The House passed a $1.2 trillion spending bill. The legislation funds most government activities for the fiscal year beginning October 1. It includes $658.1 billion for the Department of Defense and $44.3 billion for the Department of Homeland Security, and about $1.6 billion to start construction for the “wall” between Mexico and the US. The bill would bar the IRS from enforcing the Affordable Care Act’s tax penalty on individuals who choose to go without health insurance. The Senate is likely to disagree on several issues.
Speaking of disagreement: The Big Six. They are deeply divided on overhauling the tax code, specifically over how to pay for rate cuts and how sharply to reduce the corporate tax rate. Senate Finance Committee Chair Orrin Hatch is a member of the group but warns it “will not dictate the direction we take in this committee. The Finance Committee will not be bound by any previous tax reform proposal or framework when we start putting our bill together… My preference is to move tax reform through this committee with bipartisan support.” Separately, Treasury Secretary Steven Mnuchin says the tax plan that he’s promised by the end of September will specify a corporate tax rate. Not clear what other details it will include.
On to the Supreme Court in October? The South Dakota Supreme Court blocked the state from requiring firms to collect sale tax even if they have no physical presence in the state. The justices cited the US Supreme Court’s 1992 law Quill decision and their ruling sets the stage for South Dakota to ask the high court to reconsider that ruling. The state’s attorney general said “Today's decision paves the way to respectfully request the US Supreme Court to provide that much needed fairness to save main streets and jobs across South Dakota.”
And in Cook County, Illinois: Next month for a soda tax ruling. The Cook County Board delayed its vote on repealing the penny-per-ounce tax on sugar- and artificially sweetened beverages. The county’s Finance Committee will hold a hearing October 10 giving the Chicago-land county time to conduct a financial analysis of the tax. Without one, repeal could face a legal challenge.
A radical plan to expand the EITC. The Earned Income Tax Credit was designed primarily to help working families with children. But two Democratic lawmakers—California Representative Ro Khanna and Ohio Senator Sherrod Brown—would turn the credit into a broad wage subsidy for low- and moderate-income workers. TPC Elaine Maag explains that the proposal would cost $1.4 trillion over 10 years but benefit many workers making about $48,000 or less.
Meanwhile, in Europe… Member states of the European Union may have lost €5.4 billion in tax revenues from Google and Facebook between 2013 and 2015. That’s the estimate from the EU lawmaker shepherding corporate tax reform. Google and Facebook book most of their EU revenues in low tax-rate Ireland. The EU started a two-day meeting on corporate taxation in Tallinn, Estonia, yesterday.
TPC Event on September 27: Income Volatility and Tax Policy. Leading practitioners and policy experts will discuss how households experience income volatility and how current policies affect a family’s ability to predict and plan for tax obligations and windfalls. The conversation will include groundbreaking research from the recently released book The Financial Diaries: How American Families Cope in a World of Uncertainty by Jonathan Morduch and Rachel Schneider.
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