61% of Americans paid no federal income taxes in 2020, Tax Policy Center says – Robert Frank, CNBC. “More than 100 million U.S. households, or 61% of all taxpayers, paid no federal income taxes last year, according to a new report. The pandemic and federal stimulus led to a huge spike in the number of Americans who either owed no federal income tax or received tax credits from the government. According to the Urban-Brookings Tax Policy Center, 107 million households owed no income taxes in 2020, up from 76 million — or 44% of all taxpayers — in 2019."
‘It’s a really big number,’ said Howard Gleckman, senior fellow in the Tax Policy Center. ‘It’s also really transitory.’ Gleckman said the main reasons for the spike — high unemployment, large stimulus checks and generous tax credit programs — will largely expire after 2022, so the share of nontaxpayers will fall again starting next year.
The data can be found here.
97 percent of small business owners won't pay more income taxes under Biden plan - U.S. Treasury – Jarrett Renshaw, Reuters. “Just three percent of the nation's small businesses would see a tax increase under U.S. President Joe Biden's plan to tax the nation's highest earners to help fund a $3.5 trillion spending bill, a new U.S. Treasury analysis shows. The Biden administration is expected to tout the findings of the report in a virtual meeting on Thursday with a Pennsylvania small business. Democrats in Washington hope to overcome intra-party squabbles to pass the president's signature spending plans, aimed at climate initiatives and expanding the social safety net.”
The White House has sought to harness the political popularity of the nation's some 30 million small businesses and their agitation over the current corporate tax structure, which small businesses view as generous to larger, billion-dollar corporations like Walmart Inc (WMT.N) and Amazon.com Inc (AMZN.O) over Main Street establishments.
Important to note: Congress has not released legislation for the president's $3.5 trillion proposal.
Unwinding TCJA Will Help Working Class, Sen. Van Hollen Says – Steven Cooper, Law360 ($). “Democrats are intent on undoing key parts of the 2017 tax overhaul law in order to shift more benefits to working-class families and limit provisions used by the wealthy to avoid taxes, a senior senator said Wednesday. en. Chris Van Hollen, D-Md., a member of the Senate Budget and Appropriations committees, said Congressional Democrats will use the budget reconciliation process to raise revenue from individuals and corporations that received unfair tax breaks from the GOP's Tax Cut and Jobs Act."
‘We had an economy where the very well-to-do did better and better over the years and everybody else is either flat or sinking,’ Van Hollen said during a program held by the left-leaning Center for American Progress. ‘We need to change that, both for reasons of equity but also for reasons of faster economic growth across the board and a more inclusive economy.’
Biggest Tax Hike on Wealthy Since ‘93 Is Bogged Down in Congress – Laura Davison, Bloomberg ($):
The biggest problem for congressional staff as they try to construct the tax portion of the bill is that they still don’t know how much revenue they will need to raise. Of the $3.5 trillion in spending allowed in the budget resolution, at half would be funded by tax increases.
Reporting the bill is "bogged down" is a bit of an exaggeration. More accurate reporting would be the bill is "not bogged down - yet."
Your Tax Pro’s Just Not That Into You: Why You May Get Dropped – Kelly Phillips Erb, Bloomberg ($). “So, what could make a tax professional want to dump a client”:
When I posed this question to tax professionals on social media, I received 216 comments just on Facebook. I received more than 100 additional responses on Twitter, LinkedIn, and email. The answers were fairly consistent from tax professionals from all over the country, and firms of all sizes. Here are some reasons that your tax pro may not be that into you anymore:
You don’t pay your bills…
You complain about costs…
You expect miracles…
You lie. Repeatedly…
You’re too predictable… [Really?]
You don’t call or show up like you said you would…
You call too often…
You don’t respect boundaries…
You’re always on social media…
You’re sloppy…
You sneak around… [We're still talking about tax prep, right?]
You’re rude to everyone...
SALT Cap Workaround Rules Due Soon From New York Tax Department – Donna Borak, Bloomberg ($). “New York business owners hankering to seize on a fresh tax break may get guidance from the state’s tax department as early as next week, according to a source familiar with the matter. Partnerships, limited liability companies, and S corporations have been waiting four months for details—and forms to file—to determine whether they should choose to pay a pass-through entity tax ahead of an Oct. 15 deadline. The tax would give members of those businesses a way to ease the pain of a $10,000 federal cap on individuals’ deductions for state and local taxes paid.”
Gov. Andrew Cuomo (D) and Democratic legislative leaders rolled out the SALT cap workaround as part of the state’s $212 billion fiscal 2022 budget, which began on April 1. James Gazzale, a spokesman for the state’s Department of Taxation, said guidance would be made available “soon,” but declined to be more specific.
Does Your State Have an Individual Alternative Minimum Tax (AMT)? – Janelle Cammenga, Tax Foundation. “This week’s map shows the five states that have an Alternative Minimum Tax (AMT) in their individual income tax codes: California, Colorado, Connecticut, Iowa, and Minnesota. Under an individual alternative minimum tax, many taxpayers are required to calculate their income tax liability under two systems and pay the higher amount.”
State Tax Limitations Inhibit Public School Funding And Educational Equity – Jake Fisher, Tax Policy Center. “As the first day of school approaches, remember that the quality of a child’s education is largely determined by where their public school is located. And in many cases, the roots of educational inequities lie within state and local tax policy. While school districts get revenues from multiple sources, state and local money is most important. Each state has its own complex web of rules and formulas that determine this funding. But nowhere is it more complex than in my home state of Colorado. Tax limits and workarounds to them have especially hurt school districts that serve rural and high-poverty areas and pushed some to adopt a four-day school week.”
Challenge to Arizona Income Tax Hike Returned to Trial Court – Brenna Goth, Bloomberg ($). “An income-tax increase passed in November by Arizona voters to fund education will stand until a trial court decides whether the revenues it raises will exceed state spending limits, the Arizona Supreme Court ruled Thursday. The court declined to halt implementation of the initiative, known as Prop. 208, which about 52% of voters approved, though the ruling points to risks for its future. Republican legislators and Gov. Doug Ducey (R) fought against the 3.5% surcharge on taxable income over $250,000 for individuals and $500,000 for joint filers or heads of households and have since passed tax cuts that dampen its impact.”
Walmart Tax Appeals Time-Barred, Minnesota High Court Rules – Michael Bologna, Bloomberg ($). “Walmart Inc. lost a campaign for property tax reductions at two stores in Minnesota with a state Supreme Court ruling that the retail giant’s claims were time-barred.”
The high court on Wednesday affirmed an appeals court’s ruling that Walmart’s constitutional claims on behalf of supercenter stores in Winona and Martin counties were subject to the limitations established under statute section 278.01. The law imposes a strict timeline for property owners to challenge their tax assessments, and Walmart missed the statutory deadline in its objections to assessments issued for the tax years 2013 through 2018, the court ruled.
We will eliminate double taxation, says OECD tax chief – Mukesh Butani, Mint. “Global leaders are rewriting the tax rules to check the corporate practice of shifting profits artificially to low tax countries and to give taxation rights to countries where tech giants have their markets. But there will be no reallocation of taxing rights without tax certainty, assures OECD (Organisation for Economic Co-operation and Development), which is spearheading the efforts.”
‘We will eliminate double taxation. It will happen in a fast manner, in a timely manner, and countries will not feel like their sovereignty has been completely ignored,’ says Pascal Saint-Amans, director of the Center for Tax Policy and Administration at the OECD, in an interview with Mukesh Butani, as part of panel discussion at the 25th Bombay CA Society function.
Companies Want Tax Certainty From OECD Plan, Google Exec Says – Isabel Gottlieb, Bloomberg ($). “Companies hope that the OECD’s global tax overhaul won’t increase uncertainty and disputes with national authorities, a Google official said Thursday. ‘Pillar One’ of the preliminary global plan agreed last month would see a portion of the biggest, most profitable multinationals’ profits taxed in countries where they have markets, not headquarters. For the companies subject to the new rules, that most likely means new tax obligations in more countries, raising the prospect of increased conflicts with tax authorities.”
‘The main objective here is to get to some international agreement, so that the way that this pillar is implemented in country ‘Y’ is agreed upon in country ‘Z’, and that there is no room for dispute or disagreement about how that reallocation of taxing rights should work,’ said Adam Cohen, director of economic policy at Google. He was speaking at a prerecorded event, posted Thursday by the Urban-Brookings Tax Policy Center.
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