Senate Finance Committee unanimously approves retirement savings bill. The catch-all bipartisan measure includes almost three dozen proposals affecting both retirement savings and account withdrawals. The Enhancing American Retirement Now (EARN) Act encourages employers to offer retirement savings plans, expands the savers credit, increases “catch-up” contributions for older workers and delays to age 75 required distributions from retirement accounts, but not until 2032. It fails to crack down on “super-IRAs.”
Senate Finance also goes after conservation easements. The committee also agreed to tack on to the retirement bill a measure curbing the use of tax breaks aimed at keeping land undeveloped. The easements have become a widely used tax shelter. The provision is not included in the House retirement bill.
President Biden calls for a three-month suspension of the federal gas tax. He also asked states to suspend their own gas taxes and urged oil companies and refineries to lower prices for consumers. But the proposal generated little enthusiasm in his own party and is likely to die in Congress. Sen. Joe Manchin of West Virginia said he has several concerns with the proposal, saying ”I'm not a yes right now, that's for sure.”
Maybe that’s because a federal gas tax holiday is a terrible idea. TPC’s Howard Gleckman argues that while President Biden might be trying to address inflation, “suspending the gas tax is a terrible idea that, on the margin, will make inflation worse, not better.”
National Taxpayer Advocate warns of continued refund delays and poor taxpayer service. National Taxpayer Advocate Erin Collins, in her mid-year report to Congress, warned of continuing delays in processing paper-filed tax returns. She said there were 21.3 million unprocessed returns at the end of May, 1.3 million more than at the same time last year. Nearly 9 million filers still are waiting for refunds. Collins wrote, “Processing delays are creating unprecedented financial difficulties for millions of taxpayers and outright hardships for many.”
Another year of state tax cuts. TPC’s Richard Auxier reviews the action in 27 states and the District of Columbia—all of which have passed significant tax cuts. Last year the total was 29 states and the District of Columbia. Income tax rate cuts, refundable tax credits, and tax rebates returned, accompanied by some tax cuts on groceries and gas. Richard concludes that if the economy weakens and strong revenue growth doesn’t continue, states could be in trouble.
As in Ohio, for example. Lawmakers in the Ohio House proposed a bipartisan bill to eliminate the sales tax for child and adult diapers. The bill is part of a larger package proposed by Democrats, which also includes a new Infant Formula Tax Credit. Meanwhile, most of a group of academic economists recommended a state Child Tax Credit (CTC) comparable to the federal CTC, according to a survey conducted by Scioto Analysis. Two economists preferred an extension of the federal CTC.
Better ways to use synthetic controls. TPC’s Robert McClelland and Livia Mucciolo updated their guide on how to use synthetic controls to model state and local tax policies. The synthetic control method (SCM) is a relatively new and valuable tool that allows researchers to measure policy changes against a theoretical baseline. Their updated guide incorporates some changes that improve the SCM, as well as graphic intuition behind the method and a new way to visualize how to select an ideal pool of potential controls.
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