In the House: No spending deal yet, but a balanced budget plan. The House ditched plants to vote on a rule for a stopgap spending measure amid continued disagreements over spending cuts. Meanwhile, the House Budget Committee plans today to mark up its budget blueprint, which aims to balance the federal budget over ten years by reducing spending to 2022 levels, imposing restrictions on social safety net programs, and banking on  strong economic growth. 

Bipartisan House group seeks update on US plan to combat Canada’s digital services tax. Canada plans to levy a new digital services tax on Jan. 1, 2024, even though most of the 140 participating economies of the Organization for Economic Cooperation and Development agreed to wait one more year. The Canadian government says it has waited long enough and will impose its tax in January if the treaty to implement Pillar One is not in effect. A bipartisan group of House lawmakers wrote to the Biden administration seeking information on what the president is doing to keep Canada from moving forward with the tax or “any other discriminatory unilateral measure.” 

IRS to change how it audits EITC recipients. Audit rates for Black Americans are three to five times higher than for other taxpayers, and audits focused on the Earned Income Tax Credit (EITC) have driven much of the disparity, according to research. The IRS recently announced it will change how it conducts audits of EITC recipients. IRS Commissioner Danny Werfel stated that the agency is “making broad efforts to overhaul compliance efforts in a manner that robustly advances our commitment to fair, equitable, and effective tax administration.” 

And the IRS will crack down on predatory tax preparers. IRS research suggests these preparers disproportionately file tax returns for vulnerable taxpayers, including low-income filers, minorities, and those with limited English proficiency. Doug O’Donnell, IRS Deputy Commissioner for Services and Enforcement, told The Washington Post that the agency plans to refer more tax preparers suspected of fraud to its criminal investigation division. 

Kentucky’s income tax rate will hold steady in 2025. The state’s income tax rate dropped from 5 percent to 4.5 percent this year and will fall to 4 percent next year. But it will stay at 4 percent in 2025 as well. Kentucky did not meet fiscal requirements that would otherwise trigger a rate reduction under a planned phase-out of its income tax. 

For the latest tax news, subscribe to the Tax Policy Center’s Daily Deduction. Sign up here to have it delivered to your inbox weekdays at 8:00 am (Mondays only when Congress is in recess). We welcome tips on new research or other news. Email Renu Zaretsky at [email protected].