What impact will the TCJA have on the US energy sector? A new paper from TPC, first published by Resources for the Future, combines qualitative analysis with estimates from TPC’s Investment and Capital Model to show how the Tax Cuts and Jobs Act (TCJA) will affect the energy business. The study found the TCJA initially lowered the sector’s effective tax rates substantially. Long-run tax cuts will be much smaller because many TCJA provisions are due to expire. By 2027, many energy firms will face higher effective tax rates than under pre-TCJA law.
Biden staff exodus. National Economic Council Deputy Director David Kamin is leaving the White House to return to NYU. He'll be replaced by Aviva AronDine, who currently is executive associate director at the Office of Management & Budget. Kamin, a law professor, was a leading voice in the White House for higher taxes on the wealthy.
Big increases in government borrowing costs. TPC’s Howard Gleckman explains the Congressional Budget Office’s forecast of a substantial increase in federal interest payments over the next decade, due in part to higher debt levels but mostly because of rising interest rates. The bottom line: The era of free money is about over for the federal government.
Windfall profits tax on oil and gas producers becomes reality in the UK. The United Kingdom imposed the tax to address the country’s worsening cost-of-living crisis in the face of soaring inflation. Finance Minister Rishi Sunak calls the tax a “temporary targeted energy profits levy” with an “investment allowance” to encourage the energy firms to reinvest profits. Oil and gas companies will pay the 25 percent tax until prices return to more normal levels.
And Hungary announces its own “fair windfall tax.” The government announced new taxes including an $823 million tax on banks and an equally-sized tax on the energy industry. “The levy on excess profits is fair since we’re not taking away all of the profit from anywhere, only a significant portion to meet our goals,” said Cabinet Minister Gergely Gulyas.
In Spain, a major pop star heads to trial in a tax fraud case. Colombian singer Shakira has an official residence in the Bahamas, but Spanish prosecutors allege she lived mostly in Spain between 2012 and 2014 and failed to pay $15.5 million in taxes during that time. A Spanish court dismissed her appeal, so she’s heading to trial. If convicted, she could face a fine and a prison sentence.
And in Lexington, Kentucky, a big “oops.” Fifty-three neighbors petitioned Lexington to switch their tax district to one with higher taxes that fund city services like trash pickup and street cleaning. That change was approved but officials responsible for billing never got the word. As a result, the residents received those city services for free from 2013 to 2022 and Lexington lost about $200,000 in tax revenue. Homeowners will not have to pay the back taxes. But starting in January, their taxes will go up as originally planned.
The Daily Deduction will next publish on Tuesday, May 31, in observance of Memorial Day, May 30. It will return to its regular schedule on Monday, June 6, when Congress returns.
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