SB 8608: National Housing Trust Fund Expansion Act (Passed)

[Fmr. Representative Encke]

Something I've noticed is that the practice of contacting the GM team via PM seems to have fallen by the wayside. I can't speak for Mr. R, but I have not once received an official request for a cost estimate, either by PM or via the GM office thread, and yet I am constantly seeing threads where legislators are 'waiting for a cost analysis.' I have been providing analyses when I can, such as the analyses I gave for the GAIN act and the Wage Insurance Act.

I'll just say here that any cost analyses involving tax code changes are going to be very rough until Mr. R and I receive more information about how corporate tax returns were calculated last year and in Truman's sketches from this fall.

However, a simple calculation shows that this doesn't pass paygo.

Last year, corporate tax revenues were 340 billion dollars. Let's assume that the entirety of this revenue came from the top marginal tax bracket.

Multiply 340 billion dollars by 1.005 (100.5%) and we get 341.7 billion dollars, or an increase of 1.7 billion dollars, which is less than the 5 billion dollars required in the bill.

Of course, the actual amount of money raised by a 0.5% increase in the top marginal corporate tax rate is much smaller than this, since 1) it is a marginal tax rate, 2) the lower brackets are not affected, and 3) the amount of revenue generated by the top bracket is less than the total corporate tax revenue. This exercise was simply to show that the revenue generated still falls far short even if such outrageously generous assumptions are made.

[Fmr. Representative Encke]

Sorry for being an idiot guys, I realize now that I made a really stupid error that only became apparent upon creation of a spreadsheet where I could manipulate the tax rates at will.

I was applying the 0.5% to corporate tax revenue numbers, when I should have been applying the increase to the income subject to tax, so the revenue multiplier should have been (0.285/0.28= 1.017), not 1.005 (i.e. a tax increase of 0.5% should produce a revenue increase of 1.7%).

With these changes made, and with the official corporate tax revenue numbers calculated (see the GM office), a 0.5% increase in the top bracket actually generates an increase of 5.9 billion in revenue, so this bill does in fact pass Paygo.

[Fmr. Representative Encke]

Since the bill takes immediate effect, I assume that the corporate tax increase will be a part of the FY2019 budget?