The so-called Trump tax reforms are happening now and are impacting the economy. Is it good? Or is it bad? A recent Quinnipiac University Poll says we still view them negatively but the negativity is moving toward the positive.
The new numbers:
• 39% positive
• 47% negative
However, that’s up from the January 11th poll when it was:
• 32% positive
• 52% negative
By the way, for the first time 48% to 41% say President Trump is more responsible for the state of the economy than former President Barack Obama. And when it comes to the economy, the president got some good news:
• 51% approve of the way Trump is handling the economy
• 43% disapprove
• 75% say their financial situation is excellent to good
Tim Malloy of Quinnipiac University Poll said, “The post State of the Union bump kicks in. And an attaboy on the economy doubles the pleasure for President Donald Trump. He’s at 40 percent in his approval rating for the first time in more than seven months, but he's still nowhere near that magic 50 percent mark. Americans are feeling good about their personal finances, but we'll have to see whether the Wall Street plunge takes a toll on the guy in charge.”
As they unveil the tax reforms are creating complications for states and state Legislatures needing to balance budgets and provide services. Many of the changes states are making are not good for small business and those of us — like many of you who are independent agents — choosing the pass-through income route.
Many states mirror what the federal government does with taxes. In this case, many states are taking a stronger look at what’s happening and aren’t necessarily going along.
Here’s what’s happening in the PIA Western Alliance states
The Oregon Legislature — so far — has made the most drastic changes. Oregon economists said if the state copies the federal tax law it could cost the state fund as much as $258 million. Future budgets could see losses of $400 million. So, the Legislature said the tax cuts are too high and have too big an impact on the state’s income, and it cut the tax cuts for middle and low-income wage earners.
Republicans say this is going to hurt pass-through businesses and denies them the automatic tax break from the tax reforms. Oregon’s law says these businesses already pay lower rates than regular wage earners.
Democrats in the Oregon Legislature said under the new reforms 80% of the Trump tax breaks go to households with over $1 million in income.
So far Oregon Governor Kate Brown hasn’t said whether she’ll sign the bill into law or veto. She has expressed some concern, however.
WASHINGTON and NEW MEXICO
The Washington Legislature has not taken up the issue at all but Washington has no personal income tax so the impact of the tax reforms will be much different in that state than others.
No action has been taken at all in New Mexico
In California, the Legislature is looking at a plan to require businesses to give half of the cash from their federal tax breaks to the state. Conservative talk show host Ben Shapiro — who is from California — is shocked at the sheer audacity of the idea.
“It’s typical that Democrats in California see every dollar back in taxpayers’ pocket as a dollar they can steal. They're driving business out of the state quickly and efficiently, and this latest move will continue to do just that,” he said.
The plan won’t affect small business say Democratic State Assemblymen Kevin McCarty of Sacramento and Phil Ting of San Francisco. They’re going after firms making more than $1 million a year. That money will be given — they say — to government programs aimed at middle and low-class families.
“Trump’s tax reform plan was nothing more than a middle-class tax increase. It is unconscionable to force working families to pay the price for tax breaks and loopholes benefiting corporations and wealthy individuals. This bill will help blunt the impact of the federal tax plan on everyday Californians by protecting funding for education, affordable health care, and other core priorities,” Ting said.
McCarty added, “I’ve seen enough billionaire justice in the first 11 months of this presidency to last my lifetime. At a time when reckless federal tax policy favors billionaires over middle class workers, [the bill] ACA 22 will help ensure that California can continue to grow and support middle class families throughout the state.”
Heritage Foundation tax policy analyst Adam Michel said this is a bad decision that doesn’t really hurt the rich. “With more business taxes, they are claiming to tax the rich, but instead hurting wage growth and job creation. With the other policy, they are actively seeking a way to cut taxes for the richest Californians by looking for SALT [state and local tax] workarounds. It is interesting that they want it both ways,” he said.
In January Montana Revenue Director Mike Kadas said Montana always duplicates federal tax law. He said the 20% pass-through business break will cost Montana $29 million and will put the state in a huge financial hole.
Republicans say he’s misinterpreted the law.
Senate Majority Leader Fred Thomas — a Republican, a PIA member and the former president of PIA National — produced a 15-page report by the Legislature’s staff attorney Jared Coles. It refutes Kadas claims and says many times in the past Montana has parted from federal tax rules.
Thomas thinks the state should give the report to Montana Attorney General Tim Fox and let him judge its worthiness. “The attorney general has to always use his power cautiously and carefully. My thought is, we take this opinion to the Interim Revenue Committee, present it and have them say, ‘OK, we’re going to adopt Mr. Cole's letters and positions. So, then you kind of have an official position of the revenue side of the Legislature,” he said.
So far, the Arizona Legislature has left things as they are but the Arizona Department of Revenue released statistics that finds Arizona could end up with $236 million in additional revenue during fiscal 2019 because of the tax reforms. It could go as high as $286 million by fiscal 2020.
In other words — and how this is being interpreted by some — Arizona taxpayers will be paying higher taxes than if the reforms didn’t happen.
Arizona’s tax income increases in 2019 — broken down — says $222 million will come from an increase in individual income taxes and just $14 million will come from corporations.
Department of Revenue spokesman Ed Greenberg said, “Essentially, the state of Arizona does not piggy back federal standard deductions or federal credits, which don’t flow through to Arizona taxpayers. At the same time, the federal government has repealed or substantially reduced a number of itemized deductions.”
He points to home mortgage deduction losses and the capping of the deductible state income taxes.
The Idaho Legislature is looking at a plan to fix the damage done to state residents from the tax reforms. Normally the state just copies federal codes when enacted but estimates are that residents in the state will have to pay $100 million more in taxes with the reforms so the Legislature is looking at a $200 million tax cut.
The federal plan doubles the child tax credit from $1,000 to $2,000 but Idaho doesn’t have one. The measure being considered adds a $130 child credit.
Some like Sen. Grant Burgoyne — a Democrat from Boise — say that’s not close to enough. “What is HB 463? It raises taxes on families with three or more children in a state known for its large families. Why in the world would we do that? I have no idea,” he said.
The bill reduces the state’s seven personal income tax brackets and cuts corporate tax rates by 0.475%. The tax bracket change will drop the $3.5 billion general fund by $159.6 million. The tax credit will cut it an additional $42.3 million.
In Nevada, the Legislature has passed a $1.5 billion tax hike that will be in effect for the next two-years. Governor Brian Sandoval wanted $1.1 billion and got more. The increase will go to fund the expansion of Medicaid, higher ed spending and will give — what some call — handouts to corporations like Tesla.
Here’s a list of the tax hikes:
• A higher state business license fee
• A payroll/modified business tax
• A payroll/modified business tax; even higher on mining
• A new tax on ride-sharing customers using Uber and others
• A live entertainment tax on auto racing and concerts
• A 125% increase in the cost of a pack of cigarettes
• A higher tax on elk hunters car owners (registration fee)
• A higher sales tax
Source links: Quinnipiac, OregonLive.com, Daily Signal, Billings Gazette, AZ Central, SFGate, Americans for Tax Reform