Can Treasury rewrite the new tax law? That’s what Treasury Secretary Steven Mnuchin seemed to be implying when he promised to close a Tax Cuts and Jobs Act loophole that allows private equity managers to pay the relatively low capital gains tax rate on their compensation by holding their carried interest through S corporations. But TPC’s Steve Rosenthal considers the law and court precedent and explains why Treasury “cannot simply ignore the statute and rewrite the tax law.”
Another day, another TCJA poll. This one from the Democratic activist group Not One Penny. The findings: One-fifth of voters say the new law has helped them and about 10 percent say it has made their financial situation worse. Half believe it has had no effect on them personally. About one-third think the tax cuts have already improved the economy, while 22 percent think they've made the economy worse. Overall, forty percent feel positively about the law while 44 percent have a negative view.
A tax break for borrowing now to shore up pension funds? The TCJA’s corporate rate cut gives firms an incentive to quickly issue bonds and direct the revenue toward retirement plans. Bloomberg reports that by topping up plans before filing their 2017 tax return, firms can deduct the contributions at the old 35 percent rate. By waiting until after they file, they’d only be able to deduct at the new 21 percent rate. That’s $140 million difference on a $1 billion pension contribution.
Will California’s gas tax repeal effort fail, thanks to President Trump? Last year, State lawmakers approved a 40 percent increase in the state’s gasoline tax , or 12 cents per gallon. A petition drive is underway to repeal the increase—but President Trump’s recent musings about boosting the federal gasoline tax by 25 cents, as well as his infrastructure plan that would require more state funding, might make California’s tax increase seem more palatable to some voters.
The European Commission would restructure tech industry taxes. Reuters reports that the the EC wants to tax large digital companies based on their customers’ locations, not company headquarters. The EC’s draft further proposes a common tax rate of between 1 and 5 percent on aggregated gross revenues; the tax would be deductible from national corporate taxes. The plan is similar to a proposal from the French government.
Meanwhile, Apple can’t block tax protesters in France. The tech giant tried to get French courts to ban protesters from its stores, arguing that they put customer and employee safety at risk. But a Paris court said there’s no reason to ban the protesting group based on its past behavior. The group, called Attac, has staged protests at Apple stores claiming that the firm has avoided paying France the taxes it owes.
Today on the Hill. Newly sworn-in Federal Reserve Chairman Jerome Powell will appear before the House Financial Services Committee to review the Fed's first monetary policy report of 2018.
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.
