Fightin’ Words, Eligibility, “Easy Things,” and Expenditures

Taxes

Mnuchin and Javid exchanged tax threats in Davos. British Finance Minister Sajid Javid, sitting on the same stage as Treasury Secretary Steven Mnuchin, insisted  the United Kingdom would move forward with its digital service tax in April. Javid called it “ a proportionate tax… deliberately designed as a temporary tax, so it will fall away once there is an international solution.” Echoing President Trump, Mnuchin said, “If people want to just arbitrarily put taxes on our digital companies, we’ll consider arbitrarily putting taxes on car companies.”

Can states ban donors to religious schools from claiming tuition tax credits? The US Supreme Court heard arguments yesterday in Espinoza vs. Montana Dept. of Revenue.  The case involves a 2015 state law that gives a tax credit to donors to private scholarship funds. The state Supreme Court ruled the law violated the state constitution because it made religious schools eligible for the public funds. Three mothers of religious school students said limiting access to credit-funded scholarships violates their rights. Observers say the High Court seemed divided on the issue.

Odd timing. Just when Joe Biden is getting heat from the Democratic left for his past support for Social Security reform, President Trump says he’s open to reworking Social Security and Medicare. He told CNBC that entitlement reform is “the easiest of all things.”  

An Opportunity Zone mulligan? Politico reports that Sen. Tim Scott, an author of the Tax Cuts and Jobs Act (TCJA) provision that granted generous capital gains tax breaks to investors in designated zones, said he’d like to give governors a chance to reconsider some “bad decisions” they made approving certain zones. The program has gotten negative attention for some projects in high-rent communities.    

Are tax expenditures worth the money? In a new brief, TPC’s Frank Sammartino and Eric Toder evaluate major federal tax expenditures (brush up on the basics here). They find that most major preferences  have some policy justification, but could be  more effective and cost-efficient. Harder to justify: Many smaller tax expenditures that grant  benefits to selected industries or individuals. 

How did tax expenditures change under the Tax Cuts and Jobs Act? TPC’s Frank Sammartino and Eric Toder, in another new brief, review the law’s major changes in individual and business tax expenditures. While the 2017 law did reduce some preferences, it did much less than the Tax Reform Act of 1986.

Speaking of tax expenditures: How about redesigning the tax subsidy for employer-sponsored health insurance? TPC’s Howard Gleckman argues that by repealing the Affordable Care Act’s Cadillac tax on high cost health insurance plans, Congress took health policy in exactly the wrong direction. He says Congress should have redesigned or repealed the tax exclusion. “That step could have helped slow the growth in health care costs and generated new revenue that could have been used, in part, to expand access to health coverage for low- and moderate-income people.”

Utah’s voters might repeal the state’s new tax law in November. The legislature raised the 1.75 percent sales tax on food to 4.85 percent. But opponents have collected enough signatures to put the increase on the November ballot. If  voters reject the change, the legislature will have to go back to the drawing board—it cannot amend the current law. 

For the latest tax news, subscribe to the Tax Policy Center’s Daily Deduction. Sign up here to have it delivered to your inbox weekdays at 8:00 am (Mondays only when Congress is in recess). We welcome tips on new research or other news. Email Renu Zaretsky at dailydeduction@taxpolicycenter.org.

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