Trump escalates the trade war with China. In another step down the road to a full-blown trade war, President Trump announced tariffs on another $200 billion in Chinese exports to the US. He acted in response to China's retaliation against preveiously announced US trade sanctions.
Track post-TCJA economic changes. The Wall Street Journal presents (paywall) 12 charts to track the impact of the new federal tax law over time. While it could take months or even years to draw conclusions, the charts measure a dozen indicators before and after passage of the Tax Cuts and Jobs Act. They include capital spending, corporate profits, dividends and share buybacks, after-tax personal income, consumer spending, and consumer confidence.
The new tax law still rewards some companies that shift profits to tax havens. Reuters explains how, using pharmaceutical company AbbVie as an example. Before enactment of the TCJA, a company that shifted profits overseas needed to pay a 35 percent tax when it brought that income back to US. Now, those profits are taxed at about one-third that rate. In AbbVie’s case, its effective tax rate will likely fall to 9 percent this year, down from around 22 percent in recent years.
New from the American Enterprise Institute: Effects of the TCJA on the medical expense deduction. In a new paper, researchers show how the tax savings from the medical expense deduction increases with income, and the share of taxpayers claiming the deduction also generally rises with income. The paper estimates that half as many taxpayers will claim the medical expense deduction in 2018 compared to 2017.
Will Free File ever gain traction? The IRS says that more than 50 million low- and moderate-income households have used its Free File over the past 16 years. But ProPublica reports that this reflects only 3 percent of eligible tax returns. As a result, it estimates that US taxpayers are spending about $1 billion a year in unnecessary filing fees. Among the reasons: Taxpayers are unaware of the free filing option.
In Massachusetts: No “millionaire’s tax” on the November ballot. The Massachusetts Supreme Judicial Court ruled yesterday that voters will not have an opportunity to approve an income surtax on the state’s wealthiest households. The “Fair Share Amendment,” would have imposed a 4 percent surtax on income above $1 million and raised an estimated $2 billion for education and transportation expenditures. The court said that because voters effectively would have to answer three questions, they would have been in the “untenable position of casting a single vote on two or more dissimilar subjects.” Polls show voters support the tax by more than 2-1.
If you’d like to tell us about a new research paper or have any comments about the Daily Deduction, TPC’s summary of the day’s tax news, write Renu Zaretsky at [email protected]. You can sign up here to receive the Daily Deduction as an email newsletter every weekday morning (Mondays only when Congress is in recess) at 8:00 am.
