Tax and Spend Tuesday, a roundup of news, views and policy proposals affecting your paycheck and pocketbook!
The election: The Center for State Fiscal Reform at the American Legislative Exchange Council analyzed November 3 ballot measure results in the states, noting that “Many of these ballot measures will impact their pocketbooks – and state economies – for years to come.” Among them:
- California voters rejected Proposition 15, which would have seen commercial property owners’ property tax bills increase by as much as $12.5 billion annually. California voters also approved Proposition 22, protecting rideshare drivers’ right to work as independent contractors. Had California rejected Prop 22, it is likely Uber and Lyft would have ceased operations in California and thousands of rideshare drivers would have lost their jobs.
- Colorado voters – yes, Colorado! – approved the only income tax reduction passed by any state in 2020, reducing the flat state personal and corporate income tax rates from 4.66% to 4.55%. This tax cut will save taxpayers an estimated $154 million.
- Illinois voters rejected a constitutional amendment that would have permitted a graduated income tax.
- Arizona voters approved Proposition 208, raising the state’s top income tax rate from 4.5% to 8%. This gives Arizona the ninth highest top personal income tax rate in the nation, and income taxpayers will owe nearly $1 billion in increased taxes annually.
- Florida voters approved a measure incrementally increasing the state minimum wage to $15 per hour over the next five years. ALEC points out, “The National Federation of Independent Business (NFIB) expects small businesses to bear the brunt of a $15 minimum wage. If small businesses cannot afford to hire new employees, not only will businesses close, but workers will lose their jobs as well.”
Nanny government: Heartland Institute’s Budget and Tax News reports on a change that could drive you to drink! The Dietary Guidelines Advisory Committee (DGAC) published a major change to recommendations dating to the 1980s for daily alcohol consumption for men, lowering it from two drinks per day to one. The dietary guidelines, issued every five years, “are highly influential, informing health policy for agencies throughout the U.S. government and abroad,” according to the report. Of the 60 research studies examining the link between drinking and health, only one called for lowering the recommendation. ”Most of the studies either found actual health benefits from moderate drinking or no correlation between moderate drinking and health outcomes.” What does this have to do with taxes and spending, you ask? “State agricultural commissioners in Kentucky and Idaho expressed concern over the economic impact of the proposed change, particularly for agriculture, in letters to the USDA. The letters state that the alcoholic beverage industry provides 38,000 agricultural jobs and contributes $5 billion per year to the nation’s economy.” It makes no sense to issue guidelines based on flimsy evidence that could hurt the adult beverage industry at a time when COVID-19 has hurt the job market and economy. Let’s hope sensible policy prevails.
Opportunity knocks: Accounting Today reports that Joe Biden’s team sees potential in opportunity zones, which President Trump championed. The policy is meant to encourage investment in distressed communities across the nation. Biden’s campaign website listed ways oof reforming, rather than repealing, the policy that is credited to Steve Glickman, a former Obama administration official who pushed for the incentives and now runs a consulting firm for investors in the zones. According to Accounting Today
The policy traces back to a 2015 report by Jared Bernstein, who advised Biden when he was vice president, and Kevin Hassett, the former chairman of the Council of Economic Advisers for Trump. Their idea was to get people to redeploy unrealized capital gains into needy areas through a series of investment tax breaks.
A bipartisan group of lawmakers introduced bills in 2016 to enact the idea, but they never reached a floor vote. One sponsor, Republican Senator Tim Scott of South Carolina, successfully got a modified version into the tax overhaul Trump signed into law. Governors then nominated Census tracts, creating roughly 8,800 zones where investors could reap the breaks.
What to do? With no end in sight to COVID-19’s effects and duration, Accounting Today shares financial advice from tax professionals on what to do for the next six months. One sage piece of advice from Bill Nemeth, executive director of the Georgia Association of Enrolled Agents: “On my mom-and-pop rental clients, I’m preparing this year’s return and telling them they can pay me next year or whenever. … Their renters stopped paying rent beginning with the April payments. I’m advising the taxpayers to request extended terms on their mortgages and insurance. I called my car insurer and asked for a COVID break,” Nemeth added, “and got [a] 15% reduction for the next three months just by asking.”
“When asked what the stock market will do: It will fluctuate.” – J.P. Morgan
Compiled by Benita M. Dodd