CBO released its ten-year budget and economic outlook. The full report estimates that the federal budget deficit in 2016 will reach $544 billion and the public debt will rise to 76 percent of Gross Domestic Product. Two reasons for the increase in the deficits: slowdowns in payroll tax and corporate tax receipts. CBO projects that while short-term economic growth will be solid, subsequent years will see a slowdown. CBO Director Keith Hall will discuss the report before the Senate Budget Committee this morning.
Will West Virginia balance its budget? The state faces a budget deficit for the third consecutive year, due in large part to declines in both coal production and natural gas prices. In his 2017 budget, Democratic Governor Earl Ray Tomblin would pay off the state’s workers’ compensation debt early and cut the state’s severance tax. He’d also increase taxes on tobacco products and telecommunications. He can expect push-back from the Republican-led legislature.
In Massachusetts, Governor Charles Baker wants to swap a film credit for a business tax break. The Republican wants to trim the state’s film tax credit and use the $43 million in savings to pay for more affordable housing and a tax cut on Bay State businesses that sell out-of-state. But over five years, according to his administration’s projections, the proposal would cost more than twice the amount of savings.
Another day, another inversion. Johnson Controls, an auto supplier currently based in Milwaukee, Wisconsin, will buy Tyco International, based in Ireland. An Irish mailing address will save the new company about $150 million a year.
And abroad, a different move might not save much after all. British bank HSBC might relocate to Hong Kong to get away from the UK corporate tax rate, soon to be 26 percent. But the bank might have difficulty moving enough profit to benefit from Hong Kong’s 16.5 percent rate. Moreover, Hong Kong isn’t as generous in the way it treats share bonuses, which could cost HSBC millions of dollars in annual tax deductions.
This article first appeared at TaxVox.