Blog - Federal Policy
489 posts
Five Ways States Can Recoup Corporations’ Massive Federal Tax Giveaway
March 2, 2018 • By Aidan Davis
Corporate America is doing alright. Corporate profits soared last year, and 2018 has already brought a major windfall in the form of the Trump-GOP tax law, which dramatically cut the federal corporate tax rate from 35 percent to 21 percent and shifted to a territorial tax system, giving income earned offshore by U.S. companies a free pass by no longer making it subject to U.S. taxes.
Why the Minute Federal 529 Provision Has Huge Consequences for States
February 23, 2018 • By Ronald Mak
When Republican leaders rushed through an overhaul to the federal tax code over a seven-week legislative period, they failed to acknowledge that many provisions in their bill would have negative consequences for states. One such provision of the Tax Cuts and Jobs Act that undermines state laws is the expansion of federal tax breaks that now allows taxpayers to use 529 savings plans to pay for private K-12 education.
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.)
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,…
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.
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.
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.”
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.
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.
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.
The Problems with State Workarounds to the Federal SALT Deduction
January 12, 2018 • By Alan Essig
From the outset, states—particularly wealthier states—objected to the GOP’s proposal to limit SALT deductions in part because it reduces the amount of state and local taxes that the federal government essentially picks up for taxpayers (by allowing a SALT deduction, the federal government is, in effect, paying part of taxpayers’ state and local tax bill), which could hinder states’ ability to raise revenue. Simply focusing on SALT, though, misses the bigger picture. The fact remains that the overall tax bill disproportionately benefits higher-income taxpayers even with the $10,000 SALT cap in place. Responding to federal tax cuts that disproportionately benefit…
The Walmart Smiley Face Is Lying: Corporate Tax Cuts Are Not Causing Pay Raises and Bonuses
January 12, 2018 • By Steve Wamhoff
Last night, Yahoo reported that 81 corporations had announced pay raises and bonuses that they claim result from the Trump-GOP tax law’s reduction in the official corporate tax rate from 35 percent to 21 percent. Of these 81 corporations, 13 were included in ITEP’s most recent corporate tax study, which focuses on the Fortune 500 companies that were profitable every year from 2008 through 2015. These 13 companies had a combined effective tax rate of just 19.1 percent, which undermines the idea that the federal corporate tax rate was holding back their ability to pay workers.
Walmart’s Minimum Wage Hike: Did the Tax System Make Them Do It?
January 12, 2018 • By Matthew Gardner
The Walmart corporation announced this week that it will increase its minimum wage to $11 an hour, in a move that the company attributed to the major corporate tax cut signed into law by President Trump last month. The $300 million the company will spend on the wage boost is just a fraction of the more than $2 billion a year ITEP estimates Walmart could net from the corporate tax rate cuts that took effect January 1—but even so, the company felt the need to make the wage boost more affordable by simultaneously closing 63 Sam’s Club stores and laying…
New Tax Breaks for Craft Beer Are a Drop in the Barrel: 76 percent of Tax Bill’s Beer Tax Cut Goes to a Handful of the Biggest Producers
January 10, 2018 • By Matthew Gardner
The $1.5 trillion tax cut that took effect on Jan.1 was never really going to be about small businesses, despite President Trump’s transparently false claims to the contrary. However, one economic sector still appears happy, for now, to hoist a mug to Congress’s successful sleight of hand: craft breweries.
Corporate America, You Just Got a $650 Billion Tax Cut! What Are You Going to Do Next?
December 22, 2017 • By Matthew Gardner
While many Fortune 500 CEO’s likely had to restrain themselves from preemptively shouting “we’re going to Disneyland” in an homage to the Disney Corporation’s trademark ad spot involving the winner of each year’s Super Bowl, it’s pretty understandable that several of them—including known tax avoiders AT&T, Boeing, Comcast and Wells Fargo—would preemptively make grandiose promises that they will reserve part of their tax cuts for the little people who made it all possible.
Final Tax Bill Hits Parents of College Students Harder than Other Taxpayers
December 19, 2017 • By Steve Wamhoff
While many provisions targeting higher education in previous versions of the tax plan were eventually dropped, little thought has been given to how the bill still raises taxes on parents at the time they are trying to pay for college tuition.
The Trump-GOP’s Big Giveaway to Multinational Corporations
December 19, 2017 • By Richard Phillips
The tax bill just approved by Congress was a golden opportunity to solve these problems for good—but turned out to be a colossal missed opportunity. Instead of addressing the hundreds of billions in lost federal tax revenue due to offshore tax avoidance schemes, the Trump-GOP tax bill would forgive most of the taxes owed on the profits held offshore right now and open the floodgates to even more offshore profit-shifting in the future.
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