A new IRS commissioner? Politico broke the news that the White House will name Beverly Hills, California tax lawyer Charles “Chuck” Rettig as the new IRS commissioner. Rettig specializes in representing clients with tax disputes before the IRS, the Justice Department and state revenue authorities. He has chaired the IRS Advisory Council, which advises the commissioner on tax administration. Rettig would replace acting commissioner David Kautter.
States’ tax code changes could boost the federal deficit. The Tax Cuts and Jobs Act’s $10,000 cap on state and local tax deductions has prompted some high tax states to explore new ways to ease their residents’ federal tax burdens. If just California, New York, Illinois, New Jersey and Connecticut are successful, federal budget deficits could increase by $154 billion over eight years, according to a Bloomberg analysis.
More businesses cite the tax law for bonuses, dividends, and layoffs. Starbucks will spend over $250 million for pay raises and bonuses. Wage hikes will vary by region. Hourly workers will receive at least $500 in stock and store managers will get $2,000. Disney says it will give $1,000 bonuses to 125,000 employees. Comcast, in addition to previously announced $1,000 bonuses for most full-time employees, will increase its annual dividend by 21 percent to 76 cents per share. Kimberly-Clark says the new tax law will help fund its restructuring plan to lay off as much as 13 percent of its workers as it closes factories.
Treasury Secretary Steven Mnuchin touts the tax law at Davos. In advance of the President’s upcoming speech to the World Economic Forum, Mnuchin told reporters that the White House “couldn’t be happier” about the corporate response to the TCJA. "I think you've seen already massive investment… The response from business has been even better than we expected."
“Ixnay on that axtay…” While the US Chamber of Commerce pushes for a 25-cent-per-gallon increase in the federal gasoline tax to pay for infrastructure improvements, the Koch network of political lobbyists urges President Trump to reject such a tax hike. The Trump Administration has been noncommittal on the issue.
Speaking of noncommittal… The latest poll from the Pew Research Center reveals mixed views of the new tax law. It finds that 29 percent of respondents think the tax law will have a mostly positive effect on them, while 27 percent say it will have a negative effect. As for the country as a whole, 35 percent say it will be mostly positive, while 40 percent say it will be mostly negative. Believe it or not, partisan affiliation drives much of the difference. Pew conducted the survey January 10-15.
In Michigan, a House panel approves a tax cut. Michigan’s $4,000 personal exemption disappeared with passage of the TCJA. A committee has approved a bill to restore the state exemption and boost it to $4,800 in 2020. The Senate adopted a similar plan last week. Governor Snyder warns the TCJA would raise state taxes by $1.5 billion annually unless the exemption is restored.
A good tax benefit spoiled, for some… Under the TCJA, client golf is no longer a deductible entertainment expense, while business meals at restaurants remain deductible. Eliminating the entertainment deduction could raise $21 billion and golf lobbyists failed in their attempts to retain it—even though they argue that 80 percent of golf is played at public facilities and only 20 percent at private clubs. “In terms of optics, ‘We need more deductions for entertainment’ is a tough sell,” said Christa Bierma, a tax partner at the firm Ernst & Young.
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.
