The government is open through February 8. Congress agreed to reopen the federal government—for three weeks. The latest short-term spending bill renews the Children’s Health Insurance Program for six years. The bill also delays the Affordable Care Act’s Cadillac tax on high-cost employer sponsored health plans and the tax on medical devices for two years and its tax on health insurance plans for one year. Senate Majority Leader Mitch McConnell promised the chamber would vote by mid-February on separate legislation to protect undocumented immigrants who came to the US as children.
The IRS gets back to work. Just over 43 percent of the IRS workforce went to work during yesterday’s shutdown—just as tax season was getting underway. The IRS will begin accepting tax returns on Monday, but refunds may be slightly delayed given the brief shutdown and new tax law.
Taxpayers should prepare for a little extra work, too. The Wall Street Journal offers (paywall) a helpful reminder to taxpayers: Now that the Tax Cuts and Jobs Act is the law of the land, review your paycheck withholding. Why? The new tax tables employers are using to calculate withholding take into account some changes in the law such as the bigger standard deduction and repeal of personal exemptions. But they ignore others, including the expanded child tax credit and the cap on the state and local tax deduction. If tax filers don’t check, they could have too little tax withheld in 2018 and owe penalties. Or, their tax refunds may end up being smaller than expected.
Maryland vies for Amazon’s second headquarters with a historic tax break. The online retailer announced a list of 20 finalists for its new site, and Montgomery County, Maryland is one of them. Republican Governor Larry Hogan made a $5 billion pitch to Amazon. It would give Amazon—and other Fortune 100 companies that invest in Maryland—tax breaks worth up to a total of $3 billion. Hogan says he’ll combine this with $2 billion in road and infrastructure projects to create the largest economic development package in state history.
Speaking of the DC Metro area… TPC’s John Iselin and Philip Stallworth examine how the region’s taxpayers may fare under the Tax Cuts and Jobs Act. They look at DC and eight surrounding counties and show “how much differences in where people live and how they spend their money can affect how much their income tax bill will change under the TCJA.… Just a few miles can mean all the difference.”
The IMF says US economic growth will accelerate thanks to the new tax law. The International Monetary Fund is boosting its forecast of 2018 US growth to 2.7 percent from 2.3 percent now that the Tax Cuts and Jobs Act is law. It is projecting 2.5 percent growth for 2019. Nonetheless, IMF head Christine Lagarde said “We certainly should feel encouraged by the strengthened growth, but we should not feel satisfied. There are still too many people who are left out of that recovery…”
South Korea will tax cryptocurrency trades. The government announced a 22 percent corporate tax and 2.2 percent local income tax on cryptocurrency exchanges. A money laundering investigation revealed a 36-fold increase in commissions from virtual accounts linked to the cryptocurrency exchanges.
In Iceland, a tariff on fries is not super-sized. The nation’s Supreme Court dismissed a case in which two importers claimed a tariff on french fries “contradicted basic concepts of equality and proportion.” The companies wanted the government to refund $971,000 in taxes they already paid, arguing that the duty on fries shouldn’t be higher than the 46 percent tariff on imported raw Canadian and Peruvian potatoes. The court ruled that the french fry tax is permitted under Iceland’s constitution. The two importers must also chip in for the government’s legal costs.
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.
