Who will replace Orrin Hatch? The Finance Committee Chairman announced that he will retire at the end of the year after more than four decades in the Senate. Leading contenders to replace him as Finance chair—if the GOP retains control of the Senate—are former chairman Chuck Grassley (who currently heads the Judiciary Committee) and Banking Committee chair Mike Crapo. Mitt Romney tops the list of candidates for Hatch’s Senate seat.
Tax season opens in three weeks; tax withholding changes to follow. The IRS will start accepting tax returns for 2017 on January 29. The agency will issue tax withholding guidance under the Tax Cuts and Jobs Act later this month, which means workers will see changes to their paychecks in February. But the Tax Hound asks: Will taxpayers feel those changes, and will those changes matter in their daily lives?
The TCJA and tax complexity. The Joint Committee on Taxation, with the help the IRS and Treasury, is supposed to determine whether major tax legislation adds complexity to the revenue code. And TPC’s Gene Steuerle wonders how the agencies could have missed the enormous new complexity created by just one provision—the new tax cut for pass-through businesses.
CBO’s latest tally of the TCJA’s cost. On Jan 5—two weeks after Congress passed the new tax law—CBO reported that measure would add $1.8 trillion to federal budget deficits over the next decade, including added interest costs. The CBO score does not include macroeconomic effects, through TPC, JCT, and most outside analysts believe they would be very small.
And who will pay the bill? TPC’s Bill Gale explains that “tax cuts are not free; they eventually have to be financed with higher taxes or lower spending. And once those financing requirements are taken into account, most low- and middle-income households are likely to be worse off than they would have been without the tax cut in the first place.”
Speaking of paying later. AT&T and Comcast, two companies who timed their end-of-year bonus announcements with TCJA passage last December, also laid off workers. Comcast terminated hundreds of direct sales employees two weeks before Christmas. AT&T is laying off thousands of installation technicians across the United States.
What will AG Jeff Sessions marijuana announcement mean for state tax revenues? Sessions announced last week that he’s reversing the Obama Administration’s policy of allowing states to legalize marijuana sales. No one seems to know quite what that means, but states are worried that it could cost them billions of dollars in tax revenues. Colorado Republican Senator Cory Gardner is so angry that he’s threatened to hold up all future Justice Department confirmations until Sessions backs off. Marijuana sales generated more than $600 million in taxes for his state last year.
Will New York State change its tax code in response to the TCJA? Governor Andrew Cuomo says the state is exploring whether a payroll tax would be a better alternative to the state income tax. It might be a way to ease the burden on individual taxpayers who are now subject to the TCJA’s $10,000 cap on the deduction of state and local taxes. A state official says the CEOs of some of New York City’s largest employers may support such a change. Companies would still be able to deduct those payroll taxes.
But should we take the SALT panic with a grain of… salt? TPC’s Frank Sammartino explained on NPR’s Morning Edition that only about a third of tax filers claim state and local tax deductions, and they tend to be higher-income households who will benefit from the TCJA in other ways. Most will still pay less in taxes overall next year. “It’s just that relative to someone in a low-tax state, their tax cut might be smaller.”
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.
