A Park Avenue loophole from the SALT deduction cap. You may have heard that many New Yorkers are furious about the Tax Cuts and Jobs Act’s $10,000 cap on the state and local tax deduction. But a subset of sort-of homeowners may be living large in a huge loophole. Politico’s Brian Faler reports that a mistake in the TCJA may exempt from the cap property taxes paid by co-op owners. While co-ops exist throughout the country, they are especially popular in New York City.
Senator Rubio, foreign investors still benefit from the TCJA, even if stock buybacks are taxed. TPC’s Steve Rosenthal considers Marco Rubio’s idea to raise taxes on corporate stock buybacks by treating them like dividends. He explains how Rubio’s plan would affect foreign investors in US firms. Rosenthal says the TCJA gave a "large windfall to foreign shareholders of US corporations, many of whom would still retain a large tax cut even if Rubio’s proposal becomes law.”
Tax hikes encourage lower earning spouses to retire early. TPC’s Rob McClelland explains new findings from a study he coauthored with Kevin Pierce of the IRS and TPC colleagues John Iselin and Philip Stallworth. They found that taxes affect retirement decisions in a surprising way. “When both members of a couple work, tax rates didn’t seem to affect retirement decisions. Once the primary earner of a couple retires, higher tax rates encourage the remaining worker to follow suit.” They estimate that a 10 percentage point increase in effective tax rates boosts the probability that lower-earning spouses will quit by about 2 percentage points. In contrast, spouses with higher lifetime incomes appear indifferent to those same tax increases, at least when it comes to retirement.
Early data on charitable giving, post-TCJA. Charities feared the TCJA’s big increase in the standard deduction and other changes would reduce tax incentives to make charitable donations. But a new study from the Blackbaud Institute for Philanthropic Impact offers some solace. Its early assessment shows donations nationwide increased 1.5 percent last year.
Tax time leaves taxpayer in tears, and it’s hard for the IRS, too. CBS News reports on the plight of a PhD neuroscientist. She says she carefully checked the IRS website in 2018 to make sure she and her husband withheld enough tax but learned this month that her family actually owes $8,000: “I went back in and checked everything and then I started to cry.” Said TPC’s Bill Gale "The IRS had to tell people what to withhold and it's a difficult problem for tax payers, but it's even difficult for tax experts at the IRS.”
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