New Jersey’s SALT lawsuit would help the state’s wealthiest residents. According to the state’s lawsuit challenging the Tax Cuts and Jobs Act’s cap on state and local tax deductions, the limit would cost residents $3.1 billion a year. But using state data, northjersey.com calculates that if the state wins “60 percent of the tax benefits – almost $1.9 billion – would go the richest 1.5 percent of state residents, those who make more than $500,000. The 280 families with incomes over $10 million would get $118 million, or 4 percent of the total.”
Treasury’s pass-through rules: fixing the unfixable. TPC’s Howard Gleckman concludes that the TCJA’s special 20 percent deduction for pass-through businesses was misguided from the start. By giving special tax treatment to some businesses and not others, Congress violated a core principle of tax reform—horizontal equity. While Treasury has proposed rules aimed at clarifying the law, the pass-through provision seems unfixable.
Tax cuts? Meh. Politico’s Aaron Lorenzo reports that Democratic polling finds the TCJA is fading as a political issue. An early August survey by Global Strategy Group found that the percentage of respondents who are not sure if they support the plan spiked to 32 percent from 18 percent in April. Only 32 percent said they support the tax plan, down from 39 percent in April, while 36 percent opposed it, down from 43 percent in April. Only one-quarter of respondents said the new law cut their taxes, while 21 percent said it raised their taxes. Twenty-nine percent said it has not had much impact either way and 25 percent say they don't know what it means for them.
The Senate begins its debate on a big spending bill. The chamber is considering appropriations for Defense, Labor, and Health and Human Services and Education. The combined measures account for 60 percent of the entire 2019 appropriations of $1.3 trillion. Will the lawmakers avoid getting caught up in controversial policy riders?
Pension plans can be an especially nice tax dodge, for some. Bloomberg explains how doctors, law partners and wealth managers can use defined-benefit plans to shelter hundreds of thousands of dollars in annual income from taxes. By doing so, they avoid the taxable income limits Congress established for owners of pass-through entities.
Will Boulder residents choose to keep extra revenue raised by its soda tax? The Coloradans will decide in November. Since voters approved the measure in 2016, the tax has raised $3.2 million. Groups working on health and nutrition programs have benefitted from the revenue. Should the measure fail, extra revenue would be returned to residents as rebates, due to Colorado’s Taxpayer Bill of Rights (TABOR).
An IMF working paper offers a TCJA appraisal. The report by Nigel Chalk, Michael Keen, and Victoria Perry assesses the 2017 tax law from the perspective of the US and the rest of the world. Among the authors’ conclusions: The personal income tax rate reductions could have been better targeted to help low-income households, and more might have been done to address distortions in business taxation.
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.
