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Yesterday’s notice by the Treasury Department and the IRS that they plan to propose regulations related to the state and local tax (SALT) and charitable contribution deductions has generated lots of news coverage. ...

Let’s start with what the notice did say. First, it revealed — and this is new news — that Treasury and the IRS “intend to propose regulations addressing the federal income tax treatment of certain payments made by taxpayers for which taxpayers receive a credit against their state and local taxes.” That’s apparently a reference to laws already enacted in New Jersey, New York, and Oregon that allow taxpayers to claim a state tax credit for charitable contributions to certain state-affiliated funds, as well as several similar proposals pending in other state legislatures. Interestingly, Treasury and the IRS signaled no intention to issue regulations addressing New York’s new “Employer Compensation Expense Program,” which allows employees to claim a state tax credit if their employer opts into a new payroll tax regime. Even those who are skeptical of the charitable credit arrangement acknowledge that the payroll tax shift “almost certainly” will pass muster under federal tax law, and nothing in yesterday’s notice suggests otherwise.

May 25, 2018 in IRS News, Tax, Tax Policy in the Trump Administration | Permalink | Comments (1)

Friday, May 18, 2018

Tax Policy In The Trump Administration

By Paul Caron

Accounting Today, Low Income Americans See Little Benefit From Tax Law
Bloomberg, It’s a Great Time to Be a Wealthy Heir After Trump Tax Overhaul
Bloomberg, The Kochs Helped Slash State Taxes. Now Teachers Are in the Streets
Center on Budget and Policy Priorities, New Estate Tax Cut Encourages More Wealthy Individuals to Skirt Capital Gains Tax

May 18, 2018 in Tax, Tax Policy in the Trump Administration | Permalink | Comments (0)

Thursday, May 17, 2018

Top GOP Donors Close Wallets Over Tax Law

By Paul Caron

CNN, Top GOP Donors Close Wallets Over Tax Law:

As national Republicans scramble their resources for a high-stakes midterm election year, some of the party's biggest and most reliable donors have quietly withheld their support for Senate and House Republican groups out of frustration with the new tax law, CNN has learned.

May 17, 2018 in Tax, Tax Policy in the Trump Administration | Permalink | Comments (2)

GOP Tax Cut Not Why Economy Is Booming: Economists Are Rolling Their Eyes At Candidates’ Claims

By Paul Caron

Politico, GOP Tax Cut Not Why Economy Is Booming: Economists Are Rolling Their Eyes at Candidates’ Claims:

Republicans facing a tough midterm election season are pointing to the strong economy as proof their new tax law is working its magic.

But as campaign ads tout swelling payrolls and lawmakers spotlight companies handing out employee bonuses, there’s little evidence the tax cuts are already having an impact across the economy, which was already humming even before the law was enacted.

May 17, 2018 in Tax, Tax Policy in the Trump Administration | Permalink | Comments (0)

Monday, May 14, 2018

Is Trump’s Tax Incoherence Just A Way To Hurt Amazon?

By Paul Caron

New York Times op-ed: Is Trump’s Tax Incoherence Just a Way to Hurt Amazon?, by Veronique de Rugy (Mercatus Center, George Mason University):

For months, the Trump administration has rightfully been trying to thwart attempts by some European governments to impose a new corporate “digital tax” on American high-tech giants. This campaign to block internet-inspired extraterritorial taxation — taxation of income earned outside of a jurisdiction — is strongly supported by the American business community. But the White House, in an odd twist that turns its European Union digital tax arguments upside down, just argued before the Supreme Court that the same kind of extraterritorial taxation is acceptable when carried out by American states on retail sales on the internet.

Does the left hand of the Trump administration know what the right hand is doing on internet-related tax policy? Are American corporate leaders who have ignored the issue of internet sales taxes about to suffer a key setback in relation to the European Union tax grab? And does sound tax policy go out the window if the president seems to think Amazon is in the cross hairs?

May 14, 2018 in Tax, Tax Policy in the Trump Administration | Permalink | Comments (1)

NY Times: Federal Tax Cuts Leave States In A Bind

By Paul Caron

New York Times, Federal Tax Cuts Leave States in a Bind:

The federal tax overhaul cut taxes for millions of American families and businesses. But the law also had an unintended effect: raising the state-tax bite in nearly every state that has an income tax.

Now, governors and state legislators are contending with how to adjust their own tax codes to shield their residents from paying more or, in some cases, whether to apply any of the unexpected revenue windfall to other priorities instead.

May 14, 2018 in Tax, Tax Policy in the Trump Administration | Permalink | Comments (2)

Friday, May 11, 2018

Tax Policy In The Trump Administration

By Paul Caron

May 11, 2018 in Tax, Tax Policy in the Trump Administration | Permalink | Comments (0)

Sunday, May 6, 2018

Resistance To The New GOP Tax Law In California, New York, And Illinois

By Paul Caron

Following up on my previous posts (links below):

Bloomberg, Illinois’ Federal Deduction Workaround Measure Hits Snag
Fiscal Times, New York Embraces Tax Workarounds, but There Could Be Trouble Ahead
Los Angeles Times, New California Legislation Would Allow State Taxpayers to Dodge a Key Part of President Trump's Tax Plan
Wall Street Journal, New York Found a Fix for Some Hit by Tax Law. Employers Are Skeptical
Washington Post, Is This Tax Avoidance? No, Think Of It As Tax Revenge.

May 6, 2018 in Tax, Tax Policy in the Trump Administration | Permalink | Comments (0)

Friday, May 4, 2018

Tax Policy In The Trump Administration

By Paul Caron

Business Insider, Marco Rubio: There's 'No Evidence Whatsoever' That Trump's Tax Bill Has Helped American Workers
Daily Beast, The Republican Party Is Exposing Its Own Policy-Making Screw-Ups
Forbes, Where Workers Pay The Highest Income Tax
Motley Fool, 95% of Americans Won't Benefit From These 5 Tax Breaks In 2018

May 4, 2018 in Tax, Tax Policy in the Trump Administration | Permalink | Comments (0)

Field: Tax Implications Of The Dynamex Worker Classification Ruling

By Shuyi Oei

Following up on Paul Caron's previous post: California Supreme Court Deals Major Blow to Gig Economy Business Model, Treats Workers as Employees Rather than Independent Contractors: Heather Field (UC-Hastings) at Surly Subgroup: Tax Implications of the Recent Dynamex Worker Classification Ruling

Greetings from San Francisco, the epicenter of the gig economy, where workers-rights advocates are celebrating Monday’s California Supreme Court decision in the Dynamex case. The ruling, which cites an article by my colleague Veena Dubal, is expected to make it harder for businesses in California to classify gig economy workers (and others) as independent contractors rather than employees. As a result, these workers are more likely to be protected by rules about minimum wage, overtime, rest breaks, and other working conditions, although there are open questions about exactly how these rules will apply to gig workers.

But what is good for workers for employment/labor law purposes may not be so good for workers for federal income tax purposes. As readers of this blog know, independent contractors can generally deduct their business expenses above-the-line and may be able to take the new Section 199A deduction equal to up to 20% of qualified business income (significantly reducing the effective tax rate). Employees, on the other hand, can do neither. Thus, the employment/labor law win for workers in the Dynamex case may come with some unexpected and unwanted tax losses for these same workers. This is especially true for workers with non-trivial amounts of unreimbursed business expenses (although the amount of a worker’s unreimbursed expenses may decline if the worker is classified as an employee because California Labor Code 2802 generally requires employers to reimburse significant business expenses of employees).

So, taking tax into account, is independent contractor status or employee status better for workers? This question involves complicated employment/labor law and tax law tradeoffs. For example, despite the tax disadvantages of employee classification mentioned above, employee status can benefit workers for employment tax and tax compliance purposes. Others (including Shuyi Oei here, Shuyi Oei and Diane Ring here, here and here, and Kathleen DeLaney Thomas here) have written extensively on worker classification/taxation topics, and at least some of them have additional articles forthcoming on these topics. I will defer to them for more details as I am not an expert (at least right now) on worker classification or its tax implications. But even I know that, when analyzing the implications of the Dynamex case, it will be important for commentators to consider the tax, not just employment/labor, consequences.

May 4, 2018 in New Cases, Shuyi Oei, Tax, Tax Policy in the Trump Administration, Tax Profs | Permalink | Comments (0)

Tuesday, May 1, 2018

NY Times: Investment Boom From Trump’s Tax Cut Has Yet to Appear

By Paul Caron

New York Times, Investment Boom From Trump’s Tax Cut Has Yet to Appear:

Republicans sold the 2017 tax law as “rocket fuel” for American investment and growth, saying that corporations — flush with cash from lower tax rates — would channel money back into the economy by building factories and offices and investing in equipment, which would help companies grow and provide winnings for workers.

Economists say that may happen as companies readjust their spending plans over the coming months to take advantage of the new law, and they note that it is too early to tell how much the tax law will spread into the broader economy.

But, so far, hard evidence of such an acceleration has yet to appear in economic data, which show more of a steady investment roll than a rapid escalation. And while there are pockets of the economy where investment is picking up — among large tech companies and in shale oil business, for example — corporate spending on buying back stock is increasing at a far faster clip, prompting a debate about whether the law is returning money to the overall economy or just rewarding a small segment of investors.

May 1, 2018 in Tax, Tax Policy in the Trump Administration | Permalink | Comments (0)

Friday, April 27, 2018

Tax Policy In The Trump Administration

By Paul Caron

American Prospect, Even the CBO Says the GOP Tax Reform Will Incentivize Corporate Offshoring
Bloomberg, Four Months Later, Democrats Still Fiercely Oppose the GOP Tax Law
Bloomberg, Under New Tax Law the Question Is, To Be or Not to Be a REIT?
Neil Buchanan (George Washington), Was I Wrong About the 'Sweeping-ness' of the Tax Bill?

April 27, 2018 in Tax, Tax Policy in the Trump Administration | Permalink | Comments (1)

Did Paul Ryan Fire The House Chaplain For Tax Cut Blasphemy?

By Paul Caron

New York Magazine, Paul Ryan Allegedly Ousted House Chaplain for Disrespecting His Tax Cuts:

Under the Trump administration, we’ve learned that Paul Ryan is willing to shrug off racist remarks from the president, and has no problem enabling attacks on the rule of law. But one thing that will not be tolerated in Ryan’s House is a man of God suggesting that tax cuts should be fair to all Americans.

When Ryan announced earlier this month that House Chaplain Patrick Conroy would soon step down, he gave no explanation for his exit, and many assumed he was leaving voluntarily. But anger erupted on the Hill in recent days when the Jesuit priest told lawmakers that Ryan was pushing him out, and he didn’t know exactly why. ...

On Thursday Democratic sources pointed to a potential explanation: a prayer Conroy offered on November 6, 2017, when the House was on the verge of passing the GOP tax bill.

April 27, 2018 in Tax, Tax Policy in the Trump Administration | Permalink | Comments (0)

Thursday, April 26, 2018

GOP Tax Reform Law Continues To Sink In Polls

By Paul Caron

Real Clear Politics Poll Average, Trump, Republicans' Tax Reform Law:

April 26, 2018 in Tax, Tax Policy in the Trump Administration | Permalink | Comments (1)

Friday, April 20, 2018

Tax Policy In The Trump Administration

By Paul Caron

The Atlantic, The Tax Experiment That Failed
Bloomberg, Harvard, Yale Are Among Colleges Working to Repeal Endowment Tax
Bloomberg, Hedge Fund Titans Pull Money From Funds for Huge Tax Bills
Bloomberg, House to Vote This Year on Individual Tax Cut Extension, Ryan Says

April 20, 2018 in Tax, Tax Policy in the Trump Administration | Permalink | Comments (0)

Desai: Tax Reform, Round One

By Paul Caron

Mihir A. Desai (Harvard), Tax Reform, Round One:

The Trump Administration's successful efforts at tax legislation stand out as the primary achievement of its first year. But the hurried, largely furtive drafting, and rush to passage at the end of 2017, have helped obscure the new tax regime’s real impact. Much of the reporting and debate has focused on the politicking that went into passing the bill, and the purported effect on the federal budget deficit. That has diverted attention from the true significance of the Tax Cuts and Jobs Act (TCJA). Instead of simply changing rates and addressing loopholes, the TCJA represents a structural change to the income tax and, consequently, will lead to major changes in behavior. Teasing out those details reveals that the new law is likely to generate different incentives for economic growth than commonly claimed, unwanted complexities that invite still further gaming of the tax code (which the reforms themselves were intended to minimize), and larger deficits than forecast. If the past is a guide, and we can hope it is, the TCJA will be a precursor to further reforms that correct these shortcomings and address important distributional and fiscal concerns.

In the context of other legislation during the past 40 years, the magnitude of this tax reform is unremarkable when framed relative to gross domestic product. Indeed, the 1981 tax bill reduced federal revenue by an amount equaling more than twice the share of the estimated reduction in the Trump edition. But no reform during the last four decades approximates the scope and depth of the TCJA’s changes to the overall structure of the tax system.

April 20, 2018 in Tax, Tax Policy in the Trump Administration | Permalink | Comments (0)

Tuesday, April 17, 2018

John Oliver: Corporate Taxes

By Paul Caron

April 17, 2018 in Tax, Tax Policy in the Trump Administration | Permalink | Comments (0)

Monday, April 16, 2018

Kleinbard: Tax Policy Is a Bore, Until They Take Away Your Social Security And Medicare

By Paul Caron

Los Angeles Times op-ed: Tax Policy Is a Bore, Until They Take Your Social Security and Medicare Away, by Edward D. Kleinbard (USC):

Procrastinators race to the post office on Tax Day to postmark their tax returns or file for extensions. Sensible people use Tax Day as a time to consider their financial picture for the year ahead. But this April, in light of how Congress radically rewrote our tax obligations for 2018 onward, Tax Day might also profitably serve as an occasion for citizens to contemplate the tax health of the nation.

This checkup requires examining both taxes and government spending. We quickly see that budget deficits — how much spending exceeds revenues — are extremely large and growing at a disturbing rate. The nonpartisan Congressional Budget Office estimates that the 2019 deficit will be just shy of $1 trillion. That is a roughly 50% jump in the deficit from its 2017 level — extraordinary, considering we're in good economic times.

Tax cuts do not pay for themselves — not the Trump tax cuts, nor in any other case in modern U.S. practice. So we face only two possible courses of action: Either we tax ourselves more, or we dismantle the social safety net (in particular, Social Security, Medicare and Medicaid) that protects Americans from destitution or disability. Which is the right direction for our country to pursue? ...

April 16, 2018 in Tax, Tax Policy in the Trump Administration | Permalink | Comments (4)

Friday, April 13, 2018

Tax Policy In The Trump Administration

By Paul Caron

Bloomberg, Bitcoin Buyers Have to Take a Wild Guess on Their Taxes
Bloomberg, CBO Sees Benefits of Republican Tax Cuts Peaking in 2022
Bloomberg, Wall Street Era of Deducting $65 Dry-Aged Steaks Could Be Over
Forbes, Sorting Through Jobs Numbers And The Promise Of The Tax Cut

April 13, 2018 in Tax, Tax Policy in the Trump Administration | Permalink | Comments (0)

Thursday, April 5, 2018

Tax Law Quirk Could Help Apple And Microsoft Lower Their Bills

By Paul Caron

Bloomberg, Tax Law Quirk Could Help Apple and Microsoft Lower Their Bills:

The Internal Revenue Service is providing some relief for companies facing looming tax bills after they stockpiled trillions of dollars offshore free of U.S. income tax.

A timing quirk in the tax overhaul seemed to give companies such as Apple, Microsoft and Cisco — all of which began their fiscal years before Jan. 1 — the chance to reduce the foreign cash they’ll accumulate this year and lower their taxes. A press release issued by the IRS on Monday indicates that “if done in the ordinary course of business,” the move won’t be considered as tax avoidance, according to Stephen Shay, a tax and business law professor at Harvard Law School.

April 5, 2018 in IRS News, Tax, Tax Policy in the Trump Administration | Permalink | Comments (0)

Buchanan: What Will Republicans Do When Their Tax Cuts Fail?

By Paul Caron

Newsweek: What Will Republicans Do When Their Tax Cuts Fail?, by Neil H. Buchanan (George Washington):

The Republicans passed their regressive tax bill last year in the face of widespread public opposition, with defections by House members from suburban districts and a rushed legislative process that made a mockery of the idea of deliberative government. Even so, they managed to deliver all of their votes in the Senate, including the self-styled deficit hawks who made a big show of concern before caving to party orthodoxy.

And despite their most fervent wishes and a brief blip in the polls, the new tax law is still not popular. As I described in companion columns on Verdict and Dorf on Law last week, the public has very good reasons for hating a law that was very clearly designed to worsen already historic levels of inequality. To their credit, people are not being bought off with a few extra dollars in take-home pay.

In spite of this, will Republicans convince themselves to try to pass another round of tax cuts? And if they do, how will they justify further cuts when the current round of cuts fails?

April 5, 2018 in Tax, Tax Policy in the Trump Administration | Permalink | Comments (3)

Wednesday, April 4, 2018

WSJ: Crack And Pack — How Companies Are Mastering The New Tax Code

By Paul Caron

Wall Street Journal, Crack and Pack: How Companies Are Mastering the New Tax Code:

Dallas attorney Garry Davis plans to break up his immigration-law practice. One firm will have all the lawyers. The other will record the profits.

It’s just one of many strategies businesses are exploring as they pore over the biggest rewrite of U.S. tax rules in decades. Mr. Davis’s approach, which some have dubbed “crack and pack,” seeks to get around a provision denying high-earning lawyers, doctors and other professionals a tax break available to plumbing contractors, restaurateurs and architects.

By separating the lawyers from other parts of the business, he hopes to lower the business’s overall tax bill while changing little in his day-to-day operations.

Long before most clarifying regulations have been issued, the new law has led to a burst of activity in tax circles as lawyers, accountants and businesses look for ways around some of the proposals meant to pinch them—and for ways to extend the reach of new tax breaks. For owners of closely held businesses, that can mean splitting operations apart, reclassifying them and re-categorizing their activities, all in an effort to get as much of their income taxed at the new low rates as possible.

The legislation contains more uncertainties than usual for a tax overhaul because of the speed of its drafting, which left little opportunity for the public and congressional scrutiny that often identifies confusion in bills. The recent omnibus spending bill shut down one loophole, involving farm products sold to cooperatives, while lawmakers and regulators say they are collecting feedback as they consider future changes.

April 4, 2018 in Tax, Tax Policy in the Trump Administration | Permalink | Comments (0)

Friday, March 30, 2018

Tax Policy In The Trump Administration

By Paul Caron

Bloomberg, How Firms Could Sidestep Tax Law’s Pass-Through Deduction Limits
Bloomberg, McDonald's to Boost Its Tuition Benefits After Tax Windfall
Bloomberg, Your Tax Cut Isn’t Likely to Be Made Permanent Any Time Soon
Conversable Economist, The Commuter Parking Tax Break

March 30, 2018 in Tax, Tax Policy in the Trump Administration | Permalink | Comments (0)

Tuesday, March 27, 2018

WSJ: New Tax On Overseas Earnings Hits Unintended Targets

By Paul Caron

Wall Street Journal, New Tax on Overseas Earnings Hits Unintended Targets:

A new tax aimed at overseas income earned by U.S. technology and pharmaceutical firms is hitting unexpected places. ...

In the past, the U.S. taxed corporate profits earned overseas at the domestic rate of 35%. Companies could avoid that tax by booking their income overseas and keeping it there. The new system in theory aims to lighten the overseas tax burden and target it more carefully.

Congress set a minimum tax known as GILTI, for Global Intangible Low-Taxed Income, of roughly 10.5% on a portion of corporate income earned overseas. GILTI is directed at trademarks and patents of technology and pharmaceutical firms, which are easy to transfer to low-tax foreign countries. It was supposed to create a floor on taxing those highly mobile profits, an assurance that companies would pay something while stopping short of the full U.S. tax rate. Without it, lawmakers worried, U.S. companies could have an even larger incentive to move intangible assets and profits offshore. ...

GILTI is hitting ... companies ... because of the way the new tax interacts with other provisions in the tax code, specifically the treatment of foreign tax credits that are supposed to prevent two countries from taxing the same income. When companies calculate the credits they receive for paying taxes overseas, the law typically requires them to assign some of their domestic expenses to foreign jurisdictions. The result for some companies is that, for U.S. tax purposes, their foreign income and foreign taxes look smaller than they actually are, shrinking their credits. That, in turn, could force them to pay the new minimum tax on top of their foreign tax bills.

March 27, 2018 in Tax, Tax Policy in the Trump Administration | Permalink | Comments (0)

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