Backing away from the trade war with Europe. Late yesterday afternoon, President Trump and European Union president Jean-Claude Juncker announced an agreement aimed at calming trade tensions. Both sides agreed to “work together toward zero tariffs” on industrial goods and on reforms to the World Trade Organization. They also agreed to “hold off further tariffs and reassess existing tariffs on steel and aluminum.” For now, Trump seems to have backed off his aggressive trade stance. But will the deal stick?
Pass-through rules in early August? On July 23, Treasury sent the Office of Management and Budget draft regulations to flesh out the Tax Cuts and Jobs Act’s pass-through provisions. Under an agreement earlier this year, OMB has 10 days to review the proposed regs, though it could return some for a redo. Taxpayers are waiting resolution of many key issues that were left unclear by the TCJA.
The next round in the battle over disclosure of non-profit contributions. Democrats already have held up the nomination of Charles Rettig, Trump’s nominee to lead the IRS, to protest rules to exempt 501(c)(4) non-profits from reporting donor information to the agency. Now, they are expected to use today’s confirmation hearing for Justin Muzinich's nomination to be deputy Treasury secretary as another opportunity to blast the rules.
Democratic Governor Steve Bullock of Montana sues the IRS over those disclosure requirements. He went to court to block the IRS rules, arguing that the Trump administration did not follow proper government process in eliminating the disclosure mandate. His suit asks the court to void the new IRS policy announced by Treasury last week.
The corporate tax cut already has added to the deficit. The New York Times illustrates. Corporate tax collections are at a 75-year low thanks to the TCJA’s new 21 percent corporate tax rate. They are down by one-third—or $50 billion—compared to this time last year even though profits are strong. In part as a result of TCJA changes, the White House’s Office of Management and Budget revised its forecasts “from earlier this year to account for nearly $1 trillion of additional debt over the next decade — almost $100 billion a year in additional deficits, on average.”
In New Jersey, business tax credits are sold more often than they’re applied to tax bills. The Wall Street Journal reports (paywall) that New Jersey’s tax-incentive program isn’t being used as intended. Treasurer Elizabeth Muoio said that 75 percent of businesses have sold their tax credits, rather than using them to lower their tax bills. “The value for the majority of these companies is the actual cash value, it turns out,” Muoio said. Maybe that’s a good thing: Since 2010 the state has approved $8 billion in corporate tax breaks. In April the New Jersey Economic Development Authority found that the state could lose $1 billion in annual tax revenue from 2020 to 2023 if businesses cash in the full credits.
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