The exaction for failure to purchase health insurance under the ACA is a tax for constitutional purposes but not a tax under the Bankruptcy Code, New Orleans judge rules.
The Treasury Department released new guidelines on how much money companies should withhold from paychecks, saying that the vast majority of workers will see more money rolling in as early as next month, The Washington Times reported. About 90 percent of U.S. workers ultimately will see bigger paychecks thanks to the new tax-cut law, which necessitated the changes, and many of those gains will start in February. “These tax cuts will ensure that American workers are able to keep more of their hard earned income and decide how to spend, invest or save it,” Treasury Secretary Steven Mnuchin said. The IRS also will release a new online calculator by the end of February so that the public can figure out how much money they should be paying. “This will help provide individuals with certainty, so that they are neither over-withheld or under-withheld and can plan their financial decisions,” Mnuchin said. He added that there should be “no material change” in the percentage of taxpayers who will get refunds under the new formula. About three-quarters of taxpayers got a refund last year. The withholding tables rely on a complicated formula, but they reflect the new individual tax rates of 10, 12, 22, 24, 32, 35 and 37 percent, compared to last year’s brackets of 10, 15, 25, 28, 33, 35 and 39.6 percent, which translates to most people seeing a bump in take-home pay.
The Tax Cuts and Jobs Act (TCJA) will shrink the number of households claiming an itemized deduction for their gifts to nonprofits from about 37 million to about 16 million in 2018, Forbes reported. At the same time, the new law will reduce the federal income tax subsidy for charitable giving by one-third, from about $63 billion to roughly $42 billion. Overall, the TCJA will reduce the marginal tax benefit of giving to charity by more than one-quarter in 2018, raising the after-tax cost of donating by about 7 percent. The TCJA makes four big changes that are likely to discourage charitable giving. It lowers individual income tax rates, thus reducing the value of all tax deductions; and it caps the state and local tax deduction at $10,000 and increases the standard deduction to $12,000 for singles and $24,000 for couples — two steps that will significantly reduce the number of itemizers. The new law also roughly doubles the estate tax exemption to $22 million for couples, which will discourage tax-motivated bequests by some very wealthy households. However, that change is not included in TPC’s estimates.
Wal-Mart Stores Inc. is boosting its starting hourly wage to $11 and delivering bonuses to employees, capitalizing on the U.S. tax overhaul to stay competitive in a tightening labor market, Bloomberg reported. The increase takes effect next month and will cost $300 million on top of annual wage hikes that were already planned. The one-time bonus of up to $1,000 is based on seniority and will amount to an additional $400 million. The company is also expanding its maternity and parental leave policy and adding an adoption benefit. Wal-Mart, the nation’s largest private employer, has fought in recent years to improve its image in the U.S., as it weathered criticism over its treatment of employees. With the wage increase and bonus payment, the company seeks to even its pay gap while simultaneously sending a high-profile thank you to the U.S. government for slashing the corporate tax rate. On the same day that Wal-Mart announced the new benefits, the company also said that it will close “a series” of Sam’s Club warehouse locations after a portfolio review, illustrating how cost cutting remains a key focus.
Some high-income business owners could face marginal tax rates exceeding 100 percent under the Senate’s tax bill, far beyond the listed rates in the Republican plan, The Wall Street Journal reported. This means a business owner’s next $100 in earnings, under certain circumstances, would require paying more than $100 in additional federal and state taxes. As lawmakers rush to write the final tax bill over the next week, they already are looking at changes to prevent this from happening. House and Senate Republicans are trying to reconcile their bills, looking for ways to pay for eliminating the most contentious proposals. The formal House-Senate conference committee will meet on Wednesday, and GOP lawmakers may unveil an agreement by week’s end. The possible marginal tax rate of more than 100 percent results from the combination of tax policies designed to provide benefits to businesses and families but then deny them to the richest people. As income climbs and those breaks phase out, each dollar of income faces regular tax rates and a hidden marginal rate on top of that, in the form of vanishing tax breaks. This structure, if maintained in a final law, would create some of the disincentives to working and to earning business profit that Republicans have long complained about, while opening lucrative avenues for tax avoidance. As a taxpayer’s income gets much higher and moves out of those phase-out ranges, the marginal tax rates would go down.
