Itemized deduction limit targets top earners. A new Congressional Research Service (CRS) report examines the new “2/37ths” limit on itemized deductions, which takes effect in 2026 and applies to taxpayers in the top 37 percent bracket. The limit effectively reduces the value of itemized deductions for those taxpayers, so they receive the same 35 percent benefit as taxpayers in the next-highest bracket. CRS estimates the provision would raise $255 billion over 10 years, with most of the revenue coming from the top 1 percent of households. The report also notes the limit will partly reduce the benefit of the higher cap on state and local tax deductions, which rises to $40,400 in 2026.
Family farm sales could get capital gains relief. Rep. Thomas Massie (R-KY) introduced the No Capital Gains Tax on Family Farms Act, which would exclude gains from the sale or exchange of farms between family members. Massie says the bill is intended to reduce pressure on landowners to sell productive farmland to real estate developers or data center operators. The proposal would give family transfers a tax preference, though its revenue cost and distributional effects would depend on how many farms qualify and how the exclusion is structured.
IRS criminal investigation training needs better oversight. The Treasury Inspector General for Tax Administration (TIGTA)says the IRS needs stronger oversight of Criminal Investigation’s special agent investigative techniques training program. TIGTA found that curriculum changes were made without proper coordination or management approval, replacing some core financial lessons with law enforcement lessons and deviating from test-score practices. TIGTA made five recommendations, including stronger review procedures and more consultation with criminal tax counsel attorneys when tax-related course materials change. The IRS agreed with all five recommendations.
Social Security can add to deficits. TPC’s Jessica Riedl debunks the myth that Social Security cannot contribute to federal deficits because it is funded by payroll taxes. In 2026, Social Security is projected to collect $1.442 trillion in payroll and related taxes while spending $1.672 trillion on benefits and administration. That cash shortfall, plus interest costs tied to past shortfalls, adds about $250 billion to this year’s projected federal deficit. The Social Security trust fund is not a cash account, but an internal accounting mechanism that gives Social Security legal authority to run deficits until the trust fund is depleted, projected around 2032.
Family First Act would help many families, but not all. A new TPC analysis finds that the Family First Act would expand the child tax credit while scaling back several other family tax benefits. The bill, introduced by Rep. Blake Moore (R-UT) and Sen. Jim Banks (R-IN), would increase the CTC, create a new credit for pregnant women, and double the maximum EITC for married couples without children. TPC estimates that 62 percent of families with children would see their after-tax income rise, while 32 percent would see it fall. Many low- and moderate-income families made worse off would be single-parent families, largely because the bill would eliminate head of household filing status.
Oil profits revive windfall tax debate. Rising energy prices tied to the Iran war have renewed interest in windfall profits taxes on oil and gas companies. Finance ministers from Austria, Germany, Italy, Portugal, and Spain have urged the European Commission to tax excessive profits, arguing that companies benefiting from war-driven price spikes should help ease costs for the public. But windfall taxes are hard to design: The European Union’s temporary tax after Russia’s 2022 invasion of Ukraine raised $26 billion between 2022 and 2024, far below expectations.
Itemized: Fact of the Week. Tax expenditures are revenue losses that occur when the tax code reduces what individuals or businesses owe through exclusions, deductions, credits, preferential rates, or deferrals. The five largest tax expenditures are projected to cost about $10 trillion from 2025 through 2034. The largest of those is the exclusion of employer contributions for medical insurance premiums and medical care.
The Daily Deduction will resume its regular schedule on Monday, May 11, 2026.
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