Taxes: On cuts, sins and severance
Check out the latest economics news from TaxVox, including tax cuts in Wisconsin and Minnesota, the IRS' decision to treat Bitcoin as property and not currency, plus the agency's handling of the tax-exempt status of some political groups.
Wisconsin Gov. Scott Walker speaks with constituents before signing his half-billion dollar property and income tax bill at March at Horsens Homestead Farms March, 24, 2014, in Cecil, Wis. For individual taxpayers, the measure amounts to a $131 reduction on a median-valued home's tax bill this December and saves the average worker $46 in annual income taxes.
Lee Pulaski/The Shawano Leader/AP/File
There’s more than one way to cut a tax. Wisconsin just enacted a $541 million tax cut, including $406 million in property tax reductions and $98 million in lower state income taxes. Minnesota just cut $443 million in taxes, benefiting among others, “college students, educators, lower income families and those with mortgage insurance deductions.”
There’s one way to tax a “sin.” Smoking rates remain stubbornly high among low-income populations and follow a geographic divide, reports the The New York Times. A pack of cigarettes costs about $5 in Clay County, Kentucky, but nearly double that in New York City after state and local taxes. You can review regional variation in tobacco tax revenue here.
And severance payments? Payroll taxed. The US Supreme Court ruled yesterday that severance payments made to 3,100 employees of Quality Stores, Inc., are “wages,” and subject to the FICA tax, reports Bloomberg. The decision could block more than $1 billion in refund claims.
As for those expired tax provisions: TPC’s Howard Gleckman considers House Ways & Means chair Dave Camp’s plan for them. He wants his panel to decide whether each should be permanent or killed on its merits—an “almost good idea” that, in Congress’ hands, might be perfunctory at best, and not paid for at worst.
And what about Bitcoin? The IRS provided long-awaited guidance on the tax treatment of virtual currencies such as Bitcoin. Its ruling: Bitcoin is property and not currency for federal tax purposes. As a result, consumers have a capital gain or loss when they exchange digital currency for goods and services.
Today on the Hill: The House Committee on Oversight and Government Reform continues its examination of the IRS response to the flap over its handling of applications for tax-exempt status by political groups. At a hearing this morning, IRS Commissioner John Koskinen will be the sole witness. The Senate’s Special Committee on Aging holds a hearing this afternoon on Medicare fraud and how to protect seniors and taxpayers.
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