CBO: The federal deficit jumped by 20 percent so far this fiscal year. The Congressional Budget Office reported last week that the US spent $682 billion more than it collected between October 1, 2017, and July 31, 2018. That is a boost of $116 billion over the first ten months of last fiscal year. Why? Both the Tax Cuts and Jobs Act and the bipartisan agreement to increase spending led to the bigger deficit.
Treasury proposes new regulations for pass-through entities. The department proposed new Sec. 199A rules for the TCJA’s 20 percent income tax deduction for owners of pass-through businesses. The rules attempt to prevent the deduction from becoming a tax windfall, but very narrowly define those businesses that are excluded from the tax break. TPC’s Steve Rosenthal said, “They left a lot of winners, which may be expensive.” The deduction initially was projected to reduce federal revenue by about $415 billion over the next 10 years.
Can you get the deduction by morphing from an employee to a contractor? Not easily, says the proposed guidance. One big concern was that workers would game the system simply by shifting from being a W-2 employee to becoming an independent contractor. You could sit at the same desk and do the same work but get to deduct 20 percent of your pay from federal taxable income. Treasury’s proposed rules say that the “presumption” is that such a worker would still be an employee and thus ineligible for the deduction unless he can prove otherwise.
An idea for Tax Reform 2.0: Help more low-income families. TPC’s Elaine Maag’s new analysis shows that even a modest increase in the Earned Income Tax Credit for workers without children at home could help reduce poverty. Maag suggests four changes to the EITC that could lift about 700,000 adults out of poverty at a 10-year budget cost of about $95 billion.
Why does the IRS keep closing Taxpayer Assistance Centers? That’s what National Taxpayer Advocate Nina Olson wants to know. In an Aug. 9 blog, she said that the agency has closed nine of 371 walk-in sites since last December, continuing what she says is a troubling trend. Last March, Congress asked the agency to report by July on its plans for keeping the centers open or creating virtual alternatives. No report yet.
A new income tax for East Lansing, Michigan. The city’s voters last week backed a 1percent income tax on residents and 0.5 percent tax on those who commute into the city. It goes into effect January 1, 2019 and sunsets after 12 years. Proponents argued that without the tax East Lansing would have to close a community center and lay off police and fire staff.
Seattle’s soda tax generated $10.5 million in its first six months. The 1.75-cents-per-fluid ounce tax on sugary beverages, syrups, and concentrates may generate more revenue than anticipated, but it is not yet clear whether consumer behavior is changing. The city’s Finance and Administrative Services Department expects total revenue for six months to increase above current estimates: Some second-quarter checks are still in transit and some businesses file their taxes annually.
Britain may levy its own “Amazon tax.” The United Kingdom is considering a special tax on online platform businesses “based on value generated” that would help local online retailers compete against larger multinational online sellers. UK finance minister Phillip Hammond says, “If we can't get international agreement to do this we may have to look at temporary tax measures to rebalance the playing field.”
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