The IRS will rely on DIY withholding for early 2018. The agency has issued new withholding tables and guidance that reflect changes under the Tax Cuts and Jobs Act. Employers can begin using the tables as soon as possible, per Notice 1036, but no later than February 15. However, the agency has not produced a new W-4 to help workers figure their correct withholding. Until it does, it is asking them to use an online IRS calculator to see if they are paying the right amount of tax.
TPC estimates 21 million fewer taxpayers will itemize charitable deductions in 2018. TPC’s Howard Gleckman explains. The TCJA will “shrink the number of households claiming an itemized deduction for their gifts to non-profits from about 37 million to about 16 million in 2018.” That’s because the TCJA increases the standard deduction and limits the state and local tax deduction. Tax deductible gifts will be more likely to come from wealthier donors. The new law reduces the marginal tax benefit of giving to charity by more than one-quarter in 2018, raising the after-tax cost of donating by about 7 percent.
Mnuchin: State efforts to circumvent SALT curbs are “ridiculous.” At yesterday’s White House briefing, Treasury Secretary Steven Mnuchin said that California efforts to replace some partially-deductible state taxes with fully-deductible charitable gifts to the state is akin to promoting “evasion.”
Treasury Inspector General: Nothing “improper” about Treasury’s tax analysis. The Treasury Inspector General investigated how the Treasury’s Office of Tax Analysis conducted itself during the development of the TCJA. “It is unclear whether the Department’s involvement in the tax legislating process in 2017 has been any more or less ‘political’ than it has been in past years…” the report stated. It finds no “basis to conclude that the process employed by Treasury this past year was contrary to law, an abuse of authority or otherwise improper.” Mnuchin repeatedly asserted that a Treasury study found the TCJA would pay for itself, but no report was ever released.
Walmart gives raises and credits the TCJA. The company, which employs over 1 million hourly workers, will raise its starting hourly rate from $9 to $11 in February. Walmart executives say the raise comes in part because of expected tax savings from the new tax law. Walmart has been increasing wages since 2015. In 2016, it said its average hourly wage was $13.38 for full-time workers and $10.58 for part-timers. Walmart also announced yesterday that it would close several of its Sam’s Club locations and lay off thousands of employees.
What will happen to affordable housing under the TCJA? Advocates worry that lower tax rates will make the Low-Income Housing Tax Credit less attractive to businesses that finance housing construction. Already, most new rental housing goes into the high-end market, explains Urban Institute’s Sue Popkin. “I worry there's nowhere for [low-income renters] to go.”
Maybe Michigan will cut taxes after all. After a long delay, Republican Governor Rick Snyder has requested a “fix” to restore the state’s $4,000 personal exemption and raise it to $4,500 by 2021. Once fully implemented, it would result in a $50 million tax cut. Republican lawmakers may push for even deeper cuts, even though Snyder remains concerned about $2 billion in future budget promises already approved by the legislature.
January 24 at TPC: What the TCJA means for the states. The new tax law will create many fiscal challenges for the states. To explain how states may respond, TPC’s Howard Gleckman will moderate a discussion among John Hicks of the National Association of State Budget Officers, Laura Wheeler of Georgia State University, and Kim Rueben of TPC’s State and Local Finance Initiative. You can register to attend here, or watch the live webcast starting at 9:00 am on Wednesday, January 24.
The Daily Deduction will post again on Tuesday, January 16, in observance of Martin Luther King, Jr., Day.
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.
