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Any politician can score points by railing against President Trump and his wildly unfair, loophole-ridden tax law. But if New York’s working people find out they will be subjected to a new and complicated set of state tax rules all to help the richest 5 percent, they’ll wonder why a better solution that targets corporations and high-income earners who just received a sizable federal tax break, was not found. In the wake of the Trump-GOP tax law, this is a missed opportunity for lawmakers in New York to increase taxes on those who just benefited from a substantial tax cut.
Two narratives that intentionally obscure who benefits from the tax law are emerging. One focuses on the personal income tax cuts that will result in an increase in net take-home pay for many employees once their employers adjust withholding. Anecdotes abound of working people getting a $100 or more increase, after taxes, per paycheck, but the reality is that most workers will receive a lot less than that. Meanwhile, the wealthiest 1 percent of households will receive an average annual tax break of $55,000, an amount that nearly eclipses the nation’s median household income.
Mnuchin’s Not So Grand Stand on the Carried Interest Loophole Explained
February 15, 2018 • By Matthew Gardner
When President Trump released the initial outline of his tax reform plan in April, carried interest repeal was nowhere to be found. And when Congress hammered out a tax plan in late December, lawmakers agreed to reduce the cost of the carried interest tax provision by about 5 percent. (Full repeal would have raised $20 billion over a decade; the enacted provision raises about $1 billion.)
This Valentine's week finds California, Georgia, Missouri, New York, Oregon, and other states flirting with the idea of coupling to various components of the federal tax-cut bill. Meanwhile, lawmakers seeking revenue solutions to budget shortfalls in Alaska, Oklahoma, and Wyoming saw their advances spurned, and anti-tax advocates in many states have been getting mixed responses to their tax-cut proposals. And be sure to check out our "what we're reading" section to see how states are getting no love in recent federal budget developments.
A Gas Tax Hike Is the Obvious Answer to Infrastructure Funding
February 14, 2018 • By Steve Wamhoff
As part of his budget plan released Monday, President Trump offered an infrastructure proposal that he describes as a $1.5 trillion 10-year surge in infrastructure investments. The details of the proposal explain that the federal government would put up only $200 billion of this total, which the administration claims will be offset with cuts in other spending. Even this relatively meager funding amount is illusory because it would clearly be financed by cutting other federal spending — including infrastructure investments.
GOP Dilemma: Love the Tax Cut, Hate the Agency that Administers It
February 14, 2018 • By Matthew Gardner
The president’s budget proposal would cut the agency’s baseline funding from $12 billion to $11.1 billion this year. This is almost a quarter less, in inflation-adjusted terms, than the $14.4 billion the agency received in fiscal year 2010. Not surprisingly, the long, steady decline of IRS funding during this period has led to a reduction in staffing: the agency’s 2016 employee total of 77,000 was 17,000 lower than at the beginning of the decade.
Amazon Inc. Paid Zero in Federal Taxes in 2017, Gets $789 Million Windfall from New Tax Law
February 13, 2018 • By Matthew Gardner
The online retail giant has built its business model on tax avoidance, and its latest financial filing makes it clear that Amazon continues to be insulated from the nation’s tax system. In 2017, Amazon reported $5.6 billion of U.S. profits and didn’t pay a dime of federal income taxes on it. The company’s financial statement suggests that various tax credits and tax breaks for executive stock options are responsible for zeroing out the company’s tax this year.
The More Things Change: PG&E Records a Tenth Straight Year of No Federal Income Taxes
February 9, 2018 • By Matthew Gardner
In the runup to last fall’s tax debate, it was commonly observed that corporate tax reform is both easy and hard: the easy part is cutting the rate, and the hard part is paying for it by closing loopholes. The real test of Congress’ determination to achieve tax reform would be whether they would stand up to corporate lobbyists and shut down loopholes like accelerated depreciation that allow profitable companies to pay little or no income tax. As is now widely known, Congress was not especially determined: lawmakers aggressively cut the corporate rate from 35 to 21 percent, but then…
How the Latest Budget Deals Expose the Failure of “Tax Reform”
February 9, 2018 • By Richard Phillips
If there was one thing that tax reform legislation was supposed to accomplish, it was to put an end to the scandalous semiannual ritual of extending and expanding the list of the temporary provisions in the tax code, known as tax extenders. During the passage of the last tax extenders bill at the end of December 2015, lawmakers on both sides of the aisle agreed that it was critical to have a tax code that provides “permanency and certainty” and to move forward with comprehensive tax reform that would decide the fate of the extenders once and for all. Unfortunately,…
State Rundown 2/8: State Responses to Federal Bill Gaining Steam
February 8, 2018 • By ITEP Staff
Several states this week are looking at ways to revamp their tax codes in response to the federal tax cut bill, with Georgia, Idaho, Maryland, Nebraska, and Vermont all actively considering proposals. Meanwhile, Connecticut, Louisiana, and Pennsylvania are working on resolving their budget shortfalls. And transportation funding is getting needed attention in Mississippi, Utah, and Wisconsin.
How Much Will Typical Middle-Class Workers Really See Their Paychecks Change?
February 3, 2018 • By Steve Wamhoff
The campaign by Republican leaders in Congress to promote their new tax law has two prongs. One is the claim that corporate income tax cuts are already trickling down to workers, which, as we have explained, is believed by basically no economists anywhere. The other prong of their campaign is to argue that the personal income tax cuts will provide a noticeable decline in withholding from paychecks that middle-class people will notice soon. At this point, it’s helpful to look at some actual data and see how small the boost in take-home pay will really be for most Americans.
Sometimes, ranking near No. 1 in the world is not a badge of pride. According to the Financial Secrecy Index released by the Tax Justice Network (TJN), the United States is the second largest contributor to financial secrecy in the world, placing it in the company of infamous tax havens such as Switzerland (ranked No. 1) and the Cayman Islands (ranked No. 3). Financial secrecy is enabling people to hide income from the authorities to evade taxes or financial regulation, launder profits from crime, finance terrorism, or otherwise break the law.
State Rundown 1/31: Low-Income Families’ Taxes Getting Some Much-Needed Attention
January 31, 2018 • By ITEP Staff
This week was promising for advocates of Earned Income Tax Credits (EITCs) and other tax breaks for workers and their families, which are making headway in Alabama, Maine, Massachusetts, Missouri, Utah, and Wisconsin. The week also saw the unveiling of a tax cut plan in Missouri, a budget-balancing tax increase package in Oklahoma, the end of an unproductive film tax credit in West Virginia, and a very busy week for tax policy in Utah.
How Exxon’s Empty $50 Billion Promise Made Its Way into Trump’s SOTU
January 31, 2018 • By Matthew Gardner
Never one to let the truth get in the way of a good story, House Speaker Paul Ryan immediately published a press release with the headline, “ExxonMobil to Invest an Additional $50 Billion in the U.S. Due to Tax Reform.” The statement was completely faithful to ExxonMobil’s statement, except for the words “additional” and “due to tax reform.” Not to be outdone, President Trump implied during his State of the Union address that the company was investing $50 billion in response to the new tax law. But a closer examination of ExxonMobil’s recent history of domestic spending finds that the…
Fact-Checking Trump’s State of the Union Address on Tax Issues
January 31, 2018 • By Steve Wamhoff
Here are some claims the President made during his State of the Union address, along with the facts.
Moody’s and Conservative Economists Agree: The Trump Corporate Tax Cut Is Not Helping Workers
January 26, 2018 • By Steve Wamhoff
Moody’s does not believe that corporate tax cuts are trickling down to working people as bonuses and pay raises. The real problem with the corporate PR campaign is that even those economists who supported Trump’s corporate tax cut and claimed it would help workers do not believe that it works this way.
Federal Tax Law Will Have Mixed Effect on Taxpayers’ State Tax Bills and States’ Revenue
January 26, 2018 • By Meg Wiehe
Most states piggyback on federal law to some extent for their own taxes, especially personal and corporate income taxes. These states in particular must understand what the federal changes mean for their own tax codes and decide whether to remain “coupled” to changes in the tax bill, decouple from them or take other action in response.
States’ attempts to work around the new federal tax law and ensure their residents continue to maximally benefit from state and local tax (SALT) deductions have been in the news since the beginning of the year. At a panel discussion for tax professionals in Washington Thursday, Thomas West, tax legislative counsel at the Treasury Department, cast doubt on proposed work-around schemes that would convert state income tax payments into “charitable contributions.”
State Rundown 1/25: States Begin Tax Debates while Still Racing to Understand Federal Bill
January 25, 2018 • By ITEP Staff
State legislative sessions are in full swing this week as states grapple with revenue shortfalls and the ramifications of the federal tax cut bill. Lawmakers in Alaska and Louisiana, for example, are debating how to handle their revenue shortfalls, and a tax cut proposal in Idaho has been received tepidly. And be sure to peruse our "What We're Reading" section for helpful perspectives on how states are affected by the federal tax cut bill.
The Walt Disney Corporation announced this week that in the wake of the new tax bill’s passage, it will spend $125 million on one-time bonuses and $50 million on an education program for some employees, all in 2018. This $175 million spending commitment is notable for two reasons: it’s temporary, and it’s a drop in the bucket for a company that’s likely to see annual tax savings of $1.2 billion a year and has already committed to a $50 billion-plus corporate acquisition of 21st Century Fox’s assets.
Olympics-like Bidding for Amazon’s HQ2 Is a PR Stunt Meant to Extract Tax Subsidies
January 19, 2018 • By Guest Blogger
By Greg LeRoy Amazon.com’s announcement of a 20-site “short list” for its second headquarters, or “HQ2” location, is provoking a public backlash that could reshape how economic development is done in the United States. In one sense, Amazon is continuing to behave as predicted, staging a public-relations stunt apparently to extract the largest possible subsidies […]
Apple Gambled on Congressional Spinelessness on Tax Policy— and Won
January 18, 2018 • By Matthew Gardner
Now, Apple Inc. would like the American public to know that it has “a deep sense of responsibility to give back to our country” a small fraction of its multi-billion-dollar tax cut haul. However, the company’s splashy press release is devoid of any specifics on the jobs it will create as a result of the tax bill. Like other corporate announcements, the company’s recent proclamation of newfound patriotism should be viewed as a public relations ploy designed to convince a skeptical public that working families will see some trickle-down benefit from this historic corporate giveaway.
State Rundown 1/17: Budget Deficits, Online Sales Tax, and More
January 17, 2018 • By ITEP Staff
The big news this week in state tax law is that the U.S. Supreme Court has agreed to take on the issue of online sales, nexus, and sales tax collection. States have increasingly lost out on sales tax revenues as more transactions have shifted online from brick-and-mortar stores and the laws determining who is required to collect and remit sales taxes haven't kept up. This is potentially good news for states—25 of which National Association of State Budget Officers (NASBO) reports started the new year with budgetary deficits. In other news, grappling with the local impact of federal tax reform…
Repealing, or Working Around, the Cap on State and Local Tax Deductions Would Make the Trump-GOP Tax Law Even More Unfair
January 17, 2018 • By Steve Wamhoff
A bipartisan proposal in Congress to eliminate the new $10,000 cap on federal deductions for state and local taxes (SALT) would cost more than $86 billion in 2019 alone and two-thirds of the benefits would go to the richest 1 percent of households. Unfortunately, “work around” proposals in some states to allow their residents to avoid the new federal cap would likely have the same regressive effect on the overall tax code.
Last week, a federal court judge in California ruled that the Trump administration cannot end DACA (Deferred Action for Childhood Arrivals) while the case works its way through the courts. Although this is reassuring news for the roughly 685,000 young people currently enrolled or seeking renewals for their DACA status it does not extend protections to new applicants, and it does not lessen the need for congressional action to protect Dreamers.
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