Weekly Legislative Update - January 8, 2018
Outlook After Trump, McConnell, Ryan Outline Agenda For 2018
Emerging from a weekend meeting at Camp David, President Trump, Senate Majority Leader Mitch McConnell, and House Speaker Paul Ryan pronounced their legislative priorities for 2018 to be infrastructure and immigration.
Speaker Ryan tacked on inequality and the skills gap, but his top priority, welfare and entitlement reform, was nixed by the President when Senator McConnell said it didn't have a chance of passing the Senate (this is something Ryan's own members have been telling him because they abhor voting on a bill that'll hurt them with constituents yet die in the Senate).
The President said welfare and entitlement reform can be achieved only in a bi-partisan way and he'll keep exploring it with Democrats. Senator McConnell says Democrats want none of it.
If dropping welfare and entitlement reform is real, and we won't have any firm indication until the 2019 budget resolution in late March, then WOTC will have dodged a bullet this year because Ryan would surely have used reconciliation to force through cuts in welfare programs, and as we've seen, he's backed Brady on terminating WOTC.
With no direct threat, we'll have running room to work this year to get more GOP senators supporting permanent WOTC, including the slew of improvements we've laid out to make the program better. Our aim is to make the Senate an even stronger bulwark of WOTC than it was last year.
We don't propose to abandon efforts in the House, but we're for taking a different approach than the one-page, short-form manner of communicating that doesn't work with a person whose mind is closed. Chairman Brady's image of WOTC is a false one inherited from his predecessor Dave Camp who developed a false narrative that disadvantaged workers didn't need help, they'd be hired by employers without the incentive of a tax credit.
Evidence-based research on the labor market competition faced by unemployed and homeless veterans, people with disabilities, welfare recipients, single parents, and the rest of the underclass in the bottom decile, 67 percent of which remains stuck at the bottom year after year, disproves the Camp/Brady narrative and supports a national policy of expanding job opportunity at the bottom. Pathways to lesser inequality and upward mobility that Speaker Ryan seeks begin with a job, and we can show that WOTC is the most cost-effective Federal program to that end.
It's Ryan who brought "evidence-based policymaking" into Congress and passed a law establishing an Evidence-Based Policymaking Commission. From its first day, and especially after the second meeting of the Commission, our Coalition has seen it as an opportunity to persuade Ryan of the value of WOTC on his own terms.
The second meeting of the Commission was key: it laid out methods of using evidence-based outputs, not inputs, to evaluate a government program. We might do better communicating in the House this year presenting evidence developed by our Coalition's research, getting congressmen to read it, or hearing you summarize it, and leaving behind a four-pager (two-sheets) with evidence, first, of the need for greater job opportunity for targeted disadvantaged populations, and second, WOTC's outputs, cost, and effectiveness.
In addition, we'll push for a Ways and Means hearing on WOTC where we and employers and representatives of veterans, people with disabilities, welfare recipients, minorities, and community, state, and local welfare agencies can present their own evidence-based results and testify to their experience with the program. We haven't had a hearing for at least a decade.
We don't know whether Republicans will be in charge of the House and Senate next year, but assuming they will be, we can be sure Speaker Ryan will try again to persuade his caucus to launch welfare and entitlements reform in 2019 when WOTC is slated to expire. Should this scenario comes to pass, it's clear the work we do this year will serve well in 2019, for we'll have laid a strong foundation for our campaign to make WOTC permanent.
2018 Congressional Agenda
With tax reform now signed into law, there are a number of other issues that Congress will be wrestling with over the next year. We put together the chart below looking at what is ahead.
TIA expects to be largely involved with any infrastructure proposals, efforts on tax extenders, and changes to healthcare.
State Tax Changes That Took Effect on January 1, 2018
Many states rang in the new year with changes to their tax codes. Overshadowed in the public consciousness by federal tax reform, tax changes at the state level are nonetheless highly significant.
Here are the key changes implemented at the state level on January 1, 2018.
Connecticut: Large businesses have long faced a 20 percent surtax on the state's standard 7.5 percent corporate rate, bringing the top marginal rate to 9 percent. On January 1, the surtax dropped to 10 percent, bringing the top marginal rate to 8.25 percent. This reduction was part of the extension of the surtax adopted in 2015.
Delaware: The Delaware estate tax has been repealed effective January 1, thanks to legislation signed last year implementing a recommendation of a state advisory committee.
Hawaii: After allowing temporary income tax increases to expire last year, Hawaii has reimposed its formerly temporary rates on a permanent basis, reinstating three brackets and raising the top marginal rate from 8.25 to 11 percent, coupled with the adoption of a nonrefundable state-level earned income tax credit (EITC) at 20 percent of the value of the federal credit.
Mississippi: Mississippi begins phasing in a range of tax reforms adopted in 2016, including phasing out the 3 percent individual income tax rate (by exempting, this year, the first $1,000 of income, phasing out the bracket entirely by 2022) and creating a deduction for a portion of the federal self-employment tax. The first $100,000 of capital value is now exempt from the state's franchise tax as well, after which the franchise tax will begin to phase out through 2028.
New Jersey: The estate tax is gone-for now. In 2016, Gov. Chris Christie (R) negotiated a tax reform deal with Democratic legislative leaders which raised the gas tax but set the estate tax on a two-year phaseout. Incoming Gov. Phil Murphy (D) opposed repeal and may seek to restore the tax for tax year 2018.
New Mexico: In the culmination of a multiyear phasedown, New Mexico reduced its top corporate income tax rate from 6.2 to 5.9 percent on January 1. The top rate was 7.6 percent in 2013.
New York: The state continues to phase out its franchise tax, with the rate declining to 0.075 percent on January 1 and full repeal anticipated for 2021.
Tennessee: Although Tennessee forgoes a wage income tax, it does impose a tax-called the Hall Income Tax-on interest and dividend income. That tax is being phased out, with the rate dropping from 4 to 3 percent on January 1. Full repeal is scheduled for 2021.
District of Columbia: The final phase of the District's 2014 tax reform package went into effect on January 1, including increases to the individual income tax standard deduction and personal exemption, a corporate franchise tax rate reduction (from 8.75 to 8.25 percent), and a higher estate tax threshold.
IRS Extends Deadline to Supply ACA Forms to Employees
The Internal Revenue Services (IRS) has extended the due date for distributing 2017 health coverage information forms to employees. The deadline has been extended from January 31 to March 2, 2018. Self-insured employers and all employers with 50 or more full-time equivalent employees now have until March 2, 2018, to provide Form 1095-B,Health Coverage, or Form 1095-C, Employer-Provided Health Insurance Offer and Coverage, to employees covered by the employer's health plan.
The IRS has not extended the due date for employers, insurers, and other providers of minimum essential coverage tofile2017 Forms 1094-B, 1095-B, 1094-C, and 1095-C with the IRS. The filing due date for these forms remains February 28, 2018 (April 2, 2018, if filing electronically), unless the due dates are extended pursuant to other available relief.
2018 Standard Mileage Rates Released
The Internal Revenue Service (IRS) has released the 2018 optional standard mileage rates that employees, self-employed individuals, and other taxpayers can use to compute deductible costs of operating automobiles (including vans, pickups and panel trucks) for business, medical, moving and charitable purposes.
The 2018 standard mileage rate has increased to 54.5 cents per mile for business uses and 18 cents per mile for medical and moving uses. It remains at 14 cents per mile for charitable uses.
The updated rates are effective for deductible transportation expenses paid or incurred on or after January 1, 2018, and for mileage allowances or reimbursements paid to, or transportation expenses paid or incurred by, an employee or a charitable volunteer on or after January 1, 2018.