Category Archives: Taxation

10 Things You Should Know on Tax Day

Source: Institute on Taxation and Economic Policy (ITEP), April 13, 2018

Everyone pays taxes, including those who earn the least. Our collective federal, state, and local tax system includes income taxes, payroll taxes (Social Security, Medicare), property taxes, sales and other excise taxes. The total share of taxes (federal, state, and local) that Americans across the economic spectrum will pay in 2018 is roughly equal to their total share of income.

Waiting — and Waiting– For Corporate Tax Cuts to Deliver Those Wage Hikes

Source: Manuel Madrid, American Prospect, April 13, 2018

Though if you’re a CEO or shareholder, the new tax cuts are the gift that keeps on giving. ….

…. It’s been nearly four months since the Tax Cuts and Jobs Act became law, and the good times continue to roll for shareholders and company executives. Corporate profitability is well on its way to hitting decade-long highs, and CEO pay, coming off of a record year in 2017, will be the cause of much champagne-popping. But if the new tax bill, which showered corporate America with an estimated $68 billion in savings, has been a party for Wall Street, folks on Main Street—the supposed primary beneficiaries of the tax-cutting bonanza, as Republicans told it—have yet to receive their invitations.

A new online database launched by Americans for Tax Fairness (ATF), a broad coalition of more than 400 groups championing progressive tax reform, tracks how corporations have responded to the new law. The ATF website, entitled “Trump Tax Cut Truths,” contains information on more than 800 companies, including the amount of tax savings those companies received along with details on planned bonuses, pay raises, and stock buybacks. The information is sourced from news articles, press releases, public corporate filings, independent analysis, and ATF research. ….

New Federal Tax Law Makes It Difficult for States to Provide Accurate Revenue Forecasts

Source: Lucy Dadayan, Nelson A. Rockefeller Institute of Government, April 2018

From the press release:
A Rockefeller Institute review of recent state revenue forecasts shows that states are expecting tax revenue growth to be stronger in fiscal year (FY) 2018 compared to FY 2017. Those forecasts remain highly speculative, however, as the full effects of the federal Tax Cuts and Jobs Act (TCJA) remain unknown.

The policy brief reviews forecasts for personal income, corporate income, and sales tax revenue in 42 states and finds a median forecast for personal income tax growth at 4.4 percent in 2018 and 4.7 percent in 2019 – significantly stronger than the 2.4 percent actual growth in 2017. Forecasts for corporate income and sales tax revenue are similarly strong compared to actual growth in 2017.

Forecasters in most states are facing higher-than-usual uncertainty as they do not yet have enough data to factor in the effects of the TCJA. California’s executive budget notes, for example, “These estimates do not include any impacts of the federal tax changes passed at the end of 2017…. Changes by individuals and businesses in response to the federal tax incentives will affect revenues in potentially unexpected ways.”

State revenue forecasts will continue to be updated as the effects of the TCJA become clearer.

Related:
Introduction

Will Corporate Tax Cuts Result in Higher Wages for U.S. Workers?

Source: Gordon Gray and Matthew Gardner, HR Magazine, Vol. 63 no. 3, April 2018
(subscription required)

Two economists debate the issue.

Gordon Gray: Yes. The benefits of the 2017 tax bill are just beginning. ….
Gordon Gray is director of fiscal policy at the American Action Forum in Washington, D.C.

Matthew Gardner: No. Trickle-down tax breaks will have little effect. ….
Matthew Gardner is a senior fellow at the Institute on Taxation and Economic Policy in Washington, D.C.

The Real Cost of Luring Big Companies to Town

Source: Sarah Holder, City Lab, March 29, 2018

A new economic analysis suggests that when cities and states offer tax deals for large companies, public education suffers and incomes eventually fall.

Related:
Who Benefits From Economic Development Incentives? How Incentive Effects on Local Incomes and the Income Distribution Vary With Different Assumptions About Incentive Policy and the Local Economy
Source: Timothy Bartik, W.E. Upjohn Institute, 2018

From the abstract:
As state and local governments have assembled lavish incentive packages to lure business such as Foxconn and Amazon, many have questioned whether these incentives are a good deal. In a new report from the Upjohn Institute, Senior Economist Timothy Bartik shows that the typical incentive package has only modest benefits for local jobs and incomes. Carefully targeted incentives can provide much larger local benefits, but those that draw money from public services such as education can significantly harm local economies.

Policy Brief
Executive Summary

Should State and Local Government Bidding for Big Businesses Be More Like eBay?

Source: Linda McCarthy, Growth and Change: A Journal of Urban and Regional Policy, Early View, April 1, 2018
(subscription required)

From the abstract:
During recent decades, and especially after the economic downturn that began in the late 2000s, many U.S. state and local governments have intensified their pro‐growth efforts to promote corporate investment and jobs, including ever higher incentives (such as tax breaks and grants) in their bidding wars for big businesses. This paper draws an analogy—between bidding for big businesses and bidding on eBay—to highlight the drawbacks of high‐profile bidding wars among governments given that the large corporations establish the bidding rules in their favor. The main consideration raised is whether state and local government bidding for big businesses, which operates analogously to an auction, should be more like eBay, whose rules are fair not only for sellers but also for bidders.

Many Localities Are Unprepared to Collect Taxes on Online Purchases: Amazon.com and other E-Retailers Receive Tax Advantage Over Local Businesses

Source: Institute on Taxation and Economic Policy, March 2018

From the summary:
Online retailer Amazon.com made headlines last year when it began collecting every state-level sales tax on its direct sales. Savvy observers quickly noted that this change did not affect the company’s large and growing “marketplace” business, where it conducts sales in partnership with third-parties and rarely collects tax. But far fewer have noticed that even on its direct sales, Amazon is still not collecting some local-level taxes. This analysis reveals that in seven states (Alabama, Alaska, Idaho, Iowa, Mississippi, New Mexico, and Pennsylvania), Amazon is either not collecting local taxes or is charging a lower tax rate than local retailers. While this collection gap is troubling on its own, it also suggests that many localities are unprepared to reap the benefits of expanded sales tax collection authority that may soon be coming from the U.S. Supreme Court or Congress. Worse, this lack of preparedness extends beyond the seven states identified above and includes states such as Colorado and Illinois where Amazon collects local tax, but where e-retailers without in-state facilities may not be able to do so….

Congress snuck dozens of tax breaks into the budget deal. Here’s where they went.

Source: Dave Levinthal, Center for Public Integrity, March 13, 2018

“Tax extenders” are overlooked, underpublicized and painfully arcane, known by a name that doesn’t even make sense — they should be called “tax cut extenders,” because extending the duration of temporary tax cuts is what they do.

In practice, tax extenders are legislative favors, often slipped into folds of federal bills notable for funding bigger-ticket items — such as military programs, disaster relief, infrastructure overhauls. And despite President Donald Trump’s promise to drain the Washington “swamp,” elected officials and lobbyists conceived a new round of extenders, where they became law inside the bloat of last month’s 652-page budget bill with little public input….

U.S. tax law fuels changes to employee benefit and compensation programs

Source: Willis Towers Watson, February 21, 2018

Willis Towers Watson’s recent pulse survey on impacts from the new tax law reveals that the most common changes organizations have made or are planning or considering include expanding personal financial planning, increasing 401(k) contributions, and increasing or accelerating pension plan contributions. Other potential changes include increasing the employer health care subsidy, reducing or holding flat the employee payroll deduction, or adding a new paid family leave program in accordance with the Family Medical and Leave Act’s tax credit available for paid leave for certain employees.

Related:
Press Release