Did the president just promise to back a 25-cent gas tax hike? Politico and Axios both report that President Trump told lawmakers at a private meeting yesterday that he would support an increase in the levy to help fund his infrastructure plan. The outline he released this week has been sharply criticized for lacking a funding source. The question now: Will the president’s stick to his closed door promise? And even if he does, will Hill Republicans go there?
Make America Weak Again? TPC’s Howard Gleckman explains how President Trump and his GOP allies seem to be doing their very best to disarm the federal government’s ability to respond to a future economic slowdown. Maybe Howard worries too much with the economy growing smartly, but, he concludes, “that’s the thing about recessions. Like unpleasant relatives, they don’t always tell you they are coming.”
Hedge fund managers rush to set up LLCs to dodge carried interest limits, but the IRS says not so fast. Bloomberg reports on the recent move by hedge fund managers to set up dozens of Limited Liability Corporations in Delaware to continue to benefit from the low capital gains tax rate on carried interest. The Tax Cuts and Jobs Act limited, but did not end, the special tax treatment. “Carried interest was a key litmus test of whether the [TCJA] can be called tax reform, and it failed,” said TPC’s Steven Rosenthal. Indeed, the Treasury Secretary Steven Mnuchin announced yesterday that the IRS will issue guidance within two weeks to prevent investors and investment managers from using shell companies for this purpose.
Lawmakers are working on another TCJA fix. A provision in the new tax law allows farmers to deduct up to 20 percent of commodity sales to cooperatives, but not to other companies. Senate Finance Committee Chairman Orrin Hatch said “the current statutory language does not maintain the previous competitive balance between cooperatives, other agricultural businesses, and the farmers who sell their crops to them, which existed prior to enactment of the tax reform bill.” Hatch also warned the Administration that Congress, not the Treasury, has the last word on interpreting the new tax law.
Connecticut Governor Dannel Malloy floats a SALT workaround. He wants taxpayers to take advantage of the fact that some businesses are allowed an uncapped SALT deduction under the TCJA. He proposes that Connecticut tax pass through businesses at the entity level and create an offsetting personal income tax credit for their owners. They could deduct the payments as a business expense on their federal returns. Will it work? Connecticut’s Revenue Commissioner Kevin Sullivan seems to think so. Pass throughs “are made whole for the tax, essentially, by getting it back from the federal government.”
Iowa Governor Kim Reynolds wants to cut individual income taxes by $1.7 billion. She’s proposing a temporary rate cut of as much as 23 percent, along with tax simplification and tax cuts for small business owners. The changes would be in effect until 2023. She insists state revenue could still grow, in part by collecting more sales tax from online retailers.
A tax preparer-refund scam is getting worse, says the IRS. Tax preparers with infected computers are inadvertently providing criminals with their clients’ tax return data. The crooks then file fraudulent returns, claiming refunds that go to unsuspecting taxpayers’ checking accounts. The scammers then alert the victims to the “error,” and ask them to return the money--to the crook’s account. This IRS advisory explains what to do in the event you receive an erroneous refund.
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.
