The Fed cuts interest rates for the first time since the 2008. The widely expected move reduced interest rates by a quarter point. The Fed also announced that it has stopped selling off assets a few months early, another modest step to boost the US economy. Fed Chair Jerome Powell said he saw no immediate risk to the US economy but expressed some concern about slowdowns in China and Europe. Powell disappointed markets, however, by warning, “It’s not the beginning of a long series of rate cuts.”
Federal judge rules that IRS guidance on reduced donor disclosure is unlawful. Last year, the IRS and Treasury said certain tax-exempt organizations no longer must report the names and addresses of their major donors. Yesterday, a federal judge in Montana ruled that the guidance violated federal law. Judge Brian Morris agreed with the states of Montana and New Jersey that argued the IRS and Treasury violated notice and comment requirements of the Administrative Procedures Act.
House Ways & Means Chair warns against executive action on indexing capital gains taxes. Rep. Richard Neal issued a warning yesterday: “If the Trump Administration unilaterally changes the capital gains tax structure, it wouldn’t just be bad policy, it would be executive overreach… Tax legislation must originate in the House Ways and Means Committee — the President should not circumvent Congress to alter the tax code." For nearly a year, rumors have circulated that Treasury would adjust taxable gains for inflation on its own. However, prior agency legal opinions found it did not have the authority to do so.
Tearing up a postcard. After passage of the Tax Cuts and Jobs Act, Treasury rewrote the Form 1040 so, the White House claimed, it would fit on a postcard. Thing is, the form never did fit on a postcard and the rewrite required taxpayers to fill out as many as six extra forms—and still use an envelope. The IRS decided to retire the postcard and has issued a new draft form 1040. It looks a lot like the old Form 1040.
How much state spending is on autopilot? TPC’s State and Local Finance Initiative (SLFI) looked at how future state fiscal choices are constrained by past decisions to create spending programs that increase automatically with inflation or need. The study found a wage range of effects, depending on how states define automatic spending.
Will Pennsylvania tax retirement income instead of property? Republican state representative Frank Ryan introduced a bill to replace the state’s property tax with a 4.92 percent tax on retirement income, a new 1.85 percent local personal income tax, and a boost in the sales tax from 6 percent to 8 percent--all to fund school districts. Pensions currently are tax-exempt in Pennsylvania. A spokesman for House Democrats called Ryan’s proposal “constructive.”
Mexico’s President plans to eliminate tax write-offs. President Andrews Manuel Lopez Obrador will propose a constitutional change to eliminate tax write-offs to strengthen the country’s finances without levying new taxes. Changing the constitution requires a two-thirds majority in both chambers of Mexico’s legislature. Meanwhile lawmakers in the president’s party are working on proposals to tax purchases on digital platforms.
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