Tax News & Views Tax Agenda and Cappuccinos Roundup

2024 Election

What Trump's Win Means for the Economy - Greg Ip, Wall Street Journal:

Portions of the tax law that Trump and congressional Republicans passed in 2017, such as for lower rates for individuals and businesses who pay their taxes on their individual returns, expire at the end of 2025 and they have given priority to extending the law. That would cost about $5 trillion over 10 years, the Committee for a Responsible Federal Budget estimates. The process is likely to consume a lot of next year.

Full extension shouldn’t have much effect on growth or interest rates because that’s already built into the behavior of investors and the public.

Not so with Trump’s other proposals, which have at times included lower corporate tax rates; exempting tips, Social Security benefits and overtime pay from taxes; and deductions for car loan interest and state and local taxes. These proposals would, the CRFB estimates, add about $4 trillion to the deficit over 10 years.

Election Results Cast Doubt on Fate of IRS Funding, Direct File - Benjamin Valdez, Tax Notes ($):

Trump’s win in the November 5 presidential election and a Republican takeover in the Senate have brought a wave of uncertainty to the prospect of the IRS maintaining its remaining Inflation Reduction Act funding or its Direct File program — both of which GOP lawmakers have objected to.

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“Much of the progress the IRS has made over the last two years — improving customer service, catching wealthy tax evaders, modernizing systems — would be jeopardized if Republicans persist in cutting the agency’s resources,” NTEU President Doreen Greenwald said in a statement to Tax Notes.

Texas, California Counties Approve Higher Taxes to Fund Child Care - Harriet Torry, Wall Street Journal ($). "In Sonoma County, Calif., nearly 61% of voters approved a measure to establish a quarter-cent sales tax to fund early child care and other resources for children. Fiscal measures to improve access to affordable child care have been introduced in a number of states and communities since the Covid-19 pandemic."

What Will Happen to President-Elect Trump's Tax Policy Agenda? - Howard Gleckman, Tax Policy Center:

Expiring provisions of the 2017 Tax Cuts and Jobs Act (TCJA) almost certainly will be extended, largely intact, though not without a prolonged battle over key details. Trump will enact substantial new tariffs, though at first they may be more modest than he suggested during the campaign.

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While Trump did not discuss it in the campaign, Hill Republicans may try to repeal the 3.8 percent Net Investment Income Tax on capital gains and certain other forms of income that was included in the Affordable Care Act.

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Trump proposed fully repealing the credits for the purchase of electric vehicles and many other products, which would raise about $700 billion over 10 years. But many of the individual credits have strong support on Capitol Hill and killing them all will be a struggle.

For Trump and Republicans in Congress, 'everything is in play' on tax cuts - Jacob Bogage, The Washington Post. "As party leaders discuss their plans for the early days of a new Trump administration, the attitude that’s emerged on taxes is, “Just go,” according to a top conservative lobbyist familiar with the discussions, speaking on the condition of anonymity to describe private talks. 'Rip the Band-Aid and run and just plow it through.'”

Revenue Estimates of Trump's Universal Baseline Tariffs - Erica York, Tax Foundation:

President-elect Donald Trump has proposed to implement a universal baseline tariff on imports when he takes office. We estimate a 10 percent universal tariff would raise $2 trillion and a 20 percent universal tariff would raise $3.3 trillion from 2025 through 2034, before factoring in how the taxes would shrink the US economy. In 2025, a 10 percent universal tariff would increase taxes on US households by $1,253 on average and a 20 percent universal tariff would increase taxes on US households by $2,045 on average.

Blogs and Bits

IRS publishes 2024 Financial Report; resolves longstanding significant deficiency - IRS:

The Internal Revenue Service today released financial information and highlighted selected accomplishments and challenges in its fiscal year 2024 Financial Report PDF.

During fiscal year 2024, the IRS collected more than $5.1 trillion in tax revenue, collected more than $98 billion in enforcement revenue and distributed $553 billion in federal tax refunds and other outlays.

How Seniors Can Do Smart Roth IRA Conversions - Laura Saunders, Wall Street Journal:

The biggest reason is that traditional IRAs require distributions starting at age 73—whether the money is needed or not. Since the money used to fund the account was generally tax-deductible going in, it’s taxable at ordinary income rates when it’s withdrawn. The risk is that these forced distributions, when combined with other income, push a taxpayer into a higher tax bracket, raise Medicare premium surcharges or trigger the 3.8% net investment-income surtax.

However, once a taxpayer converts traditional IRA funds to a Roth and pays income tax on that amount, then future withdrawals—including investment gains—are typically tax-free. The bonus is that there are no forced payouts for the original owner. So if tax rates rise, they won’t apply to Roth withdrawals unless Congress guts the laws governing Roths, which isn’t likely.

IRS Healthcare FSA reminder: Employees can contribute up to $3,300 in 2025; must elect every year - IRS:

The Internal Revenue Service reminds taxpayers that during open enrollment season for flexible spending arrangements (FSAs) they may be eligible to use tax-free dollars to pay medical expenses not covered by other health plans.

An employee who chooses to participate in an FSA can contribute up to $3,300 through payroll deductions during the 2025 plan year. Amounts contributed are not subject to federal income tax, Social Security tax or Medicare tax.

Tax Trouble

Scranton man charged with committing $850,000 in COVID-19 pandemic fraud - IRS (defendant name omitted):

Defendant allegedly filed at least seven fraudulent applications for pandemic stimulus funds through the Economic Injury and Disaster Loan (EIDL) program. Defendant was charged with seven counts of wire fraud, and seven count of making false statements to the United States Small Business Administration, for the fraudulent applications. Weiss also is charged with three counts of aggravated identity theft, for using stolen identities to file three applications.

The applications allegedly submitted by Defendant were filed on behalf of corporate entities that did not, in fact, have actual business operations, and that bore false dates of business establishment, false employee headcount information, and fabricated gross revenues, costs of goods sold, and lost rental income. Defendant allegedly obtained in excess of approximately $850,000 in EIDL funds through filing the fraudulent applications, which he spent on unapproved personal expenses. Defendant is charged with 23 counts of making unlawful monetary transactions with the proceeds of his fraud.

What Day is it?

I could use some coffee... good thing it's National Cappuccino Day!