More tariff fallout. Construction manufacturer Caterpillar will raise prices, at least partially in response to US tariffs on aluminum and steel that will boost its materials costs by between $100 million and $200 million. Auto manufacturer BMW will raise prices on crossover sport-utility vehicles made in the US and sold in China.
Wall Street banks with offshore operations may be hit by the new tax on GILTI. Bloomberg explains. The Tax Cuts and Jobs Act included a new international tax on global intangible low-taxed income, or GILTI, to deter US tech and drug companies from shifting profits offshore. But Wall Street banks may have to pay the tax too.
New guidance on education savings. The IRS and Treasury have issued preliminary guidance that would expand the use of several education-related savings programs. Tuition refunds could be returned, tax-free, to Section 529 plans. Treasury and the IRS will make it easier for savers to use 529 funds to pay up to $10,000 for private elementary or secondary school tuition. And 529 accounts could be rolled over into an ABLE account, which is used to help younger people with disabilities.
Who benefits from expanding the EITC or CTC? The TCJA missed an opportunity to help low-income childless workers, very low-income families with children, and families with young children. But there will be other chances. TPC’s Elaine Maag examines how the Earned Income Tax Credit and Child Tax Credit could be redesigned to lift millions more people out of poverty.
What is the long-term impact of the EITC on children’s education and employment outcomes? A new paper in the Journal of Labor Economics by Jacob Bastian of the University of Michigan and Katherine Michelmore of Syracuse University explores the question. They estimate that an additional $1,000 in EITC when a child is 13–18 years old increases the likelihood of completing high school by 1.3 percent, completing college by 4.2 percent, being employed as a young adult by 1 percent, and raising earnings by 2.2 percent.
In California, from the Department of Uh-Oh. The Sacramento Bee reports that the state’s new $290 million sales tax collection system is riddled with technical glitches. Businesses need to report their second quarter sales tax within days, but the Department of Tax and Fee Administration’s Centralized Revenue Opportunity System (CROS) is like “choose your own adventure,” according to one business owner. A tax attorney says, “I haven’t heard a good report about it.” California has been working on the software since 2010. At the time the state’s Board of Equalization wanted to improve management of the 36 taxes and fees it collected.
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