The Trump Administration will release its 2019 budget today. With it, it will provide at least a framework of its long-awaited infrastructure plan. Since Congress agreed to top-line numbers for the 2019 budget on Friday, much of the Trump fiscal plan is entirely irrelevant. However, Congress may pay some attention to the president’s priorities for how to divide up those dollars. One issue: How much will the IRS get to implement last year’s tax overhaul?
Inverted companies may be paying higher taxes. While the Tax Cuts and Jobs Act doesn’t directly target companies that shifted their legal addresses to lower-tax jurisdictions, it will hit many deductions they commonly take. The law’s Base Erosion and Anti-Abuse Tax (BEAT) limits how much interest expense US units of inverted companies can deduct on loans they get from their foreign parents. This and other limits on interest expense deductions could bring in an additional $403 billion in new tax revenue over ten years.
Another survey of financial analysts says few TCJA benefits will go to workers. Morgan Stanley analysts predict only 13 percent of companies’ TCJA savings will go to raises, bonuses, or increases in employee benefits. They expect 43 percent will go to stock buy-backs and increased dividends to shareholders. The analysts expect manufacturers will distribute only 9 percent of their TCJA tax savings to workers.
A bellwether in southwestern Pennsylvania? A special election on March 13 for a vacant House seat may preview how Democrats and Republicans will try to use the TCJA to their advantage in the November mid-terms. Democrat Conor Lamb calls the tax law a debt-laden gift to corporations and the wealthy that will prompt cuts to entitlements, while Republican Rick Saccone says the law will turbo-charge the economy and boost worker paychecks. Says NPR, “The emphasis being placed on taxes… may remind the power players in Washington that the midterm elections will not revolve exclusively around the tempests that regularly consume the nation’s capital.”
Will Arizona be the first to take bitcoin tax payments? The state Senate just passed a bill that would allow income taxes to be paid in Bitcoin or other cryptocurrency approved by the Arizona Department of Revenue starting in 2020. Arizona’s revenue department would have to convert a tax payment to US currency at the prevailing rate and credit the taxpayer’s account with the converted dollar amount. Taxpayers would be responsible for any change in value between the time they pay the tax and the state converts the funds. Do you feel lucky?
On the Hill this week. Tomorrow, the Senate Finance Committee will hold two hearings; one on the Treasury Department’s budget request and the other on IRS’ plans to implement the TCJA. The Senate Budget Committee will hear from OMB Director Mick Mulvaney on the President’s 2019 Budget. Mulvaney will appear before the House Budget Committee on Wednesday. And the Ways & Means Committee will hear from Treasury on Thursday.
The IRS reports progress on ID theft. The agency says it got 242,000 identify theft reports from taxpayers in 2017, down 401,000 in 2016 and 677,000 in 2015.
Tune in tomorrow to TPC’s webcast on the TCJA and new business landscape. The event will be webcast starting at 9:30 am until 12:15 pm.
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.
