Tax changes, Infrastructure, and more social initiatives… The White House is preparing of a roughly $3 trillion spending package that it will roll out later this year. The elements are likely to include an extension of the enhanced refundable tax credits that were increased for only a year by the American Rescue Plan. The agenda, which could be in a single bill or split into two, also is likely to include some of the tax hikes on high-income households and corporations that President Biden proposed during the campaign. Senate GOP leader Mitch McConnell calls the initiative “a trojan horse for massive tax hikes and other job-killing, left-wing policies.”
TCJA cut the average US corporate tax rate in half. The Joint Committee on Taxation reports that the 2017 Tax Cuts and Jobs Act accomplished its goal: A major tax cut on US corporations. A new report concludes the average rate on taxes paid for US-based multinationals fell from 16 percent in 2017 to 7.8 percent after the TCJA became effective in 2018. The rate is lower than the worldwide average tax rate and the EU average rate. Biden is likely to use the analysis to support a corporate tax hike.
Today and Thursday on the Hill. The House Financial Services Committee holds an oversight hearing today on the pandemic response of the Treasury and Federal Reserve. Rescheduled for Thursday is a Senate Finance Committee hearing on how US international tax policy affects American workers, jobs, and investment. Treasury’s Deputy Assistant Secretary for Tax Analysis Kim Clausing, Former Assistant Secretary For Tax Policy Pam Olson, NYU Tax Law Center Executive Director Chye-Ching Huang, and University of Michigan Economics and Law Professor James Hines will testify.
How better data can help federal policymakers create more equitable tax policy. The Biden Administration has initiated a data-driven approach to advancing racial equity that includes tax policy. TPC’s Tracy Gordon and Aravind Boddupalli discuss how TPC is refining its tools and methods to better understand how race and ethnicity interact with the federal tax code. They outline some of the challenges that need to be overcome and considerations for its updated microsimulation model.
Georgia Gov. Kemp signs small state tax cut into law. Georgia will increase its standard deduction for single tax filers by $800, and for married couples filing jointly by $1,100. Georgians over 65 or blind would get an additional $1,300 deduction. The new, higher deductions will take effect in 2022. While the American Rescue Plan prohibits states from using COVID-19 relief funds for tax cuts, Georgia lawmakers say they were working on the legislation prior to enactment of the ARP and, thus, the tax cuts won’t use relief funds.
Florida moves ahead with online sales tax collection. The state’s House and Senate leaders are advancing legislation to require out-of-of state online retailers to collect and remit sales tax to the Florida treasury. State economists estimate that Florida could collect $973.6 million in the upcoming 2021-2022 fiscal year and $1.08 billion in each following year. The revenue would replenish the state’s unemployment compensation trust fund.
Two more states adjust their tax filing deadlines. The IRS changed Tax Day from April 15 to May 17 and states seem to be following suit. Kentucky and Connecticut are among the latest to use May 17 as their tax filing deadline.
Is the IRS Capable of administering a complex tax code on a limited budget? TPC will host a Zoom discussion on this topic on April 7 from Noon to 1:30 for the fifth annual Donald C. Lubick Symposium. The keynote speaker will be Maurice Foley, chief judge of the United States Tax Court. Register here.
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