CEA Chair Kevin Hassett resigns. The head of the White House Council of Economic Advisers is leaving his post. Hassett was a strong advocate for the Tax Cuts and Jobs Act. But he's also a long-time free-trader. Hassett told The Washington Post that his resignation was unrelated to President Trump's increasingly aggressive tariff policies. Trump announced Hassett's departure in a late Sunday night tweet.
Check out the draft Form W-4. To complete it, a taxpayer might need last year’s 1040. The IRS released a draft last week that reflects the Tax Cuts and Jobs Act (TCJA) and is far more detailed than prior versions. Taxpayers would need to account for all their jobs, whether they are filing jointly, and whether they are claiming dependent tax credits. The new W-4 would also require details of interest, dividend, and retirement income. Itemizers could list anticipated deductions to reduce withholding. The IRS will accept comments on the draft through July 1.
The Congressional Research Service finds the TCJA had little measurable effect on the US economy in 2018. Why? TPC’s Howard Gleckman reviews the study. The TCJA fell wildly short of the Trump Administration’s promise that it would pay for itself, and in fact reduced federal revenue by $170 billion. Wages grew more slowly than overall economic output at rate consistent with pre-TCJA growth. Most impactful: The TCJA cut the effective corporate tax rate in half, and firms had new access to $664 billion in overseas income. Much of it went to $1 trillion in stock buybacks, and not investments in capital or labor.
Trump will award Arthur Laffer the Presidential Medal of Freedom. President Trump will give the nation’s highest civilian honor to the 78-year old economist, who has promoted supply-side economics since the Reagan Administration. Central to Laffer’s argument: Lowering tax rates can boost revenues. The theory was central to the Reagan tax cut of 1981, the 2017 Tax Cuts and Jobs Act, and state tax cuts in Kansas and elsewhere. Critics say it never has been borne out by experience.
Minnesota simplifies filing and reduces tax bills for many. The bill, signed by Governor Tim Walz last week, will reduce the second-lowest income tax tier by 0.25 percentage points, cut property taxes for businesses, and offer tax relief for lower-income households. It retains a tax on health care that would have expired at the end of the year but lowers the rate to 1.8 percent. That tax will raise $872 million over two years and help pay for health programs, including insurance for low-income households and people with disabilities.
Connecticut lawmakers reach a budget deal with no income tax hike. The two-year $43 billion plan broadens the sales tax base, reduces a tax credit claimed by pass-through businesses, and includes a “mansion tax” on expensive homes. Although it does not increase income tax rates on the wealthy, state’s Democratic House majority leader says his party still will support it. But the plan fails to fund billions of dollars for teacher pensions.
Illinois House would boost gas taxes. Under the bill, drivers would pay 38 cents per gallon, twice the current rate. The increase would generate $1 billion next year to pay for upgrades to infrastructure. Will the Senate endorse the plan when it returns to work this week?
Thursday at TPC: A conference on the effects of the TCJA on business. TPC and the University of North Carolina Tax Center host a program on what the 2017 law means for business. Among the topics: How did TCJA affect compensation, corporate payouts, US-based multinationals, overseas firms, and pass-through businesses. Register here for the event. It will also be webcast live here.
In case you missed last week’s State of the States event. As fiscal years draw to a close, how did states change their tax and budget policies? How much revenue can states expect to generate from new taxes on sports betting and marijuana? Did state efforts to achieve broad tax reform work? And how are states continuing to respond to the TCJA’s cap on the state and local tax deduction? You can watch the TPC event online here.
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