SALT, Financial Transactions Taxes, and a Slowdown In State Tax Growth

Adding a pinch of SALT before Super Tuesday. Democratic Presidential hopeful Pete Buttigieg would repeal the Tax Cuts and Jobs Act’s cap on the state and local tax (SALT) deduction for households making $400,000 or less. Among the states hardest hit by the cap is California, whose Democratic primary is coming up on Super Tuesday (March 3). The vast majority of those who’d benefit from full repeal make between $100,000 and $500,000. But since most of the tax benefit goes to those making $500,000 or more, Buttigieg’s plan would limit the revenue loss. 

Joining the financial transactions tax bandwagon. Mayor Pete also has joined Bernie Sanders, Mike Bloomberg, Joe Biden, and Elizabeth Warren as Democratic hopefuls backing a financial transactions tax.  Buttigieg says his 0.1 percent rate would raise about $900 billion over 10 years. He also says he’ll propose expanding both the child tax credit and the earned income tax credit.

Is transparency all it’s cracked up to be? Tax historian Joe Thorndike wonders whether Congress might accomplish more if it did its work behind closed doors. In a Forbes.com column, Joe looks back at the days of smoke-filled rooms and notes that, “In the tax world, transparency and openness made it harder to cut backroom deals. But those reforms also made it harder to get anything done.” Of course, much of the tax policy Congress does do these days happens behind closed doors. Tax Cuts and Jobs Act anyone?

State and local tax revenue returning to historical averages. After a few years of unusual volatility—driven in large part by the TCJA—revenues for the third quarter of 2019 settled back to a long-run normal—modest but not dramatic increases, according to TPC’s State Tax and Economic Review. The review found state and local revenue growth grew by about 5 percent compared the same period in 2018. It projects that fourth quarter revenues likely had similar modest increases. 

US Supreme Court won’t hear Arizona’s challenge to California’s franchise tax. The High Court rejected Arizona’s claim that California is violating the US Constitution by taxing out-of-state businesses that are passive investors in California limited liability companies. Arizona argued that the California tax violated both the Commerce Clause and the Fourth Amendment. 

Truckers are not fans of a mileage-based gas tax. The American Trucking Associations has declared its opposition to motor fuels taxes based on mileage driven. The ATA objected to a Wyoming plan to shift its motor fuels tax system for truckers, but made it clear it is even more opposed to federal efforts to impose the model. Wyoming Sen. John Barrasso reportedly is considering such a plan to help fund the troubled Highway Trust Fund. 

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https://www.taxpolicycenter.org/daily-deduction/salt-financial-transactions-taxes-and-slowdown-state-tax-growth