How States Are Responding to the GOP Tax Overhaul

By Yuval Rosenberg and Michael Rainey How States Are Responding to the GOP Tax Overhaul Concerned about the effects of the Republican tax overhaul on their local economies, some state legislatures are considering revamping their own tax systems to address everything from lost tax deductions to growing income inequality. Here’s a rundown some of those efforts, based on an analysis by the liberal-leaning [Institute on Taxation and Economic Policy]( - New Jersey Gov. Phil Murphy is pushing for a temporary millionaire’s tax, driven by the windfall bestowed on wealthier residents by the federal tax law. - New York is considering the expanded use of a payroll tax, which is deductible, to make up for new limits on state and local tax deductions. - California, Connecticut, Illinois, Nebraska, New York, Virginia and Washington may convert state and local tax payments into “charitable contributions” in order to restore lost tax credits. - California is also considering a bill that would apply a special tax on highly profitable companies, allowing the state to tap into increased corporate profits. - Nebraska may maintain a personal exemption credit that is set to be eliminated. - Vermont, Minnesota and Utah are considering comprehensive tax reform to address issues that have emerged in the wake of the new federal rules. Not all states are looking for ways around the new tax rules, though. Some are embracing the spirit of the new law and looking to slash taxes at the state level: - Georgia, which expects to see a windfall of up to $1 billion due to the new tax rules, is considering a big tax cut. - Idaho, Iowa, Michigan and Missouri are also mulling state-level tax cuts. Senate Banking Bill Would Raise the Risk of Another Bailout, CBO Says The Senate took another step Tuesday toward passing a bipartisan bill to roll back some banking regulations enacted after the 2008 financial crisis. In a 67-32 vote, senators cleared the way for the bill to proceed. It is expected to be approved this week. The bill raises the threshold at which banks are considered systemically important and thus subject to stricter capital requirements and Federal Reserve supervision, from $50 billion to $250 billion. Supporters say that and other provisions will ease the burden the Dodd-Frank Act imposed on community and regional banks while maintaining regulatory requirements on the country’s largest financial institutions. Opponents of the bill say many of the banks that will benefit from the bill also got government bailouts and that the looser regulations will once again encourage excessive risk-taking that could end up costing taxpayers. The Congressional Budget Office [estimated]( Monday that the legislation would slightly increase the risk of a large bank failure or financial crisis that could result in another taxpayer bailout. The budget scorekeeper also said the regulatory rollback would add $671 million to federal deficits between 2018 and 2027, with that projected cost largely the result of the increased probability that a bank will fail and receive an injection of funds from the Federal Deposit Insurance Corporation. That bailout money would eventually get recouped after the 10-year budget timeframe used by CBO in its analysis. Chart of the Day [The Wall Street Journal]( reports that the tax cuts and economic environment are prompting U.S. companies to go on a buying binge: “Mergers and acquisitions announced by U.S. acquirers so far in 2018 are running at the highest dollar volume since the first two months of 2000, according to Dealogic. Thomson Reuters, which publishes slightly different numbers, puts it at the highest since the start of 2007.” [Wall Street Journal chart: Tax Cuts Fuel Merger Spree] Infographic of the Day The Congressional Budget Office on Monday released an updated series of four infographics detailing long-term budget trends and breaking down how much the federal government spent ([$4 trillion]( and took in ([$3.3 trillion]( during fiscal 2017. Part of one the new infographics is below. You can find the rest [here](. They’re all worth a look. Arkansas Gets the Green Light for More Conservative Medicaid Rule With the blessing of the Trump administration, Arkansas is taking Medicaid work requirements to a new level. The administration on Monday granted the state permission to create work requirements for Medicaid recipients. But unlike Indiana and Kentucky, the other states that have been granted similar waivers this year, Arkansas plans to discipline Medicaid recipients who fail to meet the requirements by locking them out of the system for a period of time — the first time a “lockout period” for failure to work, train or volunteer will be deployed in the Medicaid system. “It’s yet another way the Trump administration is embracing a slew of new regulations and requirements for state Medicaid programs as part of a broader philosophy that poor Americans should have more incentives to find employment and Medicaid should be treated only as a temporary program to give people a leg up,” Paige Winfield Cunningham writes in [The Washington Post](. Indiana has also experimented with a lockout system, but it’s triggered by a failure to pay monthly premiums. The effort began in 2015 under the leadership of then-Gov. Mike Pence and consultant Seema Verma, who now runs the Centers for Medicare & Medicaid Services and who represented the Trump administration at the signing of the Arkansas waiver in Little Rock on Monday. Verma approved Arkansas’ request to impose a work requirement on Medicaid recipients but deferred a decision on the state’s desire to roll back its Medicaid expansion by allowing only those with incomes below the federal poverty level to qualify. Medicaid expansion has added 300,000 adults to the program in the state, and the proposed change would have reduced that number by 60,000. Arkansas Republican Gov. Asa Hutchinson nevertheless hailed the waiver, [saying]( “This is not about punishing anyone. It’s about giving people an opportunity to work. It’s to give them the training that they need. It’s to help them to move out of poverty and up the economic ladder.” This is consistent with the general Republican view that social assistance such as Medicaid should be temporary, with success marked by leaving the program. Hannah Katch of the Center on Budget and Policy Priorities questioned Hutchinson’s assessment, [tweeting]( “Arkansas' new #Medicaid waiver does not provide any new job search assistance, job training, transportation, child care, or any other services that help people find and hold a job.” Like most liberal critics, Katch [sees]( the effort to impose work requirements on Medicaid recipients as part of a larger effort “to weaken the #Medicaid expansion by making it more difficult for millions of low-income people to get health coverage.” News - [Hensarling Warns Trump That Tariffs Could Undo Tax Cut Benefits]( – Politico - [Hoyer Suggests Dems Won’t Demand DACA on Spending Bill]( – The Hill - [OMB: Funding Insurer Subsidies Will Lower ACA Premiums 15-20%]( – Axios - [Trump Administration Wants to Take On Medical-Records Puzzle]( – Bloomberg - [Where Corporate Taxes Are Poised to Rise Because of Tax Overhaul: States]( – Wall Street Journal - [New Ad with Republican Lawyer 'Mom' Pushes 'Success' of Tax Cuts That 76% Haven't Noticed]( – Forbes - [Spooked by Trump Proposals, Immigrants Abandon Public Nutrition Services]( – New York Times - [UnitedHealthcare to Pass Drug Rebates on to Some Customers]( – AP - [ER Visits for Opioid Overdoses Rise by 30 Percent in a Year]( – PBS NewsHour - [West Virginia Leaders Reach Deal to End Teachers Strike]( – AP - [Kentucky Employees and Teachers Could See Health Costs Leap 50% Under Budget Plan, Critic Says]( – Courier-Journal - [How Rich Professionals Can Exploit a Tax Break for Farms and Small Firms]( – Bloomberg - [The Big Lebowski at 20: The Enduring Legacy of the Coen Brothers' Zonked-Out Cult Classic]( – The Independent Views - [The Real Reason the Investor Class Hates Pensions]( – David Webber, New York Times - [Trump’s Tax on America]( – J. Bradford DeLong, Project Syndicate - [The Big and Possibly Dumb Buyback Boom]( – Justin Fox, Bloomberg View - [Trump’s Hidden War on Medicaid]( – Dylan Scott, Vox - [Corporate America Invites a Backlash]( – USA Today Editorial Board - [Tax Cut Offers Long Lasting Economic Benefits]( – Alan D. Viard, USA Today - [New Tariff Plan Could Cost States $9 Billion]( – Scott A. Hodge, Tax Foundation - [Why Are Democrats Helping Trump Dismantle Dodd-Frank?]( – Mike Konczal, New York Times - [The Fight for Tax Reform Isn't Over Yet]( – Bruce Thompson, Washington Examiner - [The Dollar Is Getting Weaker. That Should Worry Us]( – Lawrence Summers, Washington Post Copyright © 2018 The Fiscal Times, All rights reserved. You are receiving this newsletter because you subscribed at our website, thefiscaltimes.com. 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