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The Finance 202: It’s not at all clear that voters want a tax code overhaul – Washington Post

THE TICKER

It’s become an etched-in-marble article of faith for some Republicans that the party’s ability to make good on a tax code overhaul will determine their fate in the 2018 midterms.

Coming home empty-handed after two years at the controls simply isn’t an option. And GOPers want to be able to tell voters they secured a win on their top economic priority, delivering major tax cuts for them and their businesses. 

But a pair of new polls suggest, at least so far, voters aren’t placing the same urgency on the GOP’s tax agenda. Only one in five say cutting taxes for individuals and businesses should be a major focus for Congress this fall, according to a Politico-Harvard T.H. Chan School of Public Health survey released Thursday. More, from Politico’s Bernie Becker

“Even among GOP voters, support for tax reform was rather muted, with far more Republicans interested in continuing the battle over repealing Obamacare. A third of Republicans called for taxes to be a key part of the congressional to-do list, roughly the same as wanted more defense spending and a focus on reducing federal debt. About half of Republicans want Congress to maintain its efforts to roll back the Affordable Care Act.”

Similarly, a new NBC News/Wall Street Journal survey found 42 percent of voters, a plurality, say Congress shouldn’t cut taxes. The next biggest group — 28 percent — favor cuts for businesses and individuals, while 24 percent want to see cuts for individuals only. 

More tellingly, 62 percent of voters say the wealthy should pay higher taxes. And 55 percent want corporations taxed more — though, somewhat incongruently, 54 percent think a major corporate tax cut would encourage hiring and investment. 

The numbers signal that Republicans have got their work cut out for them in making the case about why they’re doing what they’re doing on taxes. Of course, the GOP also has to continue the sausage-making, too — no easy task.

Republicans will dive into the next legislative phase in the coming days. Those on the House Ways and Means Committee are set to spend Sunday and Monday working through details of their proposal, which they will present to the full House Republican Conference next Wednesday at a gathering away from the Capitol. That day, the administration and top Republican tax negotiators from both chambers will roll out a unified tax framework, per The Post’s Damian Paletta and Mike DeBonis.  

Even as they enter the crunch period, it’s incumbent on Republicans to explain how a tax overhaul will impact the lives of voters, veteran Republican pollster David Winston says. “Clearly, the country is most interested in the economy, jobs and wages, and we haven’t really begun the process of having a discussion about tax reform in that context,” he said. “Republicans have to define the value proposition for individuals — why this is going to positively impact their lives.” 

Promoting the benefits of a policy as you put it together requires a feat of bifurcated attention — the governing equivalent of juggling on a unicycle — that’s proven tricky for both parties. Since the minority isn’t burdened by either task, it can focus entirely on stoking public opposition to the project, a fact that Democrats discovered the hard way eight years ago as they crafted the Affordable Care Act.

In 2009, then-House Speaker Nancy Pelosi (D-Calif.) was trying to describe that dynamic when she uttered a sentence that itself fueled the Republican campaign against the law: “We have to pass the bill so that you can find out what is in it, away from the fog of the controversy,” she said. Then-President Obama later lamented the party hadn’t invested more in explaining itself. Running for reelection two years after the tea party wave swept Democrats from power in the House, Obama told CBS the biggest mistake he made in his first term was in thinking “this job was just about getting the policy right. And that’s important. But the nature of this office is also to tell a story to the American people that gives them a sense of unity and purpose and optimism, especially during tough times.”

Now, says Republican strategist Doug Heye, the burden falls on President Trump to marshal popular demand for the keystone of his economic program. That effort continues today, when Vice President Pence travels to Indiana, along with Sen. Joe Donnelly (D-Ind.) — one of the vulnerable Democrats the administration is targeting as a potential partner on taxes. Trump, who earlier visited North Dakota with Sen. Heidi Heitkamp (D-N.D.), will head to the Hoosier State himself next week. But the polling results demonstrate that a multimillion-dollar push by business and conservative groups to build the case for a tax overhaul has so far failed to move the needle. “Having an event and talking about it is great, but if that’s not sustained, it’s not going to seep through to voters’ conscience,” Heye says. “If he’s focused and talking about tax reform in a sustained way, that can help drive the numbers in the country, certainly for Republican voters.”

U.S. wealth hits $96.2 trillion. But those gains aren’t evenly shared. AP’s Christopher Rugaber: “A healthy gain in the stock market and steadily increasing home prices boosted Americans’ household wealth this spring, a trend that likely adds to the nation’s inequality… Stock portfolios and mutual funds jumped $1.1 trillion. Home values climbed $600 billion. The solid gain in wealth could make many Americans more confident and spend more, which typically fuels economic growth… Roughly 10 percent of Americans own 80 percent of the nation’s stock market value.”

S&P’s China downgrade will boost investors. Bloomberg: “S&P Global Ratings may have just done China’s investors a favor. With the credit assessor cutting the nation’s rating less than a month before the start of a twice-a-decade Communist Party congress, Chinese officials have even more motivation to keep financial markets buoyant. The power of the state’s hand was seen after an equivalent downgrade by Moody’s Investors Service in May: knee-jerk losses in Chinese stocks evaporated in a single trading session, while the yuan soared to a seven-month high in offshore trading within a week amid suspected intervention.”

Market’s hot streak ends. The Wall Street Journal’s Michael Wursthorn and Riva Gold: “The Dow Jones Industrial Average and the S&P 500 ended a streak of record closes Thursday, as investors took stock of the Federal Reserve’s renewed commitment to raise interest rates again this year. Eight of the 11 major S&P 500 sectors ended the day lower, with the steepest declines among technology and consumer-staples shares.

Even with Thursday’s declines, U.S. stocks remained near their all-time highs. Some investors said they are now looking ahead to any policy developments in Washington that could provide further direction for the stock market. ‘I think imminently we will start to price in a tax cut or tax reform,’ said Eddie Perkin, chief equity investment officer at Eaton Vance.”

Warsh vaults into Fed contention. Economists expect Janet L. Yellen to get another term leading the Fed, with ex-Fed governor Kevin Warsh now running behind her — as National Economic Council director Gary Cohn has fallen out of President Trump’s favor. Bloomberg: “While Yellen came out on top in the latest survey, it was Warsh who benefitted the most from the perceived dimming of Cohn’s chances, breaking out of a pack that includes academic economists and former bank executives. Yellen’s time atop the central bank ends Feb. 3, unless Trump chooses to re-nominate her for another four-year term. During a press conference on Wednesday, Yellen reiterated her plan to serve out her term as Fed boss, adding that she had not met again with Trump since a brief introduction earlier this year.”

Trump imposes new North Korea sanctions. The Post’s David Nakamura and Anne Gearan: President Trump on Thursday announced new financial sanctions targeting North Korea as his administration seeks to build international support for more aggressively confronting the rogue nation, whose escalating nuclear and ballistic missile capabilities have reached what U.S. officials consider a crisis point.

The new penalties seek to leverage the dominance of the U.S. financial system by forcing nations, foreign companies and individuals to choose whether to do business with the United States or the comparatively tiny economy of North Korea. U.S. officials acknowledged that like other sanctions, these may not deter North Korean leader Kim Jong Un’s drive to threaten the United States with a nuclear weapon, but is aimed at slowing him down.”

Kim reacted angrily, releasing a statement calling Trump a “mentally deranged U.S. dotard” — causing searches of the meaning of “dotard” to spike. (Dictionary.com: “a person, especially an old person, exhibiting a decline in mental faculties; a weak-minded or foolish old person.”)

The Price is Wrong. Health and Human Services Secretary Tom Price racked up an estimated $300,000 in taxpayer-covered costs taking 24 private jet flights since early May. Politico’s Rachana Pradhan and Dan Diamond: “Price’s use of private jets represents a sharp departure from his two immediate predecessors, Sylvia Mathews Burwell and Kathleen Sebelius, who flew commercially in the continental United States. HHS officials have said Price uses private jets only when commercial travel is not feasible. But many of the flights are between large cities with frequent, low-cost airline traffic.”

Incidentally, Price traded more than $300,000 in shares of health-related companies over his last four years in the House while sponsoring legislation that could move those stocks — in case the Secretary wants to personally reimburse taxpayers for all these flights. 

RUSSIA WATCH: 

Facebook to give Congress thousands of Russian ads. The Post’s Craig Timberg, Carol D. Leonnig and Elizabeth Dwoskin: “Facebook on Thursday announced it would turn over to Congress copies of more than 3,000 politically themed advertisements bought through Russian accounts during the 2016 U.S. presidential campaign, reversing a decision that had frustrated lawmakers. The company has been struggling for months to address the steadily mounting evidence that Russians manipulated the social media platform in their bid to tip the presidential election in favor of Republican Donald Trump.”

Read Facebook CEO Mark Zuckerberg’s comments on the matter here

Fun visual: Phil Bump graphs every contact between Trump’s team and the Russians, here

Feds consider dropping AIG oversight. The Wall Street Journal’s Ryan Tracy and Leslie Scism: “The Financial Stability Oversight Council, a group of senior regulators, was set to discuss the matter at a meeting Friday, these people said. No final decision has been made, and the outcome of the discussion isn’t certain, they said… Removing stricter oversight of AIG would be a symbolic step: The company was at the center of the global markets meltdown in 2008 and was effectively nationalized through a government bailout that topped $180 billion.”

SEC in cleanup mode after hack. Reuters’ Sarah Lynch and Dustin Volz: “Wall Street’s top regulator came under fire on Thursday over its cyber security and disclosure practices after admitting hackers had breached its database of corporate announcements in 2016 and may have used it for insider trading… 

On Wednesday afternoon, SEC Chairman Jay Clayton gave members of Congress a “courtesy call” about the hack before it was announced publicly, said Representative Bill Huizenga, chairman of the U.S. House subcommittee that oversees the SEC, in a phone call… It is particularly embarrassing for the SEC and its new boss Clayton, who has made tackling cyber crime one of the top enforcement issues.”

Meanwhile, the Department of Homeland Security found five critical cyber security weaknesses in SEC computers back in January, Reuters reports. 

TAX FLY-AROUND:

A “fierce” fight over the state and local deduction. Washington Examiner: “A new coalition of local government officials and the real estate industry promises a “fierce” fight against the Trump administration and congressional Republicans in their effort to cut the state and local tax deduction as part of tax reform…The coalition is a re-creation of the one that successfully prevented Congress from tackling the deduction in the 1980s, when President Ronald Reagan ushered through a major reform of the tax code.”

Tax reform is all about the rich. “The top 1 percent paid a total of $542.6 billion in federal tax, or an astounding 39.5 percent of the total income tax. If you want to take a more expansive view of rich, the top 10 percent (who earn upward of $133,000) pay 71 percent of the total tax,” the New York Times’ James B. Stewart writes. “Do they pay the top rate? Not by a long shot. The average rate for the top 1 percent is 27 percent of their adjusted gross income. (It’s even lower — 24 percent — for the super-rich in the 0.001 percent bracket.) The top 10 percent pay an average of 21 percent.

That’s why a tax rewrite is all about them. They take most of the itemized deductions and have a disproportionate share of capital gains and dividends, which are taxed at a much lower rate than salaries and wages. A rewrite means ending those tax breaks, a move that always draws protests and intense lobbying from those who have benefited from them.

Howard Schultz 2020? The Post’s Aaron Blake: “Howard Schultz sure sounds like a candidate. Schultz spoke with The Washington Post at a job fair for young people on Wednesday, and while he insisted he wasn’t talking politics, it wasn’t difficult imagine him delivering the same words in a stump speech in Des Moines… Schultz also recently penned an op-ed after the tragedy in Charlottesville and traveled to Houston after Hurricane Harvey. And he’s offered pretty flimsy denials about whether he will run. (Asked about it after his December announcement, he said: ‘I’m all in on all things Starbucks and have no plans to run for public office.’ Asked if that could change: ‘That’s the way I feel today.’)”

From The Post’s Aaron Blake: “The DNC’s money woes persist”

Today

  • The Federalist Society holds an event on funding the government.

Coming Up

  • The Regional Bank Coalition hosts a discussion on the paper “The Effects of Increased Post-Crisis Regulation and Supervision on U.S. Regional Banks and the Economies They Serve” on Sept. 25.
  • The American Enterprise Institute holds an event on how “decade of extreme monetary policy changed the banking system” on Oct. 10.

From The Post’s Tom Toles: “Republicans point out the solid base of their health-care plan”

Facebook turns over information about Russian ad sales from the 2016 election:

President Trump praises China for economic measures against North Korea:

Trump announced economic sanctions against North Korea: 

U.N. Ambassador Nikki Haley: “We’re not going to run scared from North Korea”: 

Trump jokes about ‘deplorable’ while meeting South Korea’s president:

Stephen Colbert tries to get ahead of any leaks and publishes his own on-camera meltdown: 

Former White House press secretary Sean Spicer says Trump was “very supportive” of his Emmys cameo: 

The Finance 202: It’s not at all clear that voters want a tax code overhaul – Washington Post}

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