Tax season starts today but it will feel different to filers. Refunds will likely be smaller for several reasons. There are no more stimulus checks, enhanced child credits, and above-the-line deductions for charitable donations. Filers might also face capital gains taxes if their mutual funds sold stocks or bonds in a down market.
When will negotiations to raise the debt ceiling start? So far, the Biden Administration has not yet scheduled talks with House Speaker Kevin McCarthy to discuss a deal to raise the debt ceiling. Republicans want any increase in the borrowing limit to include spending cuts but Biden aides say he won’t negotiate with “hostage takers.” And in a familiar twist, Sen Joe Manchin says Biden would be making a “mistake” if he doesn’t including some spending reductions in a debt limit agreement.
But spending cuts alone won’t fix the country’s budget and debt problems. McCarthy promised a floor vote on a bill to balance the federal budget in ten years with zero tax increases and plenty of spending reductions. TPC’s Howard Gleckman walks through the math, and shows necessary cuts are far too big to be credible. And if the GOP can’t present a credible way to balance the budget, how will it justify letting the country breach its debt limit?
Treasury: At least 90 percent of some tax benefits go to White taxpayers. A new Treasury analysis finds that Whites receive a disproportionate share of the benefits of tax breaks for capital gains, charitable giving, mortgage interest, and employer-sponsored health insurance. Hispanic people disproportionately benefit from the Child Tax Credit and the Earned Income Tax Credit. One caveat: The Treasury analysis had to impute race based on other information since tax returns include no racial identification.
Lawmakers in eight states pursue more taxes on the rich. The Associated Press reports on bills in California, New York, Illinois, Hawaii, Maryland, Minnesota, Washington, and Connecticut all aimed at raising taxes on the wealthy. Proponents call the ideas “tax justice” while critics say they are “economically destructive.” Similar legislation has failed to advance in recent years, but proponents vow to try again in 2023.
Tax reporting would put gig workers on more equal footing with employees. TPC’s Lillian Hunter writes about the benefits to workers of a lower reporting threshold for Form 1099-K’s on income collected through third-party payment platforms. Without reporting, the IRS can’t easily determine whether gig workers are paying the correct amount of tax and these workers may not know much they owe or that they even need to file. Failing to file an income tax return could cause gig workers to miss out on important benefits like the child tax credit and the Earned Income Tax Credit.
What are the revenue implications for state pass-through-entity taxes? TPC’s Lucy Dadayan and John Buhl explain why pass-through-entity taxes have become a popular way for states to help residents avoid the $10,000 cap on the state and local tax (SALT) deduction. It generally cuts federal taxes without reducing state tax revenue.
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