Treasury’s tax legislative counsel questions state plans to mitigate SALT deduction repeal. Thomas West offered a warning to states like California, New Jersey and New York that are exploring work-arounds for the federal $10,000 cap on state and local tax deductions. They include new deductible charitable contributions to state-run non-profits or replacing the personal income tax with a payroll tax. “We’re skeptical that some of these [ideas] will work,” West said. Treasury may issue formal guidance aimed at protecting federal revenue.
Meanwhile, Maryland residents will pay higher state taxes as a result of the TCJA. State Controller Peter Franchot said that unless lawmakers act in response to federal changes that reduce the number of itemizers and eliminate personal exemptions, 28 percent of Maryland taxpayers will pay nearly $450 million more in state and local taxes. Maryland follows federal law in both areas. The state’s Republican governor promises to hold those taxpayers harmless, but has not said how.
Treasury will release priority guidance on the new tax law in the next several weeks. Issues will include the qualified business deduction, small business accounting changes, and changes in accrual accounting. First on the list: Areas that have “immediate impacts and early financial statement impacts.”
And the IRS asks for more money to implement the law. The agency formally asked Congress for $397 million in new funding over two years, about $100 million less than earlier estimates of implementation costs. Congressional Republicans say they’ll work with the service to get additional funding, but make no promises.
More businesses announce good news after the tax law. Home Depot announced that hourly employees will receive up to $1,000 in bonuses. Southwest Airlines has also awarded $1,000 bonuses this month. The news keeps coming, and it’s only the beginning reports (paywall) The Wall Street Journal, as businesses reconsider current projects and adapt investment strategies under the new tax law. Then again, tax cuts may not end up being as big as expected, as Bloomberg explains.
Some Florida mayors are worried about home buying trends. Palm Beach County mayors say the new tax law might put downward pressure on home prices, and in turn, local tax revenues. They worry that fewer people will itemize deductions, which may take away a big incentive for many to buy higher-priced homes. The new law also lowers the cap on tax-deductible mortgage interest to $750,000, down from $1 million The Tax Policy Center estimates that the number of itemizers nationwide will fall from about 46 million to about 19 million.
Time is on Apple’s side. The technology giant has eight years to pay its $38 billion tax bill on past foreign earnings on which it has deferred tax. The firm will not face any interest or penalties over that time. This year’s payment will be around $3 billion, and the amount will increase each year.
Oregon will raise taxes on insurers and hospitals to pay for Medicaid expansion. Voters overwhelmingly approved a referendum that would raise taxes on insurance companies and hospitals by $300 million over the next two years. The money would help pay the state’s share of the Medicaid expansion under the Affordable Care Act.
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