Tag Archives: tax overhaul

States sue U.S. to void state and local tax deduction cap

FILE PHOTO: New York Governor Andrew Cuomo speaks during an announcement in New York City, U.S., August 17, 2017. REUTERS/Brendan McDermid

By Jonathan Stempel

NEW YORK (Reuters) – Four U.S. states sued the federal government on Tuesday to void the new $10,000 cap on federal deductions for state and local taxes included in President Donald Trump’s 2017 tax overhaul.

The lawsuit by New York, Connecticut, Maryland and New Jersey came seven months after Trump signed the $1.5 trillion overhaul passed by the Republican-led Congress, which cut taxes for wealthy Americans and slashed the corporate tax rate.

Critics have said the cap would disproportionately harm “blue” states that tilt Democratic.

Tuesday’s lawsuit adds to the many legal battles between such states, including several with high taxes, and the Trump administration, which was accused of unconstitutionally intruding on state sovereignty by imposing the cap.

“The federal government is hell-bent on using New York as a piggy bank to pay for corporate tax cuts and I will not stand for it,” said Andrew Cuomo, New York’s Democratic governor.

The Department of the Treasury, which along with Treasury Secretary Steven Mnuchin is among the defendants, did not immediately respond to requests for comment.

Taxpayers have long typically enjoyed unlimited federal deductions for state and local taxes, known as SALT deductions.

Under the cap, individuals and married taxpayers filing jointly who itemize deductions may deduct only up to $10,000 annually for state and local income, property and sales taxes.

The four states said the cap will depress home prices, spending, job creation and economic growth and impede their ability to pay for essential services such as schools, hospitals, police, and road and bridge construction and maintenance.

According to the Tax Foundation, the four states and California, which all favored Democrat Hillary Clinton in the 2016 presidential election, may be particularly hard hit, based on SALT deductions as a percentage of adjusted gross income.

New Yorkers claimed an average $22,169 SALT deduction in 2015, the Tax Policy Center said.

UPHILL BATTLE

David Gamage, an Indiana University tax law professor, said the lawsuit faces an uphill battle, despite suggesting that keeping the SALT deduction was a factor when states in 1913 gave Congress power to levy income taxes through the 16th Amendment.

“I think it’s very unlikely that it succeeds,” he said. “The Supreme Court has generally given Congress wide latitude in carrying out its taxing power, especially in setting deductions. It would be a pretty dramatic change of direction to allow this lawsuit.”

In the complaint filed with the U.S. District Court in Manhattan, the states said the $10,000 cap “effectively eviscerates” a deduction that has been on the books since 1861.

They also said it will force New York taxpayers alone to pay $14.3 billion more in federal taxes this year, and another $121 billion through 2025, when the cap is scheduled to expire.

By imposing the cap, Congress was able to “exert a power akin to undue influence” over states by interfering with their authority to decide taxes and fiscal policy, the lawsuit said, quoting Supreme Court Chief Justice John Roberts.

In May, the Treasury Department said it would propose regulations to stop states from circumventing the cap.

New York, Connecticut and New Jersey had already adopted “workarounds” letting taxpayers fund municipal services by paying into specified funds and claiming deductible charitable deductions.

The case is New York et al v Mnuchin et al, U.S. District Court, Southern District of New York, No. 18-06427.

(Reporting by Jonathan Stempel in New York; Editing by Chizu Nomiyama and Susan Thomas)

Walmart uses lower U.S. tax bill to raise minimum wage to $11 an hour

: A customer pushes a shopping cart at a Walmart store in Chicago, Illinois, U.S. November 23, 2016.

By Nandita Bose

NEW YORK (Reuters) – Walmart Stores Inc said on Thursday it would raise entry-level wages for hourly employees to $11 an hour as it benefits from the biggest overhaul of the U.S. tax code in 30 years.

The world’s largest retailer said the increase would take effect in February and that it would also expand maternity and parental leave benefits and offer a one-time cash bonus, based on length of service, of up to $1,000.

The pay increase and bonus will benefit more than 1 million U.S. hourly workers, it said.

Walmart’s announcement follows companies like AT&T Inc, Wells Fargo Co and Boeing Co, which have all promised more pay for workers after the Republican-controlled U.S. Congress passed a tax bill last month that cut the corporate tax rate to 21 percent from 35 percent.

A Walmart employee helps a customer navigate a flyer at the store in Broomfield, Colorado November 28, 2014.

FILE PHOTO: A Walmart employee helps a customer navigate a flyer at the store in Broomfield, Colorado November 28, 2014. REUTERS/Rick Wilking/File Photo

President Donald Trump and his fellow Republicans have argued that the big corporate tax cut will benefit workers and lead to more investment by U.S. companies.

“We are in the early stages of assessing the opportunities tax reform creates for us,” President and Chief Executive Officer Doug McMillon said in a statement. The tax law gives the retailer an opportunity to be more competitive globally and to accelerate investment plans for the United States, he said.

The increase in wages will cost approximately $300 million on top of wage hike plans that had been included in next fiscal year’s plans, the company said.

The company is offering a one-time bonus to all full and part-time employees based on their length of service, rising to $1000 for employees with 20 years of service. The one-time bonus will amount to $400 million in the current fiscal year.

The company raised its minimum wage to $9 an hour in 2015. In 2016, it said employees who finished an internal training program would be eligible for $10 an hour. The retailer has spent about $2.7 billion to increase wages over the past few years.

(Reporting by Nandita Bose; Editing by Lisa Von Ahn and Frances Kerry)

Trump signs tax, government spending bills into law

U.S. President Donald Trump sits at his desk before signing tax overhaul legislation in the Oval Office of the White House in Washington, U.S., December 22, 2017.

By Susan Heavey and Lisa Lambert

WASHINGTON (Reuters) – U.S. President Donald Trump signed Republicans’ massive $1.5 trillion tax overhaul into law on Friday, cementing the biggest legislative victory of his first year in office, and also approved a short-term spending bill that averts a possible government shutdown.

Trump said he wanted to sign the tax bill before leaving Washington on Friday for his Mar-a-Lago estate in Florida, rather than stage a more formal ceremony in January, so he could keep his promise to finish work before Christmas.

“I didn’t want you folks to say I wasn’t keeping my promise. I’m keeping my promise,” he told reporters in the White House.

The two pieces of legislation represent Trump’s most significant accomplishment with Congress since taking office in January, as well as a sign of what awaits when he returns from Florida after the Christmas holiday.

The tax package, the largest such overhaul since the 1980s, slashes the corporate rate from 35 percent to 21 percent and temporarily reduces the tax burden for most individuals as well.

Trump praised several companies that have announced employee bonuses in the wake of the bill’s passage, naming AT&T, Boeing, Wells Fargo, Comcast and Sinclair Broadcast Group.

“Corporations are literally going wild over this,” he said.

Democrats had opposed the bill as a giveaway to the wealthy that would add $1.5 trillion to the $20 trillion national debt during the next decade.

The spending bill extends federal funding through Jan. 19, largely at current levels. It does nothing to resolve broader disputes over immigration, healthcare and military spending.

Republicans also are divided over whether to follow up their sweeping overhaul of the U.S. tax code with a dramatic restructuring of federal benefit programs.

House Speaker Paul Ryan has said he would like to revamp welfare and health programs but Senate Republican Leader Mitch McConnell told National Public Radio on Monday that he was not interested in cutting those programs without Democratic support.

Trump’s year also closes with significant turnover of many top staffers who had been in the White House since early in his term. On Friday, the White House confirmed Deputy Chief of Staff Rick Dearborn and Jeremy Katz, who worked under White House economic adviser Gary Cohn, were leaving.

(Additional reporting by Makini Brice; Writing by Andy Sullivan; Editing by Bill Trott)