« The Weeds

Taxing Back Better

2021-11-19

Dylan talks to Chye-Ching Huang, the executive director of the Tax Law Center at NYU Law, about the many, many, many tax provisions in Democrats’ Build Back Better package. First they dive into the new tax benefits in the bill, from the expanded child tax credit to the $7,500 credit for electric cars. Then they talk about how the bill raises money through taxes, especially through higher taxes on high-income people and corporations. Then they talk about the future of taxes, like what will happen when most of the Trump tax cuts expire at the end of 2025. 

References:

A breakdown of the components of the House Build Back Better bill

Whose taxes Build Back Better would raise and cut

Huang’s testimony to Congress on Build Back Better

UChicago and Columbia researchers on the Child Tax Credit and employment

The health care tax credit provisions of Build Back Better, explained

The clean energy tax credits would help cut emissions by 40-50 percent

The bill’s minimum corporate tax plan and millionaire surtax, explained

How rebuilding the IRS would boost tax compliance

Host:

Dylan Matthews (@dylanmatt), senior correspondent, Vox

Credits:

Sofi LaLonde, producer & engineer

Libby Nelson, editorial adviser

Amber Hall, deputy editorial director of talk podcasts

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This is an unofficial transcript meant for reference. Accuracy is not guaranteed.
Most people care about making the world a better place, but often people themselves volunteering, their time or giving money to. Whichever charity happens, to knock on the door what if there is a better way to find out how to make a difference in the world enter. Eighty thousand hours, which helps people focused their careers, undoing good, you can submit to their podcast featuring unusually in depth. Interviews with guess, working to solve the world's most pressing problems wherever you're listening to this show or learn more at eighty thousand hours, dot, Org, slash, pod. The future is here and that's true in banking, as it is in fact, in fact, capital one is building software like a tech company using machine learning in real time data in the cloud to solve unique, challenging problems to benefit millions of customers like an industry leading a high powered, intelligent assistant ino, or their fraud, detection and prevention capabilities, or improve
the customer service experience capital ones. A high and machine learning capabilities are at the forefront of what's possible in banking. Today, learn more about how capital one is building cutting edge experiences for its customers, capital, one dot, com, slash tech. flow and welcome to another episode of the weeds. I'm your hosts Dylan Matthews and today, I'm joined by Chechen Wang, whose executive director of the tax law centre at and why you lock charges knows more about tax policy, even just about anybody in the world's certainly among people I know and she's going to fuck you and me through some of the major changes to the tax code that are being proposed as part of the latest version of the bill back better bill being negotiated by Congress. So that package is of course,
worse still in a lot of flux, but as of this recording, it totally roughly two trillion dollars and spending in roughly two trillion dollars and new tax revenue over a decade give or take a few hundred billion on either side of that and each side features Some important changes to the tax code as some of the biggest new spending programmes are being implemented as tax credits. Most of the climate spending in the package is to give one again. Boys is structured as tax credits, either for individuals or for corporations. Meanwhile, The package includes some significant tax hikes for both wealthy individuals and for businesses, including important changes to international taxation that are part of Treasury Secretary Jack Yeltsin's negotiations with other countries trying to set up a common framework for taxing companies. We, Quite a lot about bill back better here on the weeds, but we haven't really talked about it as tax legislation, so I want to walk through the bill with changing and think about how different the tax code could look after this passes so thin,
So much for being here Chechen How do we get on so, let's? with the spending insight. In particular. Let's start with a provision that I know we both care about a lot which is the expanded child tax credit tell us a bit about what that credit look like before this year. How it changed under the bite and stimulus earlier this year and how it changes if go back, better passes site before the viands stimulus that child tax credit was really locks. a couple making four hundred thousand dollars a year with a toddler would get two thousand dollars: child text credit, but maximum per child. On the other hand, some twenty seven million children of low income families would get less than two thousand dollar per child credit. One zero, citing a single mother with a toddler and in ten thousand dollars a year, maybe she's working minimum? wage unpredictable hours at the home, help aid or cashier. She don't you get it.
One thousand one hundred dollars a child tax credit solar about half the amount going to the high income couple and ass, she or her kid got second chicken work for you should get absolutely nothing, saw the families most struggling to make ends meet, were locked out of a full credit, because the incomes, which alone at the back design that disproportionately left behind families already facing barriers in the labour market, including black, letting our children to Eurostat, Heather Stimulus plan, change that, and it really rebalance that picture at my twenty seven million kids and the lowest income families eligible for the full credit, and it also increase the maximum credit to three thousand six hundred dollars the goods on the six and to free thousand dollars for all the kids, including making seventeen year olds newly eligible
increase was targeted towards those making below one hundred fifty thousand dollars a year for married couple and also included the: U S: territories and the expansion and included some of the kids that between seventeen tax law, stripped of the credit, because they are eligible for a social security number. Finally sets up a really excited monthly dusting you should mechanism. So this was this is private stimulus. It expires at the end of this year. What is vital? I'm doing back better. What does he want to extend for how long, sir, what what's the future? The credit if built back better passes? Basically Those changes that we talked about would continue for one more year. The thing that's really exciting eyesight two main properly to you, because you ve been covering us for so long is that makes the provision that ensure that low income families get the maximum credit that is made permanent and
really huge deal so just had to get a little bit into the weeds here. The full refundability is the technical term for the provision that allows the mother making ten thousand dollars a year to to get the full credit same as a mother making one hundred and fifty thousand dollars a year at the top end of of the expanded credit and I sometimes have difficulty communicating this to people, because the the way that the child tax credit was stated to work was, as you can get some credit. If you make at least two thousand five hundred dollars a year- and I think I'm too, especially since her All class upper middle class readers that doesn't sound like a lot of money, but something like a third of joy. When didn't get us a full credit under the old system, why,
it leaves so many people out. What's the population that was was getting left out or getting smaller credit, the way the credit used to be designed and who are now being included under the new bite, an era rules for it. But the thing is that, under the old credit structure have to make at least two thousand five hundred dollars a year to get even a single dollar of the crater and, as you were saying, you have to make a lot more. They get the maximum credit, sir, when you introduce this provision known as full refund ability that makes people even with no earnings eligible for the credit. It doesn't just make that relatively small number of people with no earnings eligible and also ensure that lower for working people- get that full them out, and I think that really basic fact of just how many people are working, you don't sometimes long hours, making really Little money kinda vessel yesterday in orbit
that ten thousand dollars a year mother when you think about the fact that someone working full time at federal minimum wage as earning just forty thousand five. four dollars a year. That's not an unusual example. I want to ask you about the main counter argument that we ve heard against the credit, since it's been introduced into something eager from economists, sometimes people like marker, Rubio and sometimes Joe Dimension, have made this argument the Senate. But the critique is that The old system, which excluded all of these people who were earnings, are minimum wage very low wages down It was an incentive for people to work more than that because you couldn't get the credit. If you didn't hold a job, it was away do to encourage people to work, and I think of the way that this critique take shape now is. Is people claiming that this is slowing down the recovery that the people are avoiding joining the workforce cause they're getting these texts from the government? You ve studied this issue. There's a lot of research on this. Is that it
is concerned is is: is it significant? How do we use of way concerns about that against, like the humanity, and concern of. If someone has no income, you, you are worried. but for how, while their kids are doing tat, I think I just don't see the research supporting the idea that this would affect work to a substantial degree even before the pandemic, one of those that have blue ribbon animals that I voted for. The National Academy of Sciences Expert panel, a child they looked at the research and concluded that there would be a very small impact on account of employment from moving to a child allowance of the sort that we're looking at the moment. We also haven't really said about the official data following the implementation of the monthly context for payments club able universities had a look at boys,
wasted theatres and other rich countries. These countries generally do a lot more than the EU is to reduce child poverty with direct cash transfers to families and weigh things studies of Canada's implementation of its of benefits, fighting little or no employment of it, and, in fact, in finding that some families may have work more impact because it has actually costly to work. You have to pay more for transportation and child care and all of the things that are associated with actually get to work? One piece of contacts it's important to remember here is that the chalgrave isn't the only part of of by its proposal and that some other parts of the proposal might increase incentives to war so I want to ask about one one of those in particular, which is the earned income tax credit. This is a crime that existed from it years that worked a little like how HE d C, the child tax credit worked before this year without with a phase in and by a monster. bandit walk me through his proposal there
How would change it and observe what we might expect to happen to both poverty and and work I've? Those changes happen generally. The Texaco vulgarly reflect The view that you don't want to have people with incomes that are up of the poverty line, and then they got file for federal taxes and pay. The incoming payroll taxes and those taxes push them below the poverty line or even make Families with incomes already both below the poverty line, even walk, walk in a big way. The tax code achieves of winning taxing people into poverty is with you. In that context, credit s, attack screwed up for families with low in word and come earnings at offsets. Their federal common payroll taxes, it's pretty remarkable policy. Success story that I know you ve covered is a large and robust body of research on how it delivers better outcomes, the families and its enjoyed by partisan
the poor, but a big problem is that he pointed to a set of largely excludes adults who are raising children and their homes and completely excludes young workers without children were just starting off in a week was that zero alone he acc for those workers means that there are about six billion of them that the federal tax could actually does taxes to go deeper into poverty, so that the current proposal would continue for another year. The risky plan provision that raised the maximum credit, those workers from about five hundred dollars to about fifteen hundred dollars. and it would also when I made my nineteen to twenty four year olds, new eligible, as well as workers. Sixty five and over even with those improvements, are pretty much most credit and phase out the pretty low rulings, fully phased out between sixteen and twenty five
dollars of earnings a year, but I think it's some real potential there, particularly in terms of helping out those workers that are trying to get into the labour force, this place. One thing I just want to underline here is we sometimes referred to this as a child was yet you see provision. It is true that that that people who, without children, can can claim it more probably the bulk of people, claiming it by there's also a problem with were called non custodial parents. I'm so parents in endorse couples or couples who have split or One parent doesn't have focused. City or or has served minor visitation aren't eligible for things like the child tax. It is my understanding is that the political childless
yet you see, provision would help them as well as I right. If you include that of non custodial parents, there will also be people who are living families with children and the households, or maybe the youngest, a blank or nice, or any fear that might be involved in that had life, and some of the older workers also have grown children than under arms are workers, including these local, childless ones. parts of families and communities and which we should recognise that, and this also is added value in the kingdom of whether or not there are children involved of helping to alleviate hardship and also help the dogmatic prospect We ve been mostly talking about these two credits: the child tax credit and bade the earned income tax credit that serve a number of services, but better, are primarily anti poverty measures. And another segment of the tax code that by wants to change, is the affordable care act. I if you ve
robot health care on the exchanges you you might have seen the premium tax credits referred to, but people without as much familiarity, might not know that that the way Obama care largely works is is through tax credits to help you pay for exchange health insurance and bite Once you expand some others. Credits walk me through what he wants to do there in and serve how significant changes that would be too to the healthcare system submit. The proposal, strengthens this pretty attacks credits and to the ways to try to get millions more people have insurance the FIS where's that they would be used to get help coverage to those people who are living in Spain. that refused to take up the Medicaid expansion sore remember the main way that before will correct, tried to get health coverage and care to people with incomes.
No one near the poverty line was by trying to include them in the Meda programme and when it well below the Supreme Court said that states could get to choose whether or not their low income residents would get back coverage forbid K. Fifty nine states expanded, but twelve didn't I met, leaves more than two million people with incomes below the poverty line. We can't get covered by medicate, because this text refused to expand and they're not eligible for printing and tax credits to purchase health insurance on those marketplace. Exchanges, because the original health war intended for them to be covered by meditate, sir. They fall in this coverage gap and many other states that refuse to take up the expansion. The southern states, with above average, shares of black residents. Some sixty percent of people in the coverage hamper people of color. So what this proposal will do as to allow,
People who are living in states who are a net coverage Ghek to get health insurance plans on the marketplace, but there are premium cost and the way that it achieves that is to use the premium tax credits to cover the full cost of those people purchasing open, trance. The second thing that plane does in this area is to continue some of the stimulus improvements to bring in tax for that those changes increase the credit so that they have a more of the cost of care. They also protected people from having to pay back large amounts of the credits when they file for their taxes, as their incomes changed unexpectedly during the year, and that was something that particularly older people might have had to face a bay so glad to a close. of of income, are out for her at the centre of the pit or poverty line. I did want to touch briefly on some of the climate provisions, because those are also large. We structured as tax credits can you
give serve a broad sense of how that works, and what that would mean fur for both like individual types listening in and how it would change Canada corporate code as well. I don't think it's probably end
stolen, and I don't think I quite understood until I turn to us quite how much these tax subsidies could move the needle and reducing emissions. This an independent analysis by the rhodium group that finds that the Us Congress Annex a package like the one that is in the house at the moment and the administration takes regulatory action using the clean air at the? U S and actually reduce greenhouse gas emissions by about forty to fifty percent below two thousand and five levels by the end of the decade and that's a range of the administrations targets for contributing to the Paris agreement. Goal of holding global warming to about one point: five degrees Celsius above pre industrial levels- so that's quite substantial and the biggest part of the current packages emissions reductions would come from the about a hundred foot.
billion dollars and business fight. Tax credits for green energy production in Alice US is to make the that would substantially accelerate deployment of one so large and other renewables. The package, as it also Additional credits to improve energy efficiency, anthems fit the specific if that's the current greenhouse gas emissions and signals ranging for transportation to industrial production, and that's where some of the things like the individual credits, the picture saying no trick. Vehicles comes on site Well, I've professed looked at birth, coming out with it as well as other taxpayers. Then I think sometimes were drawn to the one big elegant solution: that summit like a signal that we want pricing and we could still talk about potential steps on that as well. But I think the big take away here is that you can actually get
pretty hefty reduction in emissions from going sector by sector going through a range of things and that kind of reflect. The fact that this problem is everywhere in the economy and you can you can search used to do it and I take it away piece by piece or that kind of bigger across the board to approach it serves uprising across across the board. How much you can get done? with the task code, if you're just running through the provisions, we just ran through we're talking about provisions that reduce emissions by by forty to fifty percent in conjunction with EPA that could slash child poverty, Forty per cent that could reduce pie, pretty among young people working minimum wage or near minimum wage jobs that could close the medicate covered get these are like really really big social policy changes and one question might ask you of is does walked through the pluses and minuses. Doing this kind of thing said the tax code. They think but this infrastructure can handle
a lot more in terms of mixtures of different provisions On the individual side, I think the thing that is easier for the tax system to do is to deliver a cash but does not tied to specific expenses. So things like the idea and the child tax credits which can be used for any of the expenses associated with working child care and and beckoned me does get trickier, win trying to tide was specific that experience like child care or health insurance, for example. Because we knew are traded, took crossbows policies. Quite often the people, what you want to help most What those expenses are, the ones that are most cash strapped saw, doesn't work for a lot of those people to say you have to pay The experience during the year watches you need have cash on how to do that and then come back later in the year and claim
subsidy on your tax version of actively battle of cash, there is a real problem for a lot of people. No, that's not to say that you can address that. I mean the premium tax credits as an example that I heard you dont really see that happening when you put on the exchanges and of a really tangible way. It doesn't show up directly in your bank account of happening on the back in, but That is a lot of infrastructure that went into making that work and to me that the sort of means that we should be cautious about how many of these types of programmes that are tied to specific expenses. We stand up at any one time in an attack of ministries, and you might some choose to do it. You might decide that
in the programme is more efficient. You might decide that. Actually, what you wanna do is just increase cash- let's not tied to a particular issue, but you do have to be careful about taking up to any of these big administrative problems that, in one reading take a break, but then catching Wang, and I are gonna talk about fuse. Taxes are going up in the bill and how we're paying for all of it. One way to think about therapy is through analogies. We get our car service to prevent bigger issues down the road we worked out and visit the doktor to prevent injury and disease in our bodies. We see the dentist for a teeth to prevent cavities and other issues going to therapy is like all of the above, its routine maintenance for your men. an emotional wellness going to therapy doesn't mean something's wrong with you means investing in yourself to keep your mind healthy, better help is customized online therapy that offers
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building these machine learning capabilities all on the cloud. But their work is at the forefront of what's possible and banking. Today, in fact, a lot of capital ones. A high and machine learning tech innovations are leading the industry taking up as an example, capital ones, intelligent assistant, ops, millions of customers have confidence and control over their financial lives and their apps and products have one awards for offering some of the best real time. Personalized customer experiences wearing a golden age of machine learning right now and capital. One is on the front lines leading the charge using human centred design and leading edge Tec to serve customers better more capital, one dot, com, slash tech. while the back to the weeds once again, I'm here with changing Wang, whose executive director of the tax law centre it and why you law- and we are talking about the democrats- build back better bill and I want
a dive into the tax increases that are included in the package used to pay for all that the spending and tax cuts that we talked about in the last segment. So first, let's start with visuals and high income individuals in particular. How would this bill and serve in it Latest adoration change taxes for high income, people for the really think check for the years and affect taxes, would go down for every income groups it both very top. The tax policy and estimates that the top one would pay about fifty four thousand dollars more and twenty twenty three and that's all. big tall and another until you remember that those households are making about three million dollars a year on average. So in percentage terms, thereafter, tax outcomes would go down by burglary about two point: five percent for the top zero point, one percent I'd be paying about five hundred and eighty five thousand more
On average, there comes every trap. Fourteen million here and opposition terms, the after tax income, goes down by about five point: nine percent another mix of provisions that are combining to have this overall of it like a thought with those of us with We not for the provision that does a few different, useful things at once. That's a five percent surcharge on incomes about ten million dollars and then another three percent on incomes above twenty five million dollars, and this thing is referred to as a Agee ice edge and the reason it's called back rather than just the tax rate of increase that applies to capital gains than the walloons. Also, for that would mean that the very top right on salaries above twenty five million dollars would go from thirty seven to forty five percent and the top right on capital gains ambivalence above those levels would go from twenty three point: eight
said to fifty one point: eight percent sore altogether that raises about two member billion dollars over ten years from the highest and come like two out of every one thousand Americans. and there's there's another provision, there that that raises, I think, by some, as is much more, which is a change to something called the net investment income tax. So- and I t is known well among tax walks in I've I've, never met someone outside our are little circle. Who knows what it is so walk me through what that taxes now an answer, how this deal change it and why that raises so much money yeah, what about Journal fifty billion over ten years? So, as you say, it's a pretty big money ends really a loophole. Closer Thorp plant on people, They pay a three point: eight percent Medicare attacks on their wages and self employment and come- and
the affordable care at enacted, a parallel frequent eight percent tax on their income from a business. So it would have been a little bit to rebalance that gap between earnings and investments stick to permit a car tax, but the problem is that it had a really big loophole. Some high income people can get there and come from earning partnerships and east corporations, these attacks of businesses that are faced the corporate right. Instead, the income shows up one individual tax returns, and the problem is that some categories of this income that always get from these businesses don't faced the Munich attacks of earnings and also to face the tax on investment income. So that's really big hole and the proposal is to close that home so that people that actively don't get businesses than partnerships and if corporations they do face, that equivalent frequent actors attacks on their income at a really mine, yet
There is a lot of revenue from four pretty high income people, but it also reduces the incentive to play games with the classification of your come using. These entities, which is a really big problem for TAT compliance eyes. You stay here. This sometimes referred to as the John Edward slew Paul, because he apparently when he was a lawyer. I guess he stole lawyer, but when he was a big tree, attorney in North Carolina. You would claim, is income as as profits from his law firm as to a salary for himself until you get around Medicare taxes, men, so yeah, it's not really in anyone's interest to me. I'd former demographics are like poster boy of this, but it by since it's a pretty common problem in places like law firms, doctors offices that countenances that kind of thing
the fund managers, we're talking about a pretty high income, professional or some other types of businesses that are run for these partnerships. I wanted to ask a bit about some some efforts that didn't make it into the bill to close some of those vessels So there's one wrong widen. Who chairs the scent of finance committee had something he called the billion tax? There was served in the news for about a week and then got Quixote's, but before there. Is there some discussion about changing how stocks another other inherited goods are treated when their owner dies and his passing them on to make sure that say, Mark Zuckerberg has to pay taxes on all of his facebook. At some point and most of those falling through. So I guess by my big question That is why we have this surcharge on capital gains taxes. We have this, this tax increase that will hit some capital income.
Much are some of those high earners from investments, people who, either started a company and got rich from that, like you on Musker to phases or people in finance and hedge funds, does the bill at this point do a lot. It's raised their taxes and and close that gap, but investment in and wage income, or have most of the things that were posed to try to get around that fallen, the wayside as the bill got written the bell does affect some of these people, mostly for the corporate tax changes that ultimately will be effective people want by. their holders and especially those who hold a lot of capital income. But this is something that still gonna be a big structural problem with the effects of the text.
It was late when waves of people in salary they pay taxes withheld from every pay check. The rest is made up at an angle tax for two, but the wealthiest people, but that the EU must give basis, as you say, don't get most of their income that way they get up from the increase of the values of ethics back hold if they saw back, they spent twitting about that this legal base. Still got a lower tax rate than the top right on celery, but if they hold the assets, that of brown and value until they die the tax code completely wiped out the potential tax on that lifetime of accumulated and come sir, the wealthy person doesn't face tax on, I don't come, there is still very sex or men come. There is excellent and covered with a zero percent right on the extraordinary in terms of the wealthiest and highest in company
on the contrary and ass, he said this is like a number of different ways to address this. You could say, as the bite on administration propose, that they at least pay tax on those games when they passed. The exits debate is there's another proposal that says that ok, well, we were attacks have been, but if the is somewhere else, then, we'll at least tax events, or rather by raising the tactful gains? Will together can still be deferred for a very long time across generations, but at least some time my face and tax and then Thirdly, proposal was the one that you mention the stance in other widens proposal. Four billion has income tax for the wealthiest violence. What he proposed was that they would be subject to an annual tax on gains in the value of this talk and other easily valued assets, as those gains accumulate, so in the same way that wages and salaries
the text of the year that doing at the moment. The bow does not contain any of these proposals and I also doesn't fell holes in the estate tax. so let me that that is one big problem in the tax code, but really must be addressed. day in and one other observers gap in, at least in terms of the progressive nests of the tax code. The bill as currently written awesome the changes to the state and local tax deduction. We recently a whole weeds episode, but about that I won't willing to die in the show notes if you want to get really deepened the weeds, and so I dont want to take too much today on it, but the bill, as right now. This is very much in flux, but as of right now it it would increase the cap on that deduction from ten thousand dollars to eighty thousand dollars. How does that change what this bill does for, while the Americans, when you parrot with things like the Sir TAT,
the change to the investment tax? Is this still attack site for some people for fewer people? What it would adding salts. Due to the overall picture there Besides the last year, the tax policy centre was actually analyzed. The house proposal and that provision alone, mighty four percent of the benefits would go to the top of the castles and nearly ninety percent of Billina S would get tax cuts. Averaging sympathy dollars apiece some thought. A pretty big deal does by itself, but for about half of iron come households that tax cut would be more than wiped out by the other tax increases. Package for about half of them went, and bigger than any of the tax increases that they face. So while we talk before about overall, the top one percent would be facing very large tax increases on average because of assault provision, some significant proportion would actually see attacks. Cod
These are the silicon snowflakes, thus in our again for your last, if a third set of those there isn't sandals and others have been very vocal about the need to do that, and I think there is an expectation that they will try to turn that back. Some say: I've been in prison sentences, for instance, are saying well, we could give upper middle income households some additional salt production, but we put an income cap on that may be standing at four hundred thousand dollars so that millionaires and multi millionaire households wouldn't get tax cuts, and I think it's pretty
but the old moves in that direction. Oriented one one last break, but when we come back we're gonna serves zoom out in and think about how different the tax code could look after bill back better passes if it passes, he everyone, its Neckcloth Pike S, critic for New York, magazine from my humble beginnings as an avid listener to joining some the best writers enrolled at vulture, I'm incredibly lucky to do what they do. So here's the thing there are a ton of Pike S out there and findings of the new to listen to can be a bit of a mess, means that are one and a half speed is an attempt to make your life easier every week. We point you too, A handful of podcast that we thing deserves your attention. We just enough contacts to. Have you decide you want to give it a shot? Maybe you have your staples but want to try something different for a change.
we want something more experimental one and a half feet doesn't discriminate. We recommended everything from the as a clean show to a pike ass, recognising a different frog. Every week enter your email adulthood outcomes last speed to get recommendation sent to you every Wednesday. The news at her is free to sign up and completely free to read. Sign up for Wanna have speed at voted outcome, flash speed, but May I make one point two guy myself welcome back to the weeds. I'm here with changing Wang, always executive director of the tax law centre at and why you are so. I can wanted to stay back for our last section, and I think a little bit about how major change go back. Better is just in terms of the history of taxes in the U S. So. if we're comparing what by it wants to do to something like that. The Reagan are Bush tax cuts, or as in the smaller tax hikes under Clinton and Obama. What how big of a change of it in the context of that history is, it serves small tweaks, the way that,
We think of some unlike Clinton doing earth, or is he doing something much bigger? So I think we can think about that fiscal size of these just like that, how many dollars they involve the fucking today. I think it's actually think there was significant about this package at the policy. Changes that structural and have some potential big long term shifts in the way that the text of the works away. We talk about a number of those that the tax credits, like the child tax credits that are now representing a view that investing in children through these programmes, rather than continuing to discuss the high income people and very profitable collaborations, is actually at a much stronger arrow. I on public investment and the tax administration, changes and the internet
tax changes, those rules that have pretty foundational pieces that future reform can build. One on top of, and ITALY also mentioned some structural things that it doesn't do things like everything comes a very wealthy people and their potentially carbon pricing and and other things like that. But to me I think that this package, even though, if not even attempt to be true fundamental full tax reform, is taking some pretty structural elements that often getting must by by some of the discussions. So currently you corporate tax rates, twenty one percent and the bill doesn't change that which is kind of surprising to me, but it does spanish raise seven hundred billion dollars of a decade from corporations how's that possible. What is it doing were located? Tax reforms are doing to raise that kind of money. That's it s. A great question I think, what's left,
not about the corporate right increase. I haven't. I was going with us name but
We do have left as a pretty struck, curly important change and that's that's actually part of what tax endless than watches, considering a really big deal in the way that multinationals can be taxed globally, as I want them to be preserved. So in terms of how the EU is tax could treats multinationals between seventeen tax law cut back the basic right to twenty one percent is easy but sit a right on: U S: multinationals, foreign profits, so prophets of arab wedding and subsidiaries of sure as low as zero, and that's a pretty big incentive to locate profits on paper and even real investment offshore. The bill had some rules the trying to limit that damage, but the design was pretty flawed and the single rule there was the minimum tax on: U S multinational.
foreign profits. This is known as guilty that stands for global and tangible, were taxed and come because tax law is love. Waking up really can achieve this thing, likely says that if a company doesn't pay at least ten point, five percent of foreign taxes on its foreign prophets offshore he'll have to pay a top tax to the? U S government, to take it up to at least two point: five percent and that kind of a headline, but that provision exhibited one of foreign and come, and I also calculated on a global basis, which means that multinationals can take taxes and uncalled for countries with a pay was nothing and combined with uncommon taxes from countries where they pay significant tax that ever going with them pay whiskey,
overall and from attacks the sector that has really will result in the. U S can actually be the least attractive place for a multinational to invest or profit and I could learn. Rioting by five percent is also still way below the twenty one percent domestic right. So what the proposal does- and the house at the moment is to address some of these flaws. It raises the guilty right to fifteen percent. Is dollar gonna be again birds narrowing that gap brings more foreign and come into the minimum tax, and it also applies it on a country by country basis which is a really important as a technical change. But it's a really important one structurally, because it means that the Eu S will no longer be the least attractive place to put profits and excellent. unless another changes to give a raise about two hundred and eighty billion dollars Albertini is also something that way
not even thinking about what's going on in the rest of the world, is pretty attractive at raising large sums from multinationals. That is a very progressive tax, but does flow through to both yes than the budget was at reducing the talk towards offshore profits and investment, and that's why it's been a very high. Priority for labour group settles as civil society groups, but even beyond back to understand, Just how important this moment as an international tax, the stance that the framework that countries have been using to figure out how to tax multinationals is literally a set period. It was put in place of the nineteenth weightings and what's happened this year with the bite it administrations, reengage, ring and multi level.
Negotiations is that a hundred thirty six countries have a right to a new framework that says that we can try and stop the race to the bottom on corporate tax rates. This situation, where lots of countries were cutting the corporate tax rates, trying to be tax havens or leaving their right multinationals, use tax havens to escape tax domestically, and one of the really important parts of this proposal is that all of the countries agreed to implement an international minimum tax kind of like the one. That's under the House proposal, Sir. That means other countries also have a war on their tax rates of corporations about fifteen percent, and that gives the U S room, to come back and addressed.
Echo protects right without with a much lower gap between the? U S, tax rate and the tax rate of other countries. The bird the hope is if this agreement goes through with all these other countries and if the? U S, lives up to its part of the agreement by passing the house version of this bill, you don't as many shenanigans lives with companies like Google or apple trend apart money in Ireland or wherever it is. Is that the general idea that is exactly right in the old and She'll tax regime was all about stopping those countries from facing tax that more than one country on the same come what may ultimately, as that may face zero tax, a large proportion of their income, so this, New agreement is trying to ensure that they face at least a minimum level of tax somewhere and that that puts promise not only for our home countries like the? U S where multinationals have been able to avoid paying tax.
But also for developing countries that have had to worry about the face and will make a strong corporate tax. Whether investment and activity will just move elsewhere in the last serve a pay for its. Not a tax increase but but wait a pay for some of this building. I wanted I want to ask you about. Is issues tax enforcement? and what we are doing to the second ago with some efforts to move profits overseas, but there's a lot of more than just exploiting loopholes but to fight breaking tax law. That's currently going and forest. So what is the build due on that and how can that help pay for for some of the rest of the bill? The problem, This is trying to address is that it is an estimated similar trillion dollars of taxes that are all under the current tax law, but does not gonna get paid over the next decade and that
is a big problem for school. It's also a big problem for the rule of law and taxpayers. The top one percent files are responsible for a large share of that about sixty three billion dollars annually and recent research. suggests that there could be responsible for a whole lot more because all the problems we don't know exactly. What's going on with the pretty complicated finances of some very large businesses and high income people, so that the bill with treachery back gap by adequately funding the IRA The Irish, as I mentioned before, is a bit of us site in terms of its resources between twenty cannot twenty nineteen, its enforcement budget was caught by a death. It was more than a third of a fixed, the revenue agents and, unsurprisingly, the rights of the highest and come via the largest cooper.
hence positive by more than a half, so this is money, would allow a restoration of some of that combines activity and pulling a revenue authority under the war. It's a kind of important that this is not just about. What kind of making airports but person sensitive compliance related? Some of this is just about helping people file accurately. The iris answered about a quarter of fun. steel and you won't be IRA is to be able to help people who want to know what their tax obligations are beyond the Philadelphia accurately to provide simple tools and calculators. Guy So this is a really important thing for honest files as well tomato become a bigger picture here,
and it's kind of white international tax reform. This is really structural value here beyond just the sort of impact on the budget, just building up the core function of government makes it possible to start thinking about more ambitious reforms to improve tax filing. I think a lot of people, love to see that of pre populated returns or better integration of of tax filing with other programmes or revenue proposals that really quite administratively challenging for a really depleted agency. Sir cut up rebuilding thus could have some really important long term benefits both in terms of how Tax administration functions, so the kinds of policy changes that can think about raid in it. I think it's important to note here that a lot of what we talked about the first segment child tax credit, the premium taxpayer for providing care some of the clean energy stuff. All of that has-
enforced by thy arrests, and so some of this additional funding should to make some of those provision work better right. Ok, I mean what people, whether newly signing up, they might not have had a final text return before to be able to know their their obligations and comply with them so that they create risks for themselves. On the back in and adequate funding at all sir asking the Irish. Do things like put up simple portals to produce guides in different languages, to conduct outraged that people understand their obligations and to make sure that all of these different ways of coming into the text the thumb smoothly and great with each other, because families are not stable across time? Violence is not stable across time. What you might want to know about one
there is a famous as the next year you wanna have that all working together in a really seamlessly. Thank you so much for doing this minutes. It's such a pleasure to be able to connect the German, and I think it will be a very fine episode, fervour coterie of taxpayers that, all for us today. Thank you so much to Chechen Wang for joining me today and walking me through build back better. Our producers Sophie Sophie Monde, Libby Nelson, is our editorial adviser. Amber all is the deputy editorial director for talk pot tasks and I'm your host Dylan Matthews. Just in case you forgot you can sign up for a new letter at vocs dot com, slash leads letter, we'll be back next Tuesday. With Jerusalem and DORA for our panel discussion, so We'll see you, then the weeds is.
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Transcript generated on 2021-11-19.