Tax season starts today, but taxpayers will feel differently. refunds it will probably be smaller for several reasons. No more stimulus checks, enhanced child credits, and above-the-line deductions for charitable giving. Taxpayers may also face capital gains taxes if their mutual funds sold stocks or bonds in a falling market.
When will negotiations to raise the debt ceiling begin? So far, the Biden Administration has talks not yet scheduled with Speaker of the House Kevin McCarthy for discuss a deal to raise the debt ceiling. Republicans want any increase in the borrowing limit to include expenditure cut but Biden aides say he won’t negotiate with “hostage takers.” And in a familiar twist, Sen. Joe Manchin says Biden would be making a “mistake” if he doesn’t include some spending cuts in a debt limit deal.
But spending cuts alone won’t fix the country’s budget or debt problems. McCarthy promised a floor vote on a bill to balance the federal budget in ten years with zero tax increases and many spending cuts. TPC’s Howard Gleckman breaks down the math and shows that the cuts needed are too big to be credible. And if the GOP can’t come up with a credible way to balance the budget, how will it justify letting the country go over its debt limit?
Treasury: At least 90 percent of some tax breaks go to white taxpayers. A new treasury analysis finds that whites receive a disproportionate share of the benefits of tax exemptions for capital gains, charitable donations, mortgage interest, and employer-sponsored health insurance. Hispanics benefit disproportionately from the Child Tax Credit and the Earned Income Tax Credit. One caveat: Treasury analysis had to impute race based on other information since tax returns do not include racial identification.
Lawmakers in eight states seek higher taxes for the wealthy. He Associated Press Reports on bills in California, New York, Illinois, Hawaii, Maryland, Minnesota, Washington, and Connecticut, all aimed at raising taxes on the wealthy. Proponents call the ideas “fiscal justice,” while critics say they are “economically destructive.” Similar legislation has failed to make progress in recent years, but proponents vow to try again in 2023.
The tax return would put temporary workers on a more equal footing with employees. TPC’s Lillian Hunter writes about the benefits to workers of a lower reporting threshold for Form 1099-K on income collected through third-party payment platforms. Without reporting, the IRS cannot easily determine if temporary workers are paying the correct amount of tax, and these workers may not know how much they owe or even have to file. Not filing an income tax return could cause temporary workers to miss out on important benefits like the child tax credit and the earned income tax credit.
What are the revenue implications for state pass-through entity taxes? TPC’s Lucy Dadayan and John Buhl explain why pass-through entity taxes have become a popular way for states to help residents avoid the $10,000 cap on the state and local tax (SALT) deduction. It generally reduces federal taxes without reducing state tax revenue.
For the latest tax news, subscribe to the Tax Policy Center’s Daily Deduction. Sign up here to receive it in your inbox on weekdays at 8:00 am (only on Mondays when Congress is in recess). We welcome suggestions for new research or other news. Email Renu Zaretsky at [email protected].
