In short, a full replacement is impossible. And, if you push this policy to its limit, it would be bad by any metric.
piie.com/blogs/realtime… (2/6) As fiscal policy, it would drive large deficits. Tariffs would raise nowhere near the revenue needed to replace income taxes ($2 trillion), maxing out at less than $800 billion. In contrast, recent CBO analysis shows full TCJA extensions costing about $5 trillion.

🧵 (1/10) In today’s new brief, @melovely_max and I analyze key Trump proposals, viewing tariffs as fiscal policy. Trump's new tariffs & tax cut extensions combine regressive tax cuts & regressive tax increases, increasing the deficit & harming workers.

piie.com/publications/p… (2/10) We review experience from prior Trump tariffs; the literature is clear that buyers of imports bore the costs. While prior tariffs cost US households hundreds of dollars, the Trump proposals would have a far larger effect, nearly five times the size.

🧵 (1/12) My new paper, “Capital Taxation and Market Power”, papers.ssrn.com/sol3/papers.cf…, argues that market power makes the entity level of tax especially important, that we should consider graduated corporate rates, and that intl. tax reform is essential to that vision. (2/12) It begins with a lit review on growing market power, both in US and the world. The evidence here is overwhelming: market power is large, increasing, and an important part of many macroeconomic puzzles. For one example, see De Loecker and @jan_eeckhout on rising mark-ups.

Revenue is one good reason to move forward on the international tax agreement, and OECD revisions (due to better data and rising corporate profits) show that there is a lot of revenue at stake.
wsj.com/articles/globa… Many countries have seen the wisdom of international tax cooperation to reduce tax competition pressures. In addition to the EU directive, WSJ notes progress toward implementation in UK, Korea, Canada, and several other countries.

So happy that President Biden signed IRA yesterday, which makes progress mitigating climate change, provides adequate funding for the IRS, and lowers healthcare costs.

But one important task was left undone.

The Global Minimum Tax Lives On foreignaffairs.com/united-states/… The min. tax in IRA does not adequately address intl. avoidance. Companies still have large incentives to shift profits to low-tax countries. Adopting a country by country minimum tax is key, and would make US law compatible with a historic agreement to tackle tax competition.

(1/7) Krugman makes two solid points here, but there remain strong reasons to consider pricing down the road. His points:
1. Carrots > Sticks, because politics.
2. New industries may need a carrot for viability.

Why We Don’t Have a Carbon Tax nytimes.com/2022/08/16/opi… (2/7) The climate provisions in IRA are a great step forward, and they follow both of these principles. This approach is the one that can be done with 50 Senators, and it makes key investments in clean energy.

(1/10) What do we learn about profit shifting from the new country by country data? At least five important lessons!

My new paper from Tax Notes (Fed/Intl) is now publicly available on SSRN.
papers.ssrn.com/sol3/papers.cf… (2/10) Lesson 1. Havens are *the* story. Nearly all profit shifting is destined for just a handful of economies with rock-bottom taxes. Of $638b in foreign profit in 2017, $355b (56%) is in just 11 important havens. Data sets that miss haven income miss almost all of the story.

1/7) In my piece today for the LA Times, I argue there is no time like the present (or, let’s say, soon) to replace TCJA, recession or not.
latimes.com/opinion/story/… (2/7) TCJA was deeply flawed. Tax cuts were tilted toward the top and the legislation fell short of the wildly optimistic promises of its backers. Both wage growth, and investment growth, did not deviate from pre TCJA trends in 2018 and 2019.

(1/5) TPC has updated their analysis of the Biden tax plan. Some highlights.

https://twitter.com/TaxPolicyCenter/status/1316786270195064834

(2/5) Expanded CTC now means lower quintiles experience tax cuts under the plan. All sizable tax increases fall on the top.

The minimum tax in this plan is much stronger than the TCJA minimum tax; TCJA's min tax exempts first 10% return, allows blending, and is at half the US rate.

Biden unveils plan to penalize companies that offshore jobs ahead of Michigan visit thehill.com/homenews/campa… As I've argued extensively elsewhere, TCJA's min tax is effectively an "America last" tax policy, since both haven income and other foreign income is tax preferred to US income.

americanprogress.org/issues/economy…

(1/7) A thread on the double-dipping problem. Unfortunately, the HEROES act makes the mistake of codifying a double-dip. A simple example illustrates the problem.

Tax 101: Expenses Reimbursed With COVID-19 Aid Should Not Be Deductible: tpc.io/2YHXrsl @TaxPolicyCenter (2/7) Imagine a business that in normal times earns $150 in sales and pays $100 in wages w/o other costs. Due to coronavirus, sales collapse to $50, and it struggles. Without assistance, it would lose $50 if it paid its workers. so it may have no choice but to layoff workers.

(1/8) A Thread on What I Hope We Learn from This.

I hope we see that we are all from New York, Wuhan, and Lombardy, and we share our common humanity. I hope human suffering stirs compassion, and human generosity is met with admiration. (2/8) I hope we learn that good governance, competence, expertise, and scientific achievement are priceless and should be nurtured.

(1/7) In my piece today, I warn of the dangers of nationalist economic policy making in the time of COVID19. The Trump Administration’s muddled and confused response to the crisis are rooted in xenophobia and blame.

thehill.com/opinion/nation… (2/7) Domestic responses are paramount and should focus on public health needs (such as expanded testing and health care access) and the economic needs of those in vulnerable situations. The House bill is a good step forward. Far more steps are needed.

(1/7) If you want reading prep for the State of the Union, I’ve updated my paper “Fixing Five Flaws of the Tax Cuts and Jobs Act”. papers.ssrn.com/sol3/papers.cf… The update includes the most recent data, but it does not change the story. Those at the top win; workers do not. (2/7) I address five flaws. First, the deficit-financed tax cuts have cut into possible funding for other urgent priorities. Rising deficits in and debt also risk making our fiscal response to the next recession more tepid, harming workers.

(1/11) I have new updates to my profit shifting work. In a revision of “Profit Shifting Before and After TCJA”, I investigate the size of profit shifting, and how it is likely to change (or not) after TJCA.
papers.ssrn.com/sol3/papers.cf… (2/11) We now have 2017 data from several sources; the paper is updated to include new IRS country-by-country data. Almost all profit shifting is destined for havens with rates below the US minimum tax rate, and far below the new 21% US rate. (Havens= effective tax rates < 10 %.)

Nice thread from @lilybatch on today's important NYT piece from @jimtankersley and @JesseDrucker
re. the weakening of international provisions in TCJA.

https://twitter.com/lilybatch/status/1211767125498638336

@lilybatch @jimtankersley @JesseDrucker Also of note, the international provisions as a whole were roughly revenue neutral according to JCT. (They lose $14b over ten years.) Thus, weakening GILTI/BEAT means that profit shifting will actually cost USG even more tax base/revenue than pre-TCJA law situation.

(1/6) I have posted a research note titled “How Big is Profit Shifting?” It is available here: papers.ssrn.com/sol3/papers.cf…
This note responds to a recent critique that argues that profit shifting is much smaller than we thought. In short, it is not. (2/6) Plausible benchmark estimates from recent IRS country-by-country data indicate that profit shifting in 2016 was reducing the US corporate tax base by about 35 percent, costing the US government more than $100 billion/year at 2016 tax rates. See Table 3 and surrounding text.

(1/9) It would be truly great if someone in the Trump White House could learn a bit of economics. Trade deficits are the flip side of international borrowing; we run deficits because we are net borrowers; trade surplus countries are net lenders.

https://twitter.com/RealPressSecBot/status/1125357297755086848

(2/9) Strong economies tend to make our trade deficits worse, not better, since people are consuming more when the economy is strong. Here are some data for the United States: