The TCJA encouraged foreign-owned corporations to retain more US earnings. A new TPC study shows that corporate tax cuts in the Tax Cuts and Jobs Act (TCJA) encouraged foreign-owned US companies to reinvest more of their earnings here. Researchers also found a positive relationship between the TCJA tax cuts and foreign-owned companies’ investment in US tangible assets. It is not clear whether the TCJA tax cuts will result in an overall higher level of foreign investment in the US though the significant effects of the pandemic will make it difficult to know.
GAO: IRS audit rates keep falling. The Government Accountability Office found audit rates for individual income tax returns fell from 0.9 percent in 2010 to 0.25 percent in tax year 2019. Audit rates fell for all income levels, but the biggest declines were for those with income of $5 million or more. Those high-income households still were audited at higher rates than lower income filers. The IRS blamed the decline on budget cuts. Audit rates for tax year 2020 were likely even lower.
Solving a budget mystery. TPC’s Howard Gleckman asks why Congress is willing to increase Ukraine aid by $40 billion with no offsets but may insist on spending cuts to offset $10 billion in new funds for COVID-19 therapeutics, vaccines, and tests. The answer has nothing to do with real concern about the deficit. Rather, lawmakers use the pay-for debate as a cudgel to slow or kill new spending they don’t like.
California manufacturers want the state to suspend sales taxes on new equipment purchases. The California Manufacturers and Technology Association says the tax on equipment— up to 10.75 percent in some cases— is hobbling the industry. Industry leaders hope to get a tax holiday during budget negotiations this spring.
Colorado property tax rates will decrease. Gov. Jared Polis signed bills this week to reduce property tax rates for homeowners. Commercial property tax rate cuts will be the first reduction in 40 years.
South Carolina veterans now exempt from state income tax on military retirement benefits. Gov. Henry McMaster signed a bill last week that exempts military retirement income from income tax. Previously, veterans received a partial tax exemption if they served at least 20 years. The top rate on individual income is 7 percent.
Portugal soon will tax cryptocurrency gains. The country’s finance minister said cryptocurrencies will be subject to taxation soon. Cryptocurrency gains currently are tax-exempt and Portugal has been considered a tax haven for these investors. The current capital gains tax rate on most financial profits is 28 percent.
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