White House Pivots on Tax Reform
April 14, 2017
White House signals new direction on tax reform; U.S. financial markets are closed in observance of Good Friday; U.S. Retail Sales Decrease for Second Straight Month; U.S. Consumer Price Index Measuring Inflation Fell 0.3% in March compared to 0.2% expected increase.
- White House signals new direction on tax reform. The Trump administration is drafting a new proposal for tax reform. A House tax reform blueprint, released last year as part of Speaker Paul Ryan’s (R-Wis.) “Better Way” plan, has long been considered the starting point for tax reform. Now, officials in the Trump administration are considering a range of different policy options beyond what Republican congressmen have proposed. Mick Mulvaney, Office of Management and Budget Director, said that it was “too early to say” whether the White House’s plan would match the House’s blueprint, but he expressed that he was not hesitant to “formulate our own policies.” After last month’s collapse of the Republican ObamaCare repeal bill, the White House indicated that it intends to take more of a leading role on tax reform. The most controversial aspect of the House’s tax reform plan is its reliance on border adjustability to tax imports and exempt exports. However, while that tax is the cornerstone of Ryan’s proposal, the Trump White House has not fully embraced it yet. The Washington Post reported last week that the White House is looking at other ideas, including a value-added tax and a carbon tax, but the White House has pushed back on these reports. Trump has also floated the idea of linking tax reform with infrastructure, which is not part of the House Republicans’ plan. The version of Trump’s tax plan that he released in September doesn’t include border adjustability, but shares other similarities to the House GOP tax plan, including individual tax brackets of 33 percent, 25 percent and 12 percent. Both plans would lower the corporate tax rate. [The Hill]
Economic Indicators & News
- U.S. financial markets are closed in observance of Good Friday. [MarketWatch]
- U.S. Retail Sales Decrease for Second Straight Month. U.S. retail sales declined for the second straight month in March. The decrease marks the worst two-month stretch for the consumer-spending gauge in more than two years. According to the Commerce Department on Friday, sales at U.S. stores, restaurants and online retailers fell 0.2% from February to a seasonally adjusted $470.84 billion in March. Meanwhile, sales in February were revised to a 0.3% decrease after an initial estimate of a 0.1% gain. Less spending at auto dealerships and gasoline stations were primary drivers of the recent decline. Excluding motor vehicles and automotive parts, sales were unchanged in February and up 0.1% last month. Cooling retail sales the past two months after spending growth late in 2016 suggests that consumers are limited in their capacity to drive stronger economic growth. Retail sales account for more than two-thirds of economic activity in the U.S, but don’t include spending on services such as rent and medical bills and is not adjusted for inflation. [WSJ]
- U.S. Consumer Price Index Measuring Inflation Fell 0.3% in March compared to 0.2% expected increase. According to the Labor Department on Friday, the U.S. Consumer Price Index decreased 0.3 percent in March after a 0.1 percent rise in February. This was the first monthly decline in 13 months, and the biggest drop since prices fell 0.6 percent in January of 2015. The consumer prices were pushed lower by another sharp decline in the price of gasoline and energy products. Gasoline prices dropped 6.2 percent, while the cost of cellphone plans, new and used cars and clothing all lowered last month. Core inflation, excluding the volatile food and energy sectors, dropped 0.1 percent last month. Over the past 12 months, inflation is up a moderate 2.4 percent while core prices have risen 2 percent. [CNBC]