House GOP moves from debt limit bill to tax break package. House Republicans aim to release legislation in May or June that would revive three Tax Cuts and Jobs Act tax benefits for businesses that expired or are phasing out. Per Roll Call, these include full, upfront expensing of research and development costs, tax deductions for 100 percent of first-year costs for most capital investments, and a more generous limit for interest expenses.
Details emerge on how the IRS will keep President Biden’s pledge about who could see more audits. TPC’s Janet Holtzblatt reports on what is known so far about how the IRS will navigate the administration’s pledge not to increase audits on those with incomes under $400,000. IRS Commissioner Danny Werfel testified that the goal is to increase audit rates (compared to 2018) only on tax returns with “total positive income” exceeding $400,000. Janet notes that this clarification still leaves questions. Could a self-employed lawyer who underreports earnings and claims no losses evade IRS scrutiny? Is the 2018 audit rate a fair historical level? “Some wealthy taxpayers with substantial underreporting of income may fly under the IRS’s radar, casting doubt on the IRS’s ability to implement the pledge.”
California Democrats want to boost taxes for larger corporations to cut taxes elsewhere. State lawmakers have proposed two tax rates for businesses in California. Corporations would pay 6.63 percent on the first $1.5 million earned and 10.99 percent on earnings beyond that. The higher rate would apply to 2,500 companies and generate an estimated additional $7.2 billion annually. The lower rate would apply to 1.6 million businesses, reducing state revenue by $2.2 billion annually. Gov. Gavin Newsom (D) and the business community oppose the bill. California faces a $22.5 billion budget deficit.
Denver homeowners may need to brace themselves. Property taxes owed next year in the metro area might jump by as much as 50 percent due to soaring home values, according to county assessors. The Gallagher Amendment – repealed in 2020 because it conflicted with the state’s Taxpayer’s Bill of Rights – prevented property tax bills from rising too quickly. The Colorado legislature is working to pass legislation that would temporarily ease the property tax burden before the legislative session ends on May 8. Whether it will land on a long-term solution remains to be seen.
No Social Security tax repeal in Minnesota. Axios reports that the state’s Senate Tax Committee advanced legislation that would provide $4 billion in tax cuts over the next four years. This would include one-time payments, tax credits, and property tax relief, as well as a change in tax calculations for multinationals that could raise $1 billion in state revenue. Like the companion bill in the Minnesota House, it would exempt married seniors earning up to $100,000 and individuals earning up to $78,000 from paying income taxes on their Social Security benefits instead of repealing the income tax on those benefits.
In the United Kingdom: Overpayment of taxes by pensioners for no clear reason. People who have withdrawn pension savings have collectively overpaid their taxes by about £1 billion, according to His Majesty’s Revenue and Customs. The pensioners are initially charged an emergency tax upon their withdrawals and must file and wait 30 days for a refund. Former pensions minister Sir Steve Webb told BBC, “There is no good reason why citizens who access their pension should have to go through the hassle of claiming back excess taxation, which they should never have had to pay in the first place.” Pension experts are calling for the system to be reformed.
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