The price of administering the new tax law. National Taxpayer Advocate Nina Olson’s 2017 Annual Report to Congress estimates it will cost the IRS at least $495 million in 2018 and 2019 to implement the Tax Cuts and Jobs Act. But she adds that the agency can do a better job managing its current resources: “[W]ithin the budget it currently has, there are plenty of opportunities for the IRS to demonstrate that it can do a better job of using creativity and innovation to provide taxpayer service, encourage compliance, and address noncompliance.” The report also makes 50 legislative recommendations to strengthen taxpayer rights and tax administration.
Changes at Ways & Means: The retirement of Pat Tiberi knocked over a few dominos. Vern Buchanan of Florida will take the chair of the Tax Policy Subcommittee. A top priority of his has been restructuring the IRS. Tiberi’s seat on the full committee goes to Darin LaHood of Illinois.
Colleges in “blue” states will have TCJA blues. The TCJA levies a 1.4 percent tax on the annual investment income of a few large private university endowments. The narrowly targeted measure largely affects colleges in Democratic-leaning states. Bloomberg reports the tax could raise $200 million a year for the federal government, and finds that 90 percent would be paid by 22 colleges in Democratic congressional districts.
Warren Buffett thinks the stock market hasn’t even begun to feel the TCJA’s effects. The new tax law is a huge factor in stock valuation, says billionaire Berkshire Hathaway CEO Warren Buffett. He told CNBC that he doesn’t think the big corporate tax rate cut is “baked in” to stock prices. Others think much of tax cut was priced in to equities during their recent run up. We’ll know who is right soon enough.
The TCJA’s corporate rate cuts may show up in utility bills. Residents in Massachusetts, Illinois, Oregon and other states may enjoy lower-than-expected utility bills thanks to corporate tax cuts. Pepco, the power supplier for 300,000 households in Washington DC, plans to cut back on planned rate hikes this quarter. Consumers and state regulators are pushing utilities—monopolies in most cases—to reflect their tax cuts in their energy rates. Private power and water providers may recoup costs and guarantee a return to shareholders. But that return can’t be too high: Lower tax rates mean lower utility rates.
And the TCJA could hurt Big Grain. Big grain traders like Archer Daniels Midland, Bunge, and Cargill may have a harder time buying corn. That’s because the TCJA gives farmers a 20 percent tax deduction for selling to agricultural cooperatives.
Washington State Governor Jay Inslee wants a carbon tax. In his State of the State address this week he urged lawmakers to address climate change by adopting a fossil fuel emissions tax. Inslee proposes a $20-per-ton price on carbon emissions. Revenue from the carbon tax would support clean-energy projects, improve floodwater management, reduce wildfire risks, and support low-income communities. The tax could increase residential natural-gas prices by about 10 percent in 2020, and raise gasoline prices by between 6 and 9 percent. A 2016 voter initiative to create such a levy failed when progressives couldn’t agree on what to do with the revenue.
Florida Governor Rick Scott wants more tax cuts. Scott wants to expand a sales tax holiday for hurricane supplies, as well as reduce driver's license fees. His gubernatorial term ends in one year, and he may run for the US Senate.
New Jersey’s state tax refunds will arrive a little later. The state won’t send them until March 1. The delay allows the state’s department of revenue to identify and protect taxpayers against identity theft and fraud.
If you’d like to tell us about a new research paper or have any comments about the Daily Deduction, TPC’s summary of the day’s tax news, write Renu Zaretsky at firstname.lastname@example.org. You can sign up here to receive the Daily Deduction as an email newsletter every weekday morning (Mondays only when Congress is in recess) at 8:00 am.
Posts and Comments are solely the opinion of the author and not that of the Tax Policy Center, Urban Institute, or Brookings Institution.
- © Urban Institute, Brookings Institution, and individual authors, 2016.