At Around the Tax World, you can find out all about what’s going on in the wonderful, worldwide world of tax. Every month, we’ll feature a few mini-articles on what’s been going on in the world when it comes to tax, and fully available for viewing even if you don’t have a subscription.
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In The Headlines
- New leadership, fewer lawsuits—changes are afoot at the Consumer Financial Protection Bureau. Since taking office as the CFPB’s new director, Russell Vought has closed the Washington D.C. headquarters, fired 200 employees, and dropped four major lawsuits that the agency had filed against Capital One, Vanderbilt Mortgage & Finance, Rocket Homes Real Estate, and the Pennsylvania Higher Education Assistance Agency. In its most high-profile case, the CFPB had previously sued bank holding company Capital One for allegedly cheating customers out of over $2 billion in interest. Capital One shares shot up after the case was dismissed. In the case of Vanderbilt, the CFPB alleged that the business willfully ignored evidence that customers could not afford their mortgages. The Rocket case claimed that illegal kickbacks were given to real estate agents, and the Pennsylvania case involved improper loan collections.
- Verizon is recruiting AT&T employees with the promise of flexible working arrangements. This January, AT&T announced that U.S. employees are required to shift from hybrid work to returning to the office five days a week. Shortly after this announcement, numerous AT&T employees received emails from recruiters at Verizon promoting their remote and hybrid jobs. The remote and hybrid roles currently listed on Verizon’s job board include inside sales positions, network technicians, and call center supervisors. A 2024 study conducted by Bamboo HR showed that 28% of workers would consider leaving a job if they were required to return to the office full-time. AT&T has reportedly encountered obstacles in implementing its in-person mandate due to lack of open desks in their offices and lack of parking space.
- The standoff between the White House and The Associated Press continues. The White House recently barred the AP from the Oval Office and other presidential events. The most recent response from a federal judge did not overturn the ban but advised that the Trump administration reconsider its stance. The conflict arose over the AP’s use of the name the “Gulf of Mexico” instead of the “Gulf of America,” the name chosen in a recent executive order by President Trump. In defense of its decision, the White House stated that journalists’ ability to question the President in the Oval Office and aboard Air Force One is a privilege and not a right. In its rebuttal, the Associated Press has stated that the ban is a freedom of speech issue. Two conservative news outlets have also stood behind the call for the Trump administration to change their stance—Fox News and Newsmax signed a letter asking the president to reverse the ban.
What's New In The Tax World?
Will federal budget cuts be enough to offset the revival of TCJA tax cuts?
With a Republican majority in Congress, the question has shifted from whether the Tax Cuts and Jobs Act will see a reboot to how. A number of the tax provisions introduced by President Trump back in 2017 are set to expire at the end of the year, and many conservative lawmakers have been advocating to renew and even expand these tax cuts. GOP senators in particular are hoping to make the tax cuts permanent. The problem is how to make up for the cost. Extending the tax cuts alone is expected to cost $4.6 trillion over the next 10 years. The primary proposal to fund the extension is to cut government spending, but the question of which programs can be cut has been the source of intense debate.
Though the House and the Senate are currently both GOP-controlled, the two chambers have put forward very different solutions for passing a tax cuts package. The House is attempting to accomplish all of its goals with a single bill—a move that has been supported by President Trump. The House bill would also raise the debt ceiling by $4 trillion. To offset costs, House committees would be required to cut at least $1.5 trillion in spending with the goal of raising that number to $2 trillion over the next decade.
The Senate has taken a different approach, arguing that splitting Republican priorities into two separate bills will be more effective. The first bill, that recently moved forward in the Senate, focuses not on tax cuts but on funding deportation and border security. To pay for this $340 billion budget bill, Republican senators are weighing the option of eliminating the Biden administration’s methane emissions fee, introduced through the Inflation Reduction Act. Doing so would require lawmakers to also identify other sources of revenue and to increase domestic energy production. Beyond this, GOP senators would next need to determine how to fund the second bill focused on extending Trump’s tax cuts.
So which federal programs could be on the chopping block? Clean energy programs, food stamps, and student aid have all appeared in congressional discussions. At a recent Cabinet meeting, Trump commented that he will not cut Medicare, Medicaid, and Social Security. However, the House bill would require the committee that handles Medicaid to cut their spending by $880 billion over the next 10 years. Supporters of the bill insist that this can be accomplished through eliminating fraud and waste rather than cutting health care benefits.
State-By-State Updates
- Florida’s governor advocates to axe the state’s property tax. Governor Ron DeSantis recently spoke in favor of eliminating property tax, which would make Florida the first state in the nation to do so. The governor highlighted how this would benefit senior citizens in particular so that those on fixed incomes would not be hit with higher property taxes as the value of their homes rose. DeSantis also floated the possibility of eliminating tax on business rent, which he said disadvantages small businesses. Opponents note that property tax is an important revenue stream for local governments, providing funding for emergency services, parks, roads, and schools. Advocates have suggested raising sales tax to offset the loss in revenue.
- Idaho introduces a private school tax credit. Governor Brad Little recently signed off on a $50 million program that allocates up to $5,000 to cover tuition and education expenses for private schoolers and home-schoolers and up to $7,500 for special needs students. The governor has emphasized that his administration has increased public school funding by 60% over the last few years. The bill received mixed reactions from the public with one news outlet claiming that the House Revenue and Taxation Committee received over 1,000 emails mostly opposing the tax credit. Official data has not been released to confirm the levels of opposition or support for the bill. Currently, 28 states and the District of Columbia have programs that funnel public funds toward private school options.
- A Missouri bill to end sales tax on food sold at grocery stores faces local opposition. Missouri currently levies a 1% tax on retail sales of food. This includes items that are purchased at a grocery store but intended to be consumed off the premises, such as a hot dog on a roller. While the bill gained bipartisan support from lawmakers, local officials objected that the loss of revenue would impact funding for police and other social services. For instance, one local mayor commented that food sales make up 28% of the revenue that goes into her city’s $6.8 million budget. Because the bill would phase out local sales tax on food purchases at grocery stores, some are asking how legislators plan to make up for lost revenue.
- Montana is looking at dueling proposals to provide property tax relief to residents. The first was backed by Governor Greg Gianforte and would establish homestead property tax rates. The governor has pushed for the bill to be passed this month in the hopes of enacting the tax changes for the coming year. For residential and commercial properties that qualify for the homestead rate, property taxes would drop from 1.35% to 0.9% for residences and 1.1% for long-term rentals. Smaller commercial properties would see their rates drop from 1.89% to 1.5%. The caveat is that the properties cannot be three times (or more) as valuable as the statewide median property. The second bill would establish a graduated tax rate for residential property, exempting the first $50,000 of a property’s value but levying a 2% tax on properties worth over $2 million.
Tax Planning Tips
Could repealing the clean energy tax credits drive up electricity bills? The Inflation Reduction Act (IRA), introduced under the Biden administration, could be reaching the end of its road. President Trump has already paused IRA funding disbursements. These tax credits are available to clean energy facilities that achieve net zero greenhouse gas emissions. Geothermal, hydropower, nuclear, solar, and wind are all qualifying technologies. A recent report estimates that if these tax credits are fully repealed, electricity prices across the U.S. will increase by 7.3% for residences and 10.6% for businesses by 2029. On a state level, Midwestern and Western states will likely see the sharpest increases, as much as a 21.1% uptick for residential customers and 30.6% for commercial. Meanwhile, electricity demand is expected to rise by 50% over the next 10 years due to the increased need from data centers, manufacturing, and oil and gas production. The Trump administration has stated that new policies will support gas, nuclear, and other firm resources.
Trump’s rollback on taxes on tips and overtime pay is on pause—but maybe not for long. These tax cuts do not make an appearance in the budget resolution recently passed by the U.S. House. However, as the House bill and competing bills coming from the Senate are debated and amended, new language regarding these tax cuts could still appear. 2024 polls suggest that the majority of Americans are in favor of these changes: 73% of Republicans, 75% of Democrats, and 73% of independents. According to research, 2.5% of U.S. workers or approximately 4 million Americans received tips in 2023. Among those who would qualify, the average tax cut will be around $1,700. However, opponents of the tax cuts state that it could increase the federal budget deficit by over $100 billion across the next 10 years. Others express concern that employers will simply restructure their pay to rely heavily on tips, putting strain on customers and creating widely variable pay rates for workers.
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