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Figure from Appendix of CBO Report (Feb 2021) On February 11, 2021, the Congressional Budget Office (CBO) released: The Budget and Economic Outlook: 2021 to 2031. It is grim as CBO estimates that the federal budget deficit for FY 2021 will be $2.3 trillion. But, that is $900 billion less than for 2020. The 2021 deficit is the second largest since 1945 (WWII) based on the deficit as a percent of GDP. Something else interesting in the report is an appendix on tax expenditures. Tax expenditures are spending that exists in the tax law. For example, the American Opportunity…
My latest Moving Forward? article for Tax Notes State is: Suggestions for Pandemic State Tax Policy Endurance (12/17/20). I include a variety of suggestions to help individuals, businesses and state and local governments. I hope you’ll take a look – here. Examples: Federally-declared disasters such as the COVID-19 pandemic allow the IRS to extend due datesfor tax returns and tax payments. Last year, the result was a July 15 due date rather than April 15. Most states followed suit. But a big deal for states is that their fiscal years end June 30. The shift of payments to the…
We have a few proposed changes under consideration that very much need a deep policy discussion rather than only a cost estimate and a general like or dislike. Here are three such items: 1. What is an appropriate phase-out rule for the next economic impact payments? The current ones cause a credit to still be allowed for high income taxpayers who have a few children. The CASH Act (H.R. 9051; 116th Congress) that the House passed late 2020, called for EIP of $2,000 including for dependents. If a married couple has 4 dependents, they credit would be $12,000.…
To help figure out all of the COVID-19 tax law changes enacted since March 2020, we have seen a variety of guidance from the IRS. This includes FAQs and some items just posted to an IRS website. These are non-binding items. Some guidance was published in the weekly Internal Revenue Bulletin (revenue rulings, revenue procedure, notices and announcements) so is binding on the IRS. Since these changes mostly expired in less than one year, there wasn’t time for public comment and binding guidance for everything. Taxpayers and practitioners wanted insights as quickly as possible. But what about other tax…
The FFCRA and CARES Act enacted in March 2020 and CAA-21 enacted Dec. 27, 2020 provide a variety of financial relief to individuals and small businesses. The recovery rebates (called “economic impact payments” by the IRS) in the CARES act ($1,200 per adult and $500 for child under age 17) helped over 160 million people. The $600 payments in CAA-21 should help a similar number. Is that the best way to help? There was also increased and longer payments of unemployment compensation to clearly help those who lost their jobs. There were changes to allow those with sufficient retirements accounts…
I think that often, there is some common sense consideration of tax policy before enacting or changing tax rules. One example was the 1954 decision to enact IRC section 174 to allow for expensing of R&D expenditures. That simplified the law to avoid uncertainties and taxpayer/IRS disputes on the life for amortization purposes of these expenses. It also incentivized these expenditures that also benefit the economy through new technologies to improve our lives. I’m sure we can find more recent examples too. Of course, before leaving my example, I should note that the 2017 Tax Cuts and Jobs Act modified…
On November 10, 2020, Deutsche Bank (DB) released a report, Konzept #19: What we must do to rebuild. Per DB, the report presents “ideas for how economies, businesses, and societies should rebuild from the pandemic. From changing the way we stimulate labour markets, to implementing digital currencies, and even taxing those who work from home, this Konzept is designed to spark the most important of debates. Some of our ideas may seem radical, but we hope they will inspire decision makers as we rebuild from this bracing and tragic period.” Topics include climate change, connectivity, fate of shopping malls,…
In theory, it should be fairly straightforward to find the tax law. At the federal level, we have the Internal Revenue Code (Title 26 of the U.S. Code) available at a congressional website, Cornell Law School site and from commercial tax publishers. Regulations can also be found at the Cornell Law School website, perhaps a few others (including this blogger’sites for regs published in the Federal Register for 2011 through the present), and commercial research publishers. And the U.S. Tax Court and many other federal courts publish their opinions on their websites (but not all). The best way…
On October 22, 1986, President Reagan signed the Tax Reform Act of 1986 (PL 99-514). Take a look at this picture at the Social Security Administration website to see a group of men from the tax committees cheerily watching the president sign the bill outside of the White House. At the time, we had a Republican president and controlled Senate and a Democrat controlled House, all working together and holding numerous hearings about the reforms). The TRA86 lowered rates and broadened the base. Prior to TRA86, the top corporate rate was 46% and the top individual rate was…
 We can gather some general ideas about tax changes in looking at various websites and documents of presidential candidates. This includes the Democratic Party platform for 2020, Republican Party platform for 2016 (it was not updated for 2020, so actually includes pre-TCJA tax ideas), and candidate websites. I recently reviewed these plans for an upcoming webinar. One observation I’ll make about both plans (best I can tell since most details are missing): Why not fix an outstanding problem with the individual income tax that has worsened with recent law changes and ways people generate additional income and cash flow today?…