IRS Abandons More Tax Notices For This Year; States Continue Cutting Taxes

IRS suspends more notices to taxpayers. The agency has stopped sending  notices for automated collections, past balances due, and returns it says it did not receive. The agency made the decision as it  continues to work through a backlog of several million 2020 and even 2019 individual and business returns. 

What’s in a name? Build Back Better seems dead, but Sen. Joe Manchin keeps hinting he’d support some version of a social spending and climate bill with a different name that includes some tax increases. He told NBC News he still supports raising the corporate tax rate to 25 percent, a 15 percent corporate minimum tax, a 28 percent capital gains tax, and higher tax rates for the wealthy. The only problem: Fellow Democratic Sen. Kyrsten Sinema says she is opposed to almost all those changes and Senate Democrats need support of both lawmakers to pass a bill. 

States should target tax cuts to those most harmed by the pandemic. TPC’s Richard Auxier writes about his new analysis  of how 2021 tax cuts passed by four states affected  various income groups and representative households from different racial and ethnic groups. If states do choose to cut taxes, Richard suggests state policymakers consider the unequal economic effects of the pandemic on low-income workers, particularly Black and Latino workers, and the uncertainty of future state revenue growth.

Washington State senators propose a tax on fuel exported to other states. The Democratic-led Senate included an “export fuel tax” in transportation and spending legislation unveiled this week. A 6 percent per gallon tax on wholesale fuel would go into effect in February 2023 and could generate $2 billion over 16 years. Much of that revenue would come from gasoline and diesel sold to Oregon purchasers. An Oregon state lawmaker has questioned the tax’s  constitutionality of the tax and warns, “I suppose if enacted, Oregon will look at ways to retaliate.”

Utah lawmakers continue to advance an income tax cut. The House amended  a Senate bill to lower the 4.95 percent state income tax rate by 0.1 percent. On average, individual Utah taxpayers would pay $129 less in taxes each year. The bill also would establish a nonrefundable earned income tax credit and raise the taxable threshold for Social Security benefits. If the Senate passes the amended version, it will head to Republican Gov. Spencer Cox for his signature. 

Michigan Gov. Gretchen Whitmer proposes tax relief. Her $74.1 billion budget includes provisions to cut taxes on retirement income over four years, increase the state’s earned income tax credit, and crate a $2,500 credit for the purchase of an electric vehicle and charging equipment.

For the latest tax news, subscribe to the Tax Policy Center’s Daily Deduction. Sign up here to have it delivered to your inbox weekdays at 8:00 am (Mondays only when Congress is in recess). We welcome tips on new research or other news. Email Renu Zaretsky at

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