Blog
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.
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.
State Rundown 1/12: Tax Cut Tunnel Vision Threatens to Bore State Budget Holes Even Deeper
January 12, 2018 • By ITEP Staff
As states continue to sift through wreckage of the federal tax cut bill to try to determine how they will be affected, two things should be clear to everyone: the richest people in every state just got a massive federal tax cut, and federal funding for shared priorities like education and health care is certain to continue to decline. State leaders who care about those priorities should consider asking those wealthy beneficiaries of the federal cuts to pay more to the state in order to minimize the damage of the looming federal funding cuts, but so far policymakers in Idaho,…
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…
Using Private Debt Collectors as a Substitute for the IRS Is a Bad Deal
January 11, 2018 • By Matthew Gardner
If President Trump is indeed a deal maker, then he should dismantle Congress’s decision to rely on private debt collectors as a substitute for the Internal Revenue Service. This decision, championed for years by Sens. Charles Grassley, R-Iowa, and Chuck Schumer, D-New York, is a lousy deal for everyone--American taxpayers, the federal government--except private debt collectors.
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.
New Tax Law Allows Affluent Taxpayers to Write off K-12 Private School Tuition
January 9, 2018 • By Matthew Gardner
Taxpayers are still learning about the intended and unintended consequences of the major tax overhaul that Republican leaders ramrodded through late last year. One little-noted provision subverts state laws that prohibit the use of public dollars for private schools by allowing taxpayers to use 529 plans to pay for K-12 tuition. Until last year, the […]
State Rundown 1/4: Will States Show Resolve in a Challenging Year?
January 4, 2018 • By ITEP Staff
This week marks the beginning of what is bound to be a wild year for state tax and budget debates. Essentially every state is already working to sort through the complicated ramifications of the federal tax cuts passed in December, including Kansas, Michigan, Montana, and New Jersey highlighted below. These and other states will have important decisions to make about how to incorporate, reject, or mitigate various aspects of the new federal law, and will need considerable resolve to improve state tax policy to be more fair and more adequate – even as federal taxes become less so.
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.
These have been dark days for those who care about tax justice and public investments, but with the Winter Solstice this week and many states diving into their legislative sessions in January, longer days (and long work days) are soon to come! Governors and legislators are already proposing or hinting at their 2018 tax and budget plans in Alaska, California, Iowa, Maryland, and Washington. And transportation investments are getting strong support in Missouri, Oregon, and Virginia.
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.
Corker Claims Provisions Benefiting Him Could Not Have Changed His Vote Because He Never Read the Bill
December 18, 2017 • By Matthew Gardner
Many Republicans who had previously claimed to be deficit hawks have been cheerfully supportive of major tax-cutting legislation as it has moved forward this fall. But one Republican Senator, Bob Corker of Tennessee, has taken a defiant stance on the issue, insisting that “passing off increased debt to future generations” would be a deal-breaker for him. When the Senate passed its version of the tax plan last week, Corker was the only Republican to vote No.
Final GOP-Trump Bill Still Forces California and New York to Shoulder a Larger Share of Federal Taxes Under Final GOP-Trump Tax Bill; Texas, Florida, and Other States Will Pay Less
December 17, 2017 • By Meg Wiehe
Residents of California and New York pay a large amount of the nation’s federal personal income taxes relative to their share of the population. As illustrated by the table below, the final GOP-Trump tax bill expected to be approved this week would substantially increase the share of total federal personal income taxes (PIT) paid by both states. Connecticut, Maryland, Massachusetts, and New Jersey would also see their share of federal PIT increase.
Final Tax Bill Reported to Provide Senator Rubio With Much Smaller Improvement for Children than He Demanded
December 15, 2017 • By Steve Wamhoff
The latest news on the GOP tax bill is that, in order to secure the vote of Senator Marco Rubio, Republican leaders have agreed to expand the child tax credit — but only by a fraction of the amount that Rubio initially demanded.
GOP Leaders Scrounge Up Money to Lower Top Tax Rate for the Rich But Not to Help Low-Income Working Families with Children
December 15, 2017 • By Meg Wiehe
Republican leaders who rejected a proposal to have corporations pay a single percentage point higher tax rate to benefit families with children have tapped the exact same source of savings to provide more breaks for the richest 1 percent of taxpayers. The table below compares the number and share of households nationally and in all 50-states who would benefit from the proposal to reduce taxes for working families with children versus the ”compromise” to cut the top individual tax rate -- below either the House or Senate version – to 37 percent for couples with incomes above $1 million.
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