It’s time for Tax Vox to present its annual Lump of Coal Award for the worst tax idea of the year. 2018 couldn’t match 2017’s bonanza. But you can’t fundamentally overhaul the tax law every year and 2018 still had its share of blunders. Here are the top 10 nominees—and the winner(s).
10. Living free. In June, the US Supreme Court allowed states to require remote sellers to collect sales taxes. Following the decision, most sales tax states took steps to do so. However, one non-sales tax state, New Hampshire, tried to torpedo the ruling. Gov. Chris Sununu tried to block other states from requiring New Hampshire-based firms from collecting their sales taxes. Confirming that the Articles of Confederation no longer apply, his plan died in the state legislature.
9. Why do liberals want to tax companies that hire workers? To support homeless programs, the Seattle City Council enacted a short-lived “head tax” on large employers. Unfortunately, it would encourage firms to either leave the city or replace newly taxable humans with untaxed robots. And…create more homeless people. At least lawmakers ditched the tax before it took effect.
8.Taxing workers II. Sen. Bernie Sanders introduced the ‘‘Stop Bad Employers by Zeroing Out Subsidies Act’’ (or Stop-BEZOS Act) aimed at punishing big companies like Amazon, Walmart, and McDonalds for paying their workers too little. It would tax firms to cover the cost of the federal benefits their low-wage workers receive. But this bill has the same problem as the Seattle plan: Firms likely would respond by hiring fewer low-wage workers, leaving some without any job at all.
7. Trump’s tariff talk. Against all evidence, the President spent much of 2018 insisting that tariffs are good for the US economy. Worse, he claimed the government of China pays tariffs to the US government, thus shrinking our budget deficit. Unfortunately, import taxes on foreign goods are paid by US consumers, not foreign countries.
6. Lettuce really isn’t a sugary drink. The big soda companies got initiatives on November ballots in Washington and Oregon to bar new taxes on sweet drinks. Fair enough. But instead of confronting the issue head on, they framed their efforts as an attempt to protect residents from new taxes on groceries. But the PR campaign was bogus: Washington already exempts groceries from its sales tax. Oregon doesn’t even have a sales tax. Oregon voters rejected their initiative, Washington voters passed theirs.
5. Suing Over the SALT cap. Leading the resistance against the Tax Cuts and Jobs Act’s cap on the state and local tax deduction, a group of blue state governors filed a lawsuit claiming that Congress had no constitutional authority to limit the deduction. There is just one problem: Congress has been limiting the deduction in various ways since 1944.
4. Whose Opportunity Zones? Boosting economic development in low-income communities is a fine idea. But the Trump Administration’s effort to enhance what was an already overly-generous TCJA provision is way over the top. Treasury guidance and a second White House initiative could well turn what started as a well-intentioned idea into little more than give-away for real estate developers and wealthy investors, including some of the president’s relatives.
3. The Great Amazon HQ2 Race. Amazon did a brilliant job building expectations for what it promoted as its HQ2 or second headquarters. Dozens of cities and states offered massive come-hither tax subsidies, grants, and other incentives, even though evidence shows these giveaways rarely pay for themselves. In the end, Amazon got more than $2 billion and decided to open two new regional offices—in Long Island City, NY and in the Virginia suburbs of Washington, DC. The main reason Amazon picked them: The firm was attracted by communities’ large numbers of skilled tech workers.
2. The tax extenders. Most of the ever-expiring highly-targeted tax subsidies known as the tax extenders are worthy of lumps of coal on their own merits (or demerits). But 2018 was special. A pile of these tax breaks expired at the end of 2017. Sometime in 2019, Congress will decide whether to restore them retroactively for 2018. Thus, lawmakers would dole out a tax break for something that firms or individuals already have done. How do you spell windfall, boys and girls?
1 President Trump’s promise to cut middle-class taxes by 10 percent. The polls weren’t looking good in the run-up to the November elections, so the president promised to cut taxes for the middle class. And he said he’d get the bill passed in a fortnight. Of course, there was no middle-class tax cut plan. In the words of Treasury Secretary Steven Mnuchin this week, “I’m not going to comment on whether it is a real thing or not a real thing.” It is not a real thing. Never was.
1a The credulous response to Trump’s promised middle-class tax cut. Journalists and policy analysts just can’t help themselves. The president makes an off-the-cuff campaign promise and, like mice on a wheel, they chase after it as if it is a…real thing. They opine on what his phantom tax cut might look like. They prognosticate over the odds of Congress passing the non-existent plan. They even debate who exactly is the middle class.
The winner this year is the inseparable entry of 1 and 1a. The 2018 lump of coal (not a real thing) goes to the president who made an absurd, impossible-to-keep promise, and all those self-described experts who took him seriously. Congratulations, or something.
