Brace for Big Tax Hikes in 2026 Unless Congress Acts

Published

1 month ago

May 14, 2024

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Most Americans face tax hikes starting in 2026, and the increased federal tax bite will come about without Congress lifting a finger. That’s because 2017’s Tax Cuts and Jobs Act (TCJA) expires at the end of 2025, and despite some politicians’ contrary claims, a majority of Americans benefited from that law. The end of tax cuts for so many people necessarily results in corresponding increases to come.

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Δ Tax Cuts for Most, but With a Time Limit

“Unless Congress acts, the vast majority of Americans will see higher, more complicated taxes beginning in 2026 as major provisions from the Tax Cuts and Jobs Act of 2017 expire,” warns the Tax Foundation. “The TCJA reduced average tax burdens for taxpayers across the income spectrum and temporarily simplified the tax filing process through structural reforms. It also boosted capital investment by reforming the corporate tax system and significantly improved the international tax system.”

The widespread benefits of the TCJA shouldn’t be a matter for debate. But there’s confusion because Team Biden and fans of high taxes fibbed about the law leading up to the 2020 presidential election.

“Biden’s false claim that no one but the rich got Trump’s tax cuts,” headlined a 2019 Washington Post Glenn Kessler piece about the debate over the law. “Most Americans received a tax cut,” he added.

“About 65 percent of households paid less in individual income taxes in 2018 as a result of the TCJA,” wrote the Tax Policy Center’s Howard Gleckman. “About 6 percent paid more. The rest paid about the same.”

Adjusting for all federal taxes under pre-TCJA law, the Cato Institute’s Chris Edwards commented, “lower? and middle??income groups received the largest relative individual income tax cuts.”

So, there’s widespread agreement that a law which cut taxes for most Americans is poised to expire, resulting in higher taxes. But, just as the benefits of the tax cuts varied across the population, so will the size of the bite taken by tax increases starting in 2026. Tax Hikes for All

“The largest average tax hikes would be experienced by taxpayers who reside in California’s congressional districts,” note the Tax Foundation’s Garrett Watson and Erica York. “For example, the congressional district covering the San Francisco area would see an average tax hike of $16,127 per taxpayer, the highest in the U.S. By contrast, northern New York City would see an average tax increase of $807 per taxpayer under TCJA expiration.”

That link takes you to a tool that lets you look up the estimated impact of TCJA expiration on taxpayers in states and congressional districts across the country.

Separately, the Tax Foundation published a tax calculator that lets you estimate the impact of TCJA expiration on you and your family, given specifics such as marital status, income, number of children, and choice of standard or itemized deductions. The calculator accounts for “most aspects of the federal individual income tax code except provisions related to business and self-employed income.”

That said, extending the TCJA’s tax cuts has high costs of its own since that would reduce the amount of money collected by the federal government to spend on its projects. Tax Cuts and Tradeoffs

“Federal tax revenues would fall by more than $4 trillion on a conventional basis and by nearly $3.5 trillion on a dynamic basis over the coming decade; and without spending cuts, debt and deficits would increase,” concedes a May Tax Foundation report on options regarding the law.

“By the year 2050, permanent extension of TCJA laws would reduce federal revenues from 18.4 percent to 17.1 percent of annual Gross Domestic Product (GDP),” Jagadeesh Gokhale and Mariko Paulson of the University of Pennsylvania’s Penn Wharton Budget Model specify. “Federal debt held by the public would rise from 226.0 percent of GDP to 261.1 percent by 2050.”

But that decrease in revenue and corresponding rise in debt and deficits may matter only if it hampers a serious plan to control the federal government’s ongoing spending spree. Separately, the Penn Wharton Budget Model predicts that “a maximum debt-GDP ratio of 200 percent can be sustained even if investors believe (maybe myopically) that a closure rule will then prevent that ratio from increasing into the future.” They say the real ceiling on federal debt is more like 175 percent of GDP before the financial markets entirely lose faith in the U.S. economy. Debt as a percentage of GDP above that point is disastrous, whether at 226 percent or 261 percent.

It makes sense, then, for Americans to submit to significant tax hikes only if those increases go to balancing the federal budget, eliminating deficits, and controlling debt. Otherwise, we’re going to pay more for what is essentially the same very bad outcome. A Need for Serious Reform

Benefits of extending the TCJA, on the other hand, operate independent of faith in a sudden surge in responsibility among the political class. Extending the law’s provisions “would boost long-run GDP by 1.1 percent and employment by 913,000 full-time equivalent jobs,” according to the Tax Foundation.

For extending the TCJA, the Tax Foundation considers two options, both including modifications that seek to reduce the hit to federal revenues while maximizing gains for individuals. Option 2, for example, “broadens the individual income tax base by ending the income tax exclusion for employer-provided fringe benefits, most notably health insurance.”

That’s a matter of tweaking the current system around the edges to maintain relief for individuals and a faster-growing economy. Tax Foundation experts also propose possible fundamental changes, including entirely dumping the income tax system in favor of a consumption tax. That has the potential to significantly boost personal income as well as GDP and reduce the national debt. Of course, the gains really apply only if the government also reduces spending.

But such fundamental reform is a lot to ask of a political class that spent us into a corner and now wants tax hikes so there’s even more of our money to spend. Letting the TCJA expire requires placing enormous faith in people who got us into a fiscal mess to begin with.

Fundamental reforms to the federal government’s finances are absolutely necessary. Until that happens, we should resist stealth tax hikes so we can keep our hard-earned money for ourselves.

Entertainment

Sabrina Carpenter: US singer breaks Ariana Grande’s UK chart record

Published

2 hours ago

June 21, 2024

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Sabrina Carpenter: US singer breaks Ariana Grande's UK chart record

Sabrina Carpenter has set a new UK chart record by becoming the youngest female artist to take the top two singles spots in the same week.

The US singer reached number one on the Official Charts Company rundown with Please Please Please, pushing Espresso, which had been at the top for five weeks, down to number two.

Please Please Please totalled 9.8 million combined streams, while Espresso came in second with 8.1 million streams.

At the age of 25 years, one month and 10 days, Carpenter overtakes Ariana Grande, the previous youngest holder of the record, by around six months.

Grande achieved the same two-spot hold in the same week when she was 25 years, seven months and 20 days old in February 2019 with 7 Rings at number one and Break Up With Your Girlfriend, I’m Bored at number two.

Eminem is at number three this week with Houdini, while Billie Eilish’s Birds Of A Feather is at number four, followed by Shaboozey’s A Bar Song (Tipsy).

Taylor Swift doesn’t make the top five, but sets a new personal best in the albums chart with a seventh week at the top.

The Tortured Poets Department earns a seventh non-consecutive week at number one, surpassing 2022’s Midnights which spent five weeks at the summit.

Swift is in the UK for her Eras Tour, and will take to the stage in London’s Wembley Stadium on Friday evening.

At number two is US singer-songwriter Eilish’s latest record Hit Me Hard And Soft, while British singer Charli XCX’s Brat came in at number three.

In fourth spot is Canadian musician The Weeknd’s greatest hits collection The Highlights.

British rock group Sea Girls also celebrate a hat-trick of top five albums as their third studio collection Midnight Butterflies makes its debut at number five.

The group previously saw success with 2020’s Open Up Your Head and 2022 LP Homesick, which both reached number three.

Sports

Kansas gov. signs effort to entice Chiefs, Royals

Published

2 hours ago

June 21, 2024

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Kansas gov. signs effort to entice Chiefs, Royals

Associated Press

Jun 21, 2024, 01:31 PM ET

TOPEKA, Kan. — Kansas Gov. Laura Kelly signed legislation Friday enabling the state to lure the Super Bowl champion Kansas City Chiefs and Major League Baseball’s Royals away from neighboring Missouri by helping the teams pay for new stadiums.

Kelly’s action came three days after the Republican-led Legislature approved the measure with bipartisan supermajorities — an unusually quick turnaround that signals how urgently Kansas officials consider making the offers.

Missouri officials have argued that discussions about building new stadiums are still in the early stages. They said construction of a new one typically takes about three years and pointed out that the lease on the existing complex that includes the teams’ side-by-side stadiums doesn’t end until January 2031.

The measure Kelly signed takes effect July 1 and will allow bonds to cover 70% of a new stadium’s cost. Kansas would have 30 years to pay them off with revenues from sports betting, state lottery ticket sales, and new sales and alcohol taxes generated in the area around each proposed stadium.

The Kansas-Missouri border splits the 2.3 million-resident Kansas City area, with about 60% of the people living on the Missouri side.

Kansas officials began working on the legislation after voters on the Missouri side of the metropolitan area refused in April to continue a sales tax used to keep up the existing stadium complex. The Royals outlined a plan in February to build a $2 billion-plus ballpark in downtown Kansas City, Missouri, that would be ready for the start of the 2028 season while the Chiefs were planning an $800 million renovation of their existing home.

Attorneys for the teams told Kansas legislators that they needed to make decisions about the future soon for new stadiums to be ready on time. Some critics suggested the teams are pitting the two states against each other for the biggest government subsidies possible.

“The Chiefs and the Royals are pretty much using us,” said state Rep. Susan Ruiz, a Democrat from the Kansas City, Kansas, area who voted against the bill.

Supporters of bringing the teams to Kansas warned that if neither state acts quickly enough, one or both teams could leave for another community entirely. Several economists who have studied professional sports were skeptical that a move would make financial sense for either a team or a new host city, and both the NFL and MLB require a supermajority of owners to approve franchise moves.

The plan had support from throughout Kansas, including about half of the lawmakers from western Kansas, 200 miles away from any new stadium.

Kansas lawmakers approved the stadium financing plan during a single-day special session Tuesday. Although the financing law doesn’t specifically name the Chiefs or Royals, it is limited to stadiums for NFL and MLB teams “in any state adjacent to Kansas.”

“It’s fairly clearly about how you poach,” Kansas City, Missouri, Mayor Quinton Lucas said during a news conference after Kansas lawmakers approved the measure. He added that his city would “lay out a good offer” to keep both teams in town and that the teams “are in an exceptional leverage position.”

Politics

Labour Party raises 15 times more than Tories in donations during second week of campaign

Published

2 hours ago

June 21, 2024

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Labour Party raises 15 times more than Tories in donations during second week of campaign

The Labour Party raised almost £4.4m in the second full week of the general election campaign – close to 15 times the amount brought in by the Tories.

Rishi Sunak’s party took in just under £300,000 between 6 and 12 June.

Reform UK raised more than double this figure, with £742,000 taken. However, £500,000 of this money was handed over by Britain Means Business, a company run by Reform’s deputy leader Richard Tice.

The Liberal Democrats also took in more than the Conservatives, raising £335,000.

The Green Party raised £20,000.

Labour raised £4,383,400 – and its partner the Co-operative Party raised £60,000.

Follow live: More bad news for Tory campaign

The Conservatives raised £292,500, according to Electoral Commission figures.

The Tory figure is also roughly half of what they raised in the first full week of the campaign.

Between 30 May and 5 June, the Conservatives took in £574,918, compared to Labour’s £926,908.

However, looking at the 2019 election, the Conservative Party raised 10 times this figure in the first week of the campaign – raising £5.7m between 6 and 12 November 2019.

Labour took in £218,500 at this time.

Who gave the parties the most money?

Digging into the breakdown from the Electoral Commission, we can see a bit more about who gave the different parties the most money.

As mentioned, Reform’s biggest donor is a company run by their deputy leader.

A man called David Lilley also gave the party £100,000, and another notable contributor was Holly Vukadinovic – the maiden name of model Holly Valance – who gave £50,000.

For Labour, the biggest donor was Lord Sainsbury, who gave £2.5m, followed by Autoglass boss Gary Lubner, who handed over £900,000.

Their largest union donation came from train driver body Aslef, which donated £100,000.

For the Lib Dems, they received £150,000 from Adam Management Holdings, and another £100,000 from the late John Faulkner, a former party member who has left money to the party.

The Conservatives registered a £50,000 donation from “The Spring Lunch” – which is the name of one of their fundraising events – as well as £50,000 from Bestway Wholesale, a company which has a Tory peer named as a director.