President Trump released his budget. It doesn’t balance. Even with his proposed $3 trillion in spending cuts over ten years, the budget does not balance because of additional funds for the military and a border wall and greatly reduced tax revenue under the Tax Cuts and Jobs Act. The budget forecasts $314 billion less tax revenue in 2018 than the White House projected last year, and $400 billion less in 2019. Tax receipts in 2027 will be $200 billion lower than forecast last year. Also of note: The President’s budget offers no additional money for the IRS to implement the TCJA.
And… President Trump released a $1.5 trillion infrastructure plan with no plan to pay for it. The administration’s infrastructure proposal relies on public-private partnerships and funding from state and local governments. Only about $200 billion would come from the federal government, offset in part by selling off US assets. The plan would also shorten the construction permitting process and direct funds toward rural projects and workforce training. In case you were wondering, it does not include an increase in the federal gas tax.
The president promises a plan for a reciprocal tax this week. He says he’ll propose a tax on imports this week. He talked about such a tax before, but it never appeared in the TCJA. House Republican leaders did float a border-adjustable tax, but it succumbed to heavy opposition in the Senate and lack of interest from the White House.
Full employment for lobbyists. Big trade groups spent a bundle during the last three months of 2017 to influence the tax overhaul. The National Association of Realtors spent $22.2 million, double the previous quarter. The Business Roundtable spent $17.3 million in the fourth quarter of 2017 four times as much as in the third. The US Chamber of Commerce spent $16.8 million in the final quarter, a $3.7 million increase.
Marriage gets cheaper, for some, under the Tax Cuts and Jobs Act. The Wall Street Journal reports (paywall) on how the TCJA may have reduced or eliminated the “marriage penalty” for many taxpayers, and increased the “marriage bonus” for some. One example: A two-income married couple, in which each partner earns $175,000 annually and gets $10,000 in net investment income may see their marriage penalty drop from $12,000 in 2017 to $5,000 this year. But for other couples, the marriage penalty remains. “There are so many variables,” notes a wealth management and tax adviser.
Reduced SALT? New York’s Governor Cuomo floats an alternative. Governor Andrew Cuomo proposed a new revenue-neutral two-part plan to protect residents who are losing much of their federal state and local tax deduction as a result of the TCJA. It would create a new optional employer-paid payroll tax that businesses could deduct. It would also allow residents to make tax-deductible charitable contributions to state health and education programs. Budget director Robert Mujica says businesses and employees would be kept whole by the plan. It is not clear whether either solution will pass muster with the IRS or, if it comes to it, the courts.
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