OECD optimistic on Trump Presented by the Land Trust Alliance

EXPECTATIONS RISING, PARIS EDITION: The belief that President-elect Donald Trump and a GOP Congress will cut taxes next year has gone transatlantic.

The Organization for Economic Cooperation and Development said in its latest look at the global economy on Monday that it expects the U.S. to not only cut taxes but also prime the economic pump by pouring in infrastructure spending.

Not only that, the OECD also believes that a tax-infrastructure deal in the U.S. could help jolt the economy in other parts of the world. “There is now some prospect of the world exiting from the low-growth trap,” said Angel Gurría, the OECD’s secretary-general, after the group predicted that fiscal stimulus in China and the U.S. would help raise economic growth from 2.9 percent in 2016 to 3.6 percent in 2018.

As our Toby Eckert noted, the OECD expects a Trump-led stimulus to boost the U.S. economy, raising its 2017 growth expectations from 1.9 percent to 2.3 percent and projecting 3 percent growth in 2018, up from 2.2 percent. That’s based, in part, on an expectation that income tax cuts would cause revenues to drop by 0.5 percent of GDP, and corporate taxes by 0.75 percent.

Whether or not a fully Republican government can agree to link tax reform and infrastructure investment is another question entirely, given the opposition to more spending among some GOP lawmakers. (Also recall that House Ways and Means Chairman Kevin Brady has discussed revamping the tax code without adding to deficits.)

Meanwhile, the Financial Times questioned why the OECD was so optimistic about a Trump economy, maintaining that the group of market economies was too confident that new stimulus would combat income inequality and raise labor rates. “This is especially true when looking at Mr. Trump’s fiscal stance in the context of his wider economic agenda — which includes imposing import tariffs and tax cuts,” Anton Spisak wrote, suggesting that Trump’s trade policies could be a real drag on the economy.

EXPECTATIONS RISING, NEW YORK EDITION: Who wants a piece of the companies with the highest effective tax rates? Investors confident about tax reform, The Wall Street Journal reports. “Corporate tax reform that lowers the top marginal rate from 35% today to something closer to 20% remains highly anticipated given the all-Republican government that will take over in the New Year,” wrote one macro research analyst. “Investors appear to be broadly increasing their allocation to companies with the highest tax rates.” Companies with high effective tax rates who have seen their stock rise in recent weeks include CarMax, the investment firm T. Rowe Price Group, the parent company of United Airlines and Arconic, an aerospace manufacturer that just spun off from Alcoa.

HEY, IT’S TUESDAY. Today also marks 55 years since NASA made Enos the second chimpanzee sent into space. (Enos was also the second primate to orbit the Earth, after the Russian cosmonaut Yuri Gagarin, and went through some pretty intense pain to complete that mission.)

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STILL PRESSING AHEAD: The Treasury Department has every intention to finalize the “serial inverter” rule that it proposed in the spring, Reuters reports. Treasury’s Section 385 rules on earnings stripping, finalized last month, grabbed most of the attention on the tax regulatory side this year. But it’s actual inversion rules that the Section 385 regulations were paired with that have been challenged in court by the U.S. Chamber of Commerce. Treasury’s efforts to finalize those rules come as congressional Republicans are pushing legislation to make it easier to roll back last-minute rules.

ALL COMES BACK TO WAYS AND MEANS: By all accounts, it looks like Trump will choose Rep. Tom Price (R-Ga.) — among the more strident opponents of Obamacare on Capitol Hill — to be his Health and Human Services secretary. If Price were to be confirmed, his departure would likely mean another GOP vacancy on the tax-writing House Ways and Means Committee. But perhaps more important, House Republicans would have to find a new Budget chairman — at a time when passing a budget (or two), to gain access to budget reconciliation, might play a key role in the GOP’s ability to unravel the Affordable Care Act and overhaul the tax code. Rep. Todd Rokita (R-Ind.) is currently the vice chairman of the Budget panel.

A message from the Land Trust Alliance: Congress: Support conservation; enact S. 170/H.R.1992. The Land Trust Alliance and our 1,000 member land trusts welcome the Senate Finance Committee’s report on abuse of the federal conservation tax incentive. The bipartisan study concluded the egregious, ongoing abuse must end – and makes it clear why Congress must take action now. [Learn More]

GIVING TRUMP A PUSH: The president-elect has a fair amount on his to-do list, but a corporate coalition wants to make sure tax reform is near the top. After Trump campaigned with a decidedly populist tone, the Reforming America’s Taxes Equitably Coalition made the case that its members don’t deserve the scorn heaped on other multinationals. “Although headlines abound with news reports about U.S. companies that don’t pay their fair share, our member companies, in fact, pay an average tax rate of 32.5 percent. And we think that’s not only unfair, but also counter-productive,” Elaine Kamarck and Jim Pinkerton, the group’s bipartisan co-chairs, wrote to Trump.

“It’s no secret that many Americans believe corporations don’t pay their fair share of taxes; indeed, our tax code is chock full of loopholes and special preferences,” they added, before calling for a top-to-bottom review of all the incentives in the code.

BOEING, THE NEXT STEPS: The World Trade Organization ruled that a tax break that Washington state gave to Boeing was an improper subsidy. But as Pro Trade’s Doug Palmer reports, Boeing is pushing back on the European Union’s claim that the tax break was worth $5.7 billion. Instead, a spokesman for the manufacturing power said the incentive “is conservatively estimated at $50 million a year.”

INTERNATIONAL UPDATE —

UNPACKING THE BACKPACKER TAX: The Australian government now says it can support taxing the wages of working foreign visitors at a 15 percent rate, the BBC reports. That’s less than half the rate the government originally sought — 32.5 percent — before the tourism and agriculture industries revolted against the idea. Australia’s opposition had sought a 10.5 percent rate, noting that’s what neighboring New Zealand charges its backpackers. Around 600,000 backpackers come to Australia in a given year.

TAKING A STAND: Poland is leading some 16 countries in pushing the European Commission to make it easier for vital data, like health and tax information, to flow across European borders. According to our colleagues at POLITICO Europe, the countries argue that the current setup adds “extra costs for companies and impede governments from moving their services to cloud storage in other countries. They claim the restrictions cost Europe €8 billion a year.”

STATE NEWS —

PAID LEAVE GOES BIG TIME: Washington, D.C.’s City Council appears on the verge of enacting the most sweeping paid federal leave law in the country, allowing 11 weeks of leave to new parents. The Washington Post reports that Council Chairman Phil Mendelson’s plan takes a decidedly European view on family leave, by proposing a 0.62 percent increase in all businesses’ payroll taxes to pay for the plan. Not surprisingly, companies aren’t a fan of that idea, which would raise about a quarter-billion dollars a year. The council might vote on the plan by the end of the year, but it’s unlikely to go into effect before 2020 — giving the district time to develop new processes for collecting the new payroll tax revenue and administering the benefits.

QUICK LINKS

— Retailers are increasing their efforts to get Congress to act on online sales tax.

— Clash over taxes between al-Shabab militants and Somali locals leaves 10 dead.

— Swiss bankers plead not guilty to charges of helping Americans evade taxes.

DID YOU KNOW?

The Pomeranian dog breed — known for being small and fluffy — comes from the European region Pomerania, which is split between Germany and Poland.

Follow us on Twitter Toby Eckert @tobyeckert



Bernie Becker @berniebecker3



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