ProPublica: TurboTax charged for tax forms it previously included for free. After the Tax Cuts and Jobs Act doubled the standard deduction and capped the state and local tax (SALT) deduction, affluent taxpayers who no longer itemized bought fewer copies of the Deluxe Edition of the software. ProPublica reports that TurboTax responded by moving several forms previously available without charge to paying editions of the software—a move that affected as many as 30 percent of users. The forms were most often used by lower-income filers to apply for tax credits for retirement savings, student loan interest, or child care.
The House should fix, not scrap, the Cadillac tax. TPC’s Howard Gleckman argues that while the House is likely to vote today to repeal the 40 percent excise tax on high-value employer sponsored health insurance—a levy that never has gone into effect--they should reconsider. He explains why repairing the tax or replacing it with a direct cap on the individual income tax exclusion for all job-based insurance might be politically difficult, but well worth it.
Subsidies to help victims of President Trump’s trade war with China will cost more than tariffs on Chinese goods have generated. The government reports that the US collected $20.8 billion in tariffs on Chinese imports so far. Trump has promised $28 billion in aid to farmers hurt by the trade war.
Sen. Kamala Harris proposes a tax to reduce prescription drug prices. The California Democrat and presidential candidate would require pharmaceutical companies to set “fair” prices for prescription drugs based on an international benchmark. The stick: She’d tax profits made from excessive prices at a 100 percent rate. Insurance companies would distribute the revenues to consumers as rebates. Harris also would end the deductibility of direct-to-consumer advertising expenses of pharmaceutical companies, arguing that advertising drives demand for expensive drugs. That revenue would be used to help fund the National Institutes of Health.
State revenues weakened in the fourth quarter of 2018, but the outlook for 2019 remains positive. TPC’s Lucy Dadayan explains the main findings from the latest State Tax and Economic Review. Fourth quarter 2018 declines in income tax collections were partly due to the diminishing effects of accelerated payments of state and local income taxes in the wake of the TCJA’s SALT cap. While growth in income tax collections this April was the largest in the past 10 years, Dadayan warns that the surge should be viewed as a one-time occurrence.
In Seattle, an income tax may be constitutional after all. The Washington State Court of Appeals ruled this week that Seattle cannot levy a 2.5 percent tax on wealthy households. But the court also ruled that the state’s 35-year-old ban on cities taxing net income is unconstitutional. The ruling likely will be appealed to the state Supreme Court.
Mortimer Caplin dies. Former IRS Commissioner Mortimer Caplin died Monday at age 103. Caplin was appointed by President Kennedy and was considered one of the agency's most influential leaders. Among his accomplishments: Professionalizing the agency, advocating for tax reform, and installing the IRS's first computer system. Before joining the IRS, Caplin had a remarkable life. He was a former middleweight boxer, a beachmaster at Normandy at age 28, and a long-time professor at the University of Virginia law school, where he taught both Robert and Ted Kennedy. After leaving the IRS, he formed the law firm of Caplin and Drysdale.
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