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The IRS wants to spend billions on “enforcement.” Here’s who is most likely to get audited.

The IRS wants to spend billions on "enforcement." Here's who is most likely to get audited.

One of the most gut-tightening phrases for taxpayers is “IRS audit,” but years of underfunding and a decline in staffing at the tax agency have pushed the audit rate to a decade-long low. That could soon change under the Inflation Reduction Actthe bill that proposes to give $80 billion to the IRS to beef up enforcement and hiring.

The prospect of a revitalized IRS is causing some consternation among some Republican lawmakers and taxpayers, who express fears that the proposed funding could be used to target workers and middle-class families. Indeed, Republicans on Tuesday warned taxpayers that the agency wants to hire “87,000 new IRS agents to audit Walmart shoppers.”

While the estimate of 87,000 new employees isn’t entirely accurate, the Inflation Reduction Act would inject some urgently needed funds at the tax agency. Under the plan, about $46 billion of that $80 billion would be spent on hiring more enforcement agents, as well as on keeping track of taxes on cryptocurrencies, a relatively new area for the IRS.

That has raised fears the new agents would target middle-class workers with invasive audits, although the Treasury Department on Wednesday pushed back against those concerns.

Households earning less than $400,000 “will likely see the chance of an audit decline,” Treasury said in a statement. “Instead, new funding will crack down on tax evaders among the wealthy and large corporations, invest in technology upgrades that help taxpayers, and hire more customer support staff to prevent backlogs.”

The IRS declined to comment on its hiring plans to CBS MoneyWatch, noting that it doesn’t comment on pending legislation. The Inflation Reduction Act passed in the Senate on Sundaywhile House lawmakers could vote on the bill as early as Friday.

“Anytime people hear the IRS will audit more, they are going to be concerned,” noted Eric Bronnenkant, head of tax at financial services firm Betterment. But, he added, “The audit rates are not likely to increase dramatically, I would argue, for people whose sole income is a W-2 and maybe $100 in interest from their bank account.”

Here’s what to know about audits and the proposed IRS funding.

Why does the IRS need $80 billion?

The Inflation Reduction Act would invest $370 billion in fighting climate change and $64 billion to lower costs for people with Affordable Care Act health plans. To pay for that, Democrats want the IRS to step up audits and enforcement efforts to collect billions that currently get lost in the so-called tax gap.

There’s a “gap between taxes collected and actual taxes owed, and the government has an interest in closing that gap,” Bronnenkant noted. “One way that they can close that gap is by increasing enforcement of existing laws.”

The inflation bill would direct $80 billion to the IRS, with $45.6 billion aimed primarily at enforcement. The remaining money would be spent on upgrading technology and operations at the agency, which has been dogged by delays and poor customer service.


How tax laws contribute to America’s racial wealth gap

05:57

Would the IRS really hire 87,000 new agents?

That’s a misleading figure.

Last year, before the bill emerged, the Treasury Department had proposed a plan to hire roughly that many IRS employees over the following 10 years if it got the money.

The IRS will be releasing final numbers for its hiring plans in the coming months, according to a Treasury official. But those employees will not all be hired at the same time, will not all be auditors and, in many cases, will be replacing employees who are expected to quit or retire, experts and officials say.

The IRS currently has about 80,000 workers, ranging from audit officials to customer service employees. The agency has lost roughly 50,000 employees over the past five years due to attrition, according to the IRS.

Budget cuts, mostly demanded by Republicans, have also diminished the ranks of enforcement staff, which have fallen roughly 30% since 2010 despite the fact that the filing population has increased.

Will the new funding increase audit rates?

Most likely, because that’s partly the intention behind giving the IRS billions in new funding.

The tax gap is estimated at about $400 billion annually — revenue that the US government could be collecting, but can’t because taxpayers underreport income or use other tactics to lower their tax burdens.

But the risk of getting audited currently stands at a decade-long low. The audit rate for individual tax filers was 0.25% in 2019, down from 0.9% in 2010, according to a May study from the US Government Accountability Office. Audit rates for all income levels declined over that period.

The reason for the decline: A loss of IRS staff and funding. The agency employs about the same number of people it did in the mid-1970s, according to the GAO report. And that could only get worse without more funding, with more than half of IRS employees who work in enforcement currently eligible for retirement, said Natasha Sarin, the Treasury Department’s counselor for tax policy and implementation.

Could middle-class taxpayers be targeted by the IRS?

Not likely, according to tax experts and officials at the IRS and Treasury.

Most middle-class workers receive W-2s at tax time, or tax forms that show total compensation and the amount of federal, state, and other taxes withheld from your paycheck. This data is also reported to the IRS, which then checks whether tax files match the amount reported by employers. It’s difficult for people who receive W-2s to hide income, in other words.

In an August 4 letter to the Senate, IRS Commissioner Charles Rettig noted that “audit rates will not rise relative to recent years for households making under $400,000.”

Who might face higher audit rates?

High-earning Americans and businesses, according to Treasury officials.

Other taxpayers could also face more scrutiny, including self-employed workers and people who operate cash businesses because it’s often easier for these types of workers to claim deductions that they might not be entitled to or to underreport income, tax experts note.

“If you look at that [$80 billion] as an investment, you say, ‘How do we generate the most amount of revenue for the money we are being allocated?’, and the highest potential impact is for business owners and higher-income individuals” to face more audits, Bronnenkant said.

What about the impact on low-income households?

One noteworthy point is that the IRS has recently focused its recent enforcement efforts on two groups: Wealthy taxpayers and low-income households.

In fact, households with less than $25,000 in annual earnings are five times as likely to be audited by the IRS as everyone else, according to an analysis of IRS data by the Transactional Records Access Clearinghouse (TRAC) at Syracuse University.

That’s largely due to the IRS checking whether tax returns claiming the Earned Income Tax Credit (EITC) actually qualify for the benefit, which can provide a tax credit of up to $7,000 to some families. It’s a valuable benefit, but one that can be abused, with one analysis finding that as many as half of returns claiming the tax credit had erroneously claimed too much, or even incorrectly claimed the credit at all.

It’s likely that the IRS will continue to check tax returns that claim this tax credit, but the IRS’ Rettig noted in his letter that the agency’s focus would be on “meaningful, impactful examinations of large corporate and high-net worth taxpayers to ensure they are paying their fair share.”

— With reporting from the Associated Press.

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Categories
US

The IRS wants to spend billions on “enforcement.” Here’s who is most likely to get audited.

The IRS wants to spend billions on "enforcement." Here's who is most likely to get audited.

One of the most gut-tightening phrases for taxpayers is “IRS audit,” but years of underfunding and a decline in staffing at the tax agency have pushed the audit rate to a decade-long low. That could soon change under the Inflation Reduction Actthe bill that proposes to give $80 billion to the IRS to beef up enforcement and hiring.

The prospect of a revitalized IRS is causing some consternation among some Republican lawmakers and taxpayers, who express fears that the proposed funding could be used to target workers and middle-class families. Indeed, Republicans on Tuesday warned taxpayers that the agency wants to hire “87,000 new IRS agents to audit Walmart shoppers.”

While the estimate of 87,000 new employees isn’t entirely accurate, the Inflation Reduction Act would inject some urgently needed funds at the tax agency. Under the plan, about $46 billion of that $80 billion would be spent on hiring more enforcement agents, as well as on keeping track of taxes on cryptocurrencies, a relatively new area for the IRS.

That has raised fears the new agents would target middle-class workers with invasive audits, although the Treasury Department on Wednesday pushed back against those concerns.

Households earning less than $400,000 “will likely see the chance of an audit decline,” Treasury said in a statement. “Instead, new funding will crack down on tax evaders among the wealthy and large corporations, invest in technology upgrades that help taxpayers, and hire more customer support staff to prevent backlogs.”

The IRS declined to comment on its hiring plans to CBS MoneyWatch, noting that it doesn’t comment on pending legislation. The Inflation Reduction Act passed in the Senate on Sundaywhile House lawmakers could vote on the bill as early as Friday.

“Anytime people hear the IRS will audit more, they are going to be concerned,” noted Eric Bronnenkant, head of tax at financial services firm Betterment. But, he added, “The audit rates are not likely to increase dramatically, I would argue, for people whose sole income is a W-2 and maybe $100 in interest from their bank account.”

Here’s what to know about audits and the proposed IRS funding.

Why does the IRS need $80 billion?

The Inflation Reduction Act would invest $370 billion in fighting climate change and $64 billion to lower costs for people with Affordable Care Act health plans. To pay for that, Democrats want the IRS to step up audits and enforcement efforts to collect billions that currently get lost in the so-called tax gap.

There’s a “gap between taxes collected and actual taxes owed, and the government has an interest in closing that gap,” Bronnenkant noted. “One way that they can close that gap is by increasing enforcement of existing laws.”

The inflation bill would direct $80 billion to the IRS, with $45.6 billion aimed primarily at enforcement. The remaining money would be spent on upgrading technology and operations at the agency, which has been dogged by delays and poor customer service.


How tax laws contribute to America’s racial wealth gap

05:57

Would the IRS really hire 87,000 new agents?

That’s a misleading figure.

Last year, before the bill emerged, the Treasury Department had proposed a plan to hire roughly that many IRS employees over the following 10 years if it got the money.

The IRS will be releasing final numbers for its hiring plans in the coming months, according to a Treasury official. But those employees will not all be hired at the same time, will not all be auditors and, in many cases, will be replacing employees who are expected to quit or retire, experts and officials say.

The IRS currently has about 80,000 workers, ranging from audit officials to customer service employees. The agency has lost roughly 50,000 employees over the past five years due to attrition, according to the IRS.

Budget cuts, mostly demanded by Republicans, have also diminished the ranks of enforcement staff, which have fallen roughly 30% since 2010 despite the fact that the filing population has increased.

Will the new funding increase audit rates?

Most likely, because that’s partly the intention behind giving the IRS billions in new funding.

The tax gap is estimated at about $400 billion annually — revenue that the US government could be collecting, but can’t because taxpayers underreport income or use other tactics to lower their tax burdens.

But the risk of getting audited currently stands at a decade-long low. The audit rate for individual tax filers was 0.25% in 2019, down from 0.9% in 2010, according to a May study from the US Government Accountability Office. Audit rates for all income levels declined over that period.

The reason for the decline: A loss of IRS staff and funding. The agency employs about the same number of people it did in the mid-1970s, according to the GAO report. And that could only get worse without more funding, with more than half of IRS employees who work in enforcement currently eligible for retirement, said Natasha Sarin, the Treasury Department’s counselor for tax policy and implementation.

Could middle-class taxpayers be targeted by the IRS?

Not likely, according to tax experts and officials at the IRS and Treasury.

Most middle-class workers receive W-2s at tax time, or tax forms that show total compensation and the amount of federal, state, and other taxes withheld from your paycheck. This data is also reported to the IRS, which then checks whether tax files match the amount reported by employers. It’s difficult for people who receive W-2s to hide income, in other words.

In an August 4 letter to the Senate, IRS Commissioner Charles Rettig noted that “audit rates will not rise relative to recent years for households making under $400,000.”

Who might face higher audit rates?

High-earning Americans and businesses, according to Treasury officials.

Other taxpayers could also face more scrutiny, including self-employed workers and people who operate cash businesses because it’s often easier for these types of workers to claim deductions that they might not be entitled to or to underreport income, tax experts note.

“If you look at that [$80 billion] as an investment, you say, ‘How do we generate the most amount of revenue for the money we are being allocated?’, and the highest potential impact is for business owners and higher-income individuals” to face more audits, Bronnenkant said.

What about the impact on low-income households?

One noteworthy point is that the IRS has recently focused its recent enforcement efforts on two groups: Wealthy taxpayers and low-income households.

In fact, households with less than $25,000 in annual earnings are five times as likely to be audited by the IRS as everyone else, according to an analysis of IRS data by the Transactional Records Access Clearinghouse (TRAC) at Syracuse University.

That’s largely due to the IRS checking whether tax returns claiming the Earned Income Tax Credit (EITC) actually qualify for the benefit, which can provide a tax credit of up to $7,000 to some families. It’s a valuable benefit, but one that can be abused, with one analysis finding that as many as half of returns claiming the tax credit had erroneously claimed too much, or even incorrectly claimed the credit at all.

It’s likely that the IRS will continue to check tax returns that claim this tax credit, but the IRS’ Rettig noted in his letter that the agency’s focus would be on “meaningful, impactful examinations of large corporate and high-net worth taxpayers to ensure they are paying their fair share.”

— With reporting from the Associated Press.

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Categories
US

Detroit real estate developers rebuild city amid budget shortfalls

Detroit real estate developers rebuild city amid budget shortfalls

A new wave of development is ripping through downtown Detroit.

“Walking around Detroit in 2008 or 2009 is not the same as walking around in 2022,” said Ramy Habib, a local entrepreneur. “It is absolutely magnificent what happened throughout those 15 years.”

Between 2010 and 2019, just 708 new housing structures went up in the city of Detroit, according to the Southeast Michigan Council of Governments.

Much of the new construction traces back to the philanthropic wings of large local businesses. For example, Ford Motor is nearing completion of a 30-acre mixed-used development at Michigan Central Station. The station sat abandoned for years as the city fell into bankruptcy.

Detroit’s decline into insolvency formed amid 20th century globalization in the auto industry, according to economists. The city’s population fell from 1.8 million to 639,000 in the most recent but controversial count by the US Census. “With the population leaving, with the infrastructure staying in place, it meant strains on the city. Cumulatively, they started to mount over time,” said Raymond Owens III, a former senior economist at the Federal Reserve Bank of Richmond.

The 2007-08 Great Recession left another round of scars on the city as scores of homes fell into foreclosure. The US Treasury Department has since funded the removal of 15,000 blighted structures in the city. “A lot of Black people are leaving the city. So sometimes that identity can change and shift in certain communities,” said Alphonso Carlton Jr, a lifelong Detroit resident.

Local leaders have used tax and spending policies to advance economic development downtown. In July 2022, the Detroit City Council finalized a tax abatement for the real estate developer Bedrock to finance the $1.4 billion Hudson’s site project. The abatement could be worth up to $60 million over its 10-year span. Bedrock is in a family of companies controlled by billionaire investor Dan Gilbert, who moved several of his businesses from him downtown in 2010.

Bedrock told CNBC that decision was consistent with the council’s handling of other major developments, due to high local tax rates. One local analysis suggests that in 2020, Detroit’s effective property tax rate on homes was more than double the national average. Detroit’s new tax, spending and placemaking policies have drawn the interests of bond investors in recent years, providing another source of revenue for the local government.

Watch the video above to learn more about Detroit’s escape from bankruptcy.

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Categories
US

Inflation Reduction Act extends $7,500 tax credit for electric cars

Inflation Reduction Act extends $7,500 tax credit for electric cars

David Madison | Photodisc | Getty Images

A federal tax break that’s available to car buyers for going electric may work differently starting next year.

Under the Inflation Reduction Act — which received Senate approval on Sunday and is expected to clear the House this week — a tax credit worth up to $7,500 for buyers of new all-electric cars and hybrid plug-ins would be extended through 2032. The bill would also create a separate tax credit worth a maximum $4,000 for used versions of these vehicles.

Yet the measure would also usher in new limits to both who can qualify for the credit and which vehicles are eligible for it.

The tax credit has ‘price and income restrictions’

“First, in order to qualify, there are price and income restrictions,” said Seth Goldstein, a senior equity analyst at Morningstar.

For new vehicles, the manufacturer’s suggested retail price for sedans would need to be below $55,000 to be eligible for the tax credit. For SUVs, trucks and vans, that price cap would be $80,000.

Additionally, the credit would be unavailable to single tax filers with modified adjusted gross income above $150,000. For married couples filing jointly, that income limit would be $300,000, and for individuals who file as head of household, $225,000.

“What we’ve seen is that many [electric vehicles] are luxury cars,” Goldstein said. “And buyers of those are in higher income brackets, so that limits right away the ability to qualify for the tax credit.”

For used electric vehicles to qualify, the car would need to be at least two model years old, among other restrictions. The credit would be worth either $4,000 or 30% of the car’s price — whichever is less — and the price cap would be $25,000.

Those purchases also would come with income caps: Individual tax filers with income above $75,000 would be ineligible for the credit. That cap would be $150,000 for joint filers and $112,500 for heads of household.

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Another determining factor for whether a vehicle would qualify for a full or partial credit (or neither) include a requirement that the final assembly of the car would need to be in North America. Additional qualifiers include limitations on where key materials for batteries can come from and a mandate that a specified portion of battery components must be manufactured or assembled in North America.

“It’s designed to encourage domestic production in North America,” said Scott Cockerham, an attorney and partner at Orrick.

Many electric vehicles may not qualify for the credit

However, it could be difficult for cars to qualify, he said, depending on where they source their materials and where they complete the manufacturing process. The Alliance for Automotive Innovation has warned that many electric vehicles will be ineligible for the credit right off the bat.

Additionally, another change in the legislation would allow a car buyer who qualifies for the tax credit to transfer it to the dealership, which could then lower the price of the car.

Meanwhile, another modification included in the bill is good news for some electric vehicle manufacturers.

Basically, the existing $7,500 credit was authorized in 2008 and 2009 legislation with the intention of spurring adoption of electric cars. Part of that included a phase-out of the tax credit once a manufacturer reached 200,000 of the vehicles sold.

Tesla hit that threshold in 2018, which means their electric cars currently do not qualify for the tax credit. General Motors is in the same position. Toyota (including its Lexus brand) also has now crossed that threshold, and its electric cars are scheduled to be ineligible for the tax credit after a phaseout of it ends in September 2023.

The congressional measure would eliminate that 200,000 sales cap, making their electric cars again eligible for the credit — at least based on that sales-threshold removal.

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Categories
Sports

Tiwi Islands leader and AFL legend Willie Rioli Senior farewelled by hundreds at funeral in Darwin

Two men hug among a crowd of people wearing blue.

Willie Rioli Senior has been remembered as a football legend and community leader, and a man whose “cheeky” smile brightened the lives of those around him.

Warning: Aboriginal and Torres Strait Islander readers are advised that this story contains the name and image of a person who has died.

The ABC has permission from Willie Rioli Senior’s family to use his name and image.

Hundreds of people filled the pews at St Mary’s Cathedral in Darwin on Wednesday to pay tribute to the father, grandfather, star footballer and respected leader in the Tiwi Islands community.

Mr Rioli died suddenly last month, age 50, of a heart attack, according to a statement from AFL Northern Territory.

Willie Rioli Senior smiles at the camera wearing a Tiwi Bombers shirt.
Willie Rioli Senior died suddenly in July at the age of 50. (Supplied: Tiwi Bombers Football Club)

Northern Territory Football league (NTFL) broadcaster Dominic McCormack remembered his friend as a man with a “cheeky smile” who “brightened all our lives.”

“He always brought great energy, experience, organisation, a big smile, lots of humility and a bit of stubbornness to all he did,” Mr McCormack said in a eulogy.

He said even Mr Rioli’s opponents could not help but like him.

“It would be rare to ever hear a bad word about him,” Mr McCormack said.

“Even while he was taking [the opposite] team apart they still loved him — they just wanted him on their side.”

Proud of his children and a lifelong love story

In his younger years, Mr McCormack said Mr Rioli would sneak out of boarding school at night to visit Georgina Vigona, the woman who would remain his wife until his death.

A woman hugs another woman in a crowd of people.
Mr Rioli’s wife, Georgina Vigona, had been by his side for decades.(ABC News: Myles Houlbrook-Walk)

The couple raised three children: Nikita, Kathleen and West Coast Eagles premiership winner Willie Junior.

A man holds a small child and sits next to a woman wiping her eyes with a tissue. They are sitting on church pews.
Mr Rioli is survived by his three children, two grandchildren and wife Georgina.(ABC News: Myles Houlbrook-Walk)
A red AFL ball sits on top of a casket in a church.
(ABC News: Myles Houlbrook-Walk)(ABC News: Myles Houlbrook-Walk)

“He was so proud of all of his children.” Mr McCormack said.

Cousin James De Santis remembered Mr Rioli’s passion for caring for country as a ranger supervisor.

“His passion was the land, looking after country,” he said.

“[Mr Rioli] was very devoted to his land management, he’s the only reason we’re on top of feral cats.

“We’ve been together pretty much all our lives… he was a great man.”

A long and storied football career

Mr Rioli won the NTFL’s highest honour, the Nichols Medal, at just 16.

He went on to play for the South Fremantle Football Club alongside his brother Maurice Rioli.

He was drafted by Hawthorn in 1990 — the club he grew up barracking for.

Willie Rioli Senior while playing for South Fremantle in the late 80s.
Mr Rioli played for South Fremantle in the late 80s before being drafted to Hawthorne.(Supplied: WAFL Collectables)

When his playing career finished Mr Rioli returned to home, where he coached the Imalu Tigers to a premiership in the Tiwi Islands Football League.

He served as president of the league until his death.

Another commemoration will be held on Friday, when a burial will take place at Mr Rioli’s home community at Pirlangimpi on the Tiwi Islands.

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US

With 87,000 new agents, here’s who the IRS may target for audits

With 87,000 new agents, here's who the IRS may target for audits

Jeffrey Coolidge | Photodisc | Getty Images

As the Democrats’ spending plan moves closer to a House vote, one of the more controversial provisions — nearly $80 billion in IRS funding, with $45.6 billion for “enforcement” — has raised questions about who the agency may target for audits.

IRS Commissioner Charles Rettig said these resources are “absolutely not about increasing audit scrutiny on small businesses or middle-income Americans,” in a recent letter to the Senate.

However, with the investment projected to bring in $203.7 billion in revenue from 2022 to 2031, according to the Congressional Budget Office, opponents say IRS enforcement may affect everyday Americans.

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“Our biggest worry in this is that the burden for these audits will land on Walmart shoppers,” Rep. Kevin Brady, R-Texas, said Tuesday on CNBC’s “Squawk Box.”

Overall, IRS audits plunged by 44% between fiscal years 2015 and 2019, according to a 2021 Treasury Inspector General for Tax Administration report.

While audits dropped by 75% for Americans making $1 million or more, the percentage fell by 33% for low-to-moderate income filers claiming the earned income tax credit, known as EITC, the report found.

Our biggest concern in this is that the burden for these audits will land on Walmart shoppers.

Rep. Kevin Brady, R-Texas

Ken Corbin, chief taxpayer experience officer for the IRS, said returns claiming the EITC have “historically had high rates of improper payments and therefore require greater enforcement,” during a May House Oversight Subcommittee hearing.

Since many lower-income Americans are wage earners, these audits are generally less complex and many may be automated.

How the IRS picks which tax returns to audit

Currently, the IRS uses software to rank each tax return with a numeric score, with higher scores more likely to trigger an audit. The system may flag a return when deductions or credits compared to income fall outside of acceptable ranges.

For example, let’s say you make $150,000 and claim a $50,000 charitable deduction. You’re more likely to get audited because it’s “disproportionate” to what the system expects, explained Lawrence Levy, president and CEO of tax resolution firm Levy and Associates.

Other red flags for an IRS audit may include unreported income, refundable tax credits such as the EITC, home office or auto deductions, and rounded numbers on your return, experts say.

How IRS audits may change with more funding

While the legislation still must be approved by the House and signed into law, it will take time to phase in the funding, hire and train new workers.

The IRS aims to hire roughly 87,000 new agents, according to the Treasury Department.

New auditors may have a six-month training program and receive cases worth a few hundred thousand dollars rather than tens of millions, Levy said.

“You’re not going to give a new General Motors trainee, for example,” he said. “It just isn’t going to happen.”

The chance of an audit may increase for self-employed taxpayers, Levy said, depending on their return. However, the odds may not change for traditional workers with an error-free filing, he said.

“The W-2 employee is much less likely to get audited than a self-employed person by far, in my opinion,” Levy said.

Of course, one of the best way to avoid future headaches is by keeping accurate records with detailed bookkeeping and saving all receipts, he said.

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Categories
US

Pro-SALT House Dems say they’ll back spending plan

Pro-SALT House Dems say they'll back spending plan

They’re not SALT-y.

A trio of House Democrats from New York and New Jersey have said that they’ll support the massive spending plan their party forced through the Senate over the weekend — despite their earlier insistence that any such bill lift the cap on state and local tax (SALT ) deductions.

Rep. Tom Suozzi, Mikie Sherrill and Josh Gottheimer insisted that the $740 billion so-called Inflation Reduction Act would not raise taxes on individuals, despite a recent analysis by the Joint Committee on Taxation that found levies would jump by $16.7 billion on American taxpayers making less than $200,000 in 2023, while those who make between $200,000 and $500,000 would have to pay $14.1 billion more.

SALT deductions were limited to $10,000 as part of former President Donald Trump’s tax reform plan in 2017, hurting residents of high-tax states like New York and New Jersey.

Late last year, all three lawmakers insisted that President Biden’s multi-trillion-dollar Build Back Better package increase the SALT caps, with Suozzi embracing the mantra: “No SALT, no deal.

”The Long Island rep told The Post Monday that he would support the package “because it is good for my constituents, good for America, and great for the environment.”

SALT Caucus.
The lawmakers previously insisted that any spending plan lift the cap on state and local tax (SALT) deductions.
Tom Williams/CQ-Roll Call, Inc via Getty Images
Rep. Josh Gottheimer.
“If someone tries to change the tax rates on families in my District, I will insist that we restore the State and Local Tax Deduction,” Rep. Josh Gottheimer vowed.
Kevin Dietsch/Getty Images

“Regarding SALT, the Inflation Reduction Act does not increase personal income taxes and ‘No SALT, no deal’ does not apply,” Suozzi added. “If any change is proposed in the personal income tax rate, I will insist that we restore the State and Local Tax Deduction.”

“The bill is fully paid for, in part, with provisions that go after tax cheats. It will also help pay down the debt — a fiscally-responsible way to get inflation down,” Gottheimer said Sunday after Vice President Kamala Harris cast the tie-breaking vote in the Senate.

“As for SALT, my line in the sand remains the same. If someone tries to change the tax rates on families in my District, I will insist that we restore the State and Local Tax Deduction,” he continued. “This legislation doesn’t raise taxes on families in my District — it reduces the financial burden on them. For that reason, and for its strong support of the climate, lower prescription drug prices, and job creation, I’ll be voting for it.”

Rep. Mikie Sherrill.
Rep. Mikie Sherrill said she would vote for the legislation because it “does not raise taxes on families in my district.”
Tom Williams/CQ-Roll Call, Inc via Getty Images

Sherrill also expressed her commitment to reforming SALT, but noted that “[b]Because this legislation does not raise taxes on families in my district, but in fact significantly lowers their costs, I will be voting for it.”

The measure passed by the Senate does out $369 billion on environmental programs, including tax credits for buyers of electric vehicles and rebates for low-income Americans to install renewable energy sources in their homes.

The legislation also includes provisions allowing Medicare to directly negotiate the prices of certain drugs and capping out-of-pocket costs at $2,000 annually. The bill also extends expiring Affordable Care Act subsidies through 2025, allowing people earning up to 150% of the federal poverty level to get health insurance for free.

Tom Suozzi.
Rep. Tom Suozzi previously embraced the “No SALT, no deal” mantra.
Tom Williams/CQ-Roll Call, Inc via Getty Images

A $35-per-month cap on what private insurers can charge out-of-pocket for insulin failed to survive the hours-long vote-a-rama that preceded the final vote, falling three “ayes” short of the 60 needed to make the legislation.

The House is expected to reconvene to debate and vote on the measure on Friday. It is expected to pass and be sent to Biden’s desk with all 210 of the chamber’s Republicans voting “nay.”

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Categories
US

What’s inside Democrats’ $740 billion tax, climate and health care bill

What's inside Democrats' $740 billion tax, climate and health care bill

Senate Democrats passed a $740 billion reconciliation package on Sunday that includes provisions that increase taxes on large corporations, address climate change and lower prescription drug costs.

Why it matters: The bill, though much smaller and less ambitious than what many Democrats wanted, has cleared its tallest hurdle and is expected to pass the House before heading to President Biden’s desk for his signature.

Taxes:
  • The bill puts a 15% minimum tax on corporations that earn more than $1 billion in annual profits, which is projected to raise at least $258 billion over the next 10 years.
  • It allocates $80 billion of additional funding over ten years for the IRS to in part hire additional staff members and strengthen tax collection and enforcement on corporations and high-income earners.
  • The Congressional Budget Office estimates that the new IRS investment could raise $203 billion in new revenue over the next decade, resulting in a net gain of $124 billion.
  • It does not include new taxes on families making $400,000 or less and no new taxes on small businesses.
Health care:
  • The bill increases health care spending by $98 billion, primarily by extending enhanced Affordable Care Act subsidies create through the American Rescue Plan for an additional three years.
  • It allows Medicare to negotiate the prices of certain drugs and puts a $2,000 cap on out-of-pocket prescription drug costs for people.
  • It originally contained a provision that would have capped out-of-pocket spending on insulin for patients enrolled in private insurance to $35, though it was blocked by Senate Republicans who argued that it violated the rules of reconciliation.
Climate:
  • The bill invests roughly $370 billion into initiatives to promote clean energy and reduce greenhouse gas emissions, likely becoming the most important climate bill in US history.
  • It gives tax credits to clean energy technologies, like existing nuclear power plants and advanced nuclear technologies, clean hydrogen, carbon capture and storage as well as wind and solar power.
  • It gives buyers who purchase North American-built electric vehicles up to $7,500 in federal tax credits to encourage the adoption of electric vehicles while jump-starting America’s electric vehicle industry.
  • It creates a methane fee program to fine corporations that emit the powerful greenhouse gas above federal limits.
  • Democrats have said the bill’s climate provisions put the US on a path to reduce its carbon emissions by up to 40% based on 2005 levels by 2030.

Go deeper: Biden’s BFD

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Categories
Australia

NSW Premier’s ‘thank you’ cash bonus reduced by tax as nurses work overtime during COVID-19

Two healthcare workers put on personal protective equipment

New South Wales nurses say the tax office has claimed much of their $3,000 pandemic “thank you” payment after many were pushed into a higher tax bracket by working extra shifts during the latest COVID-19 wave.

NSW Premier Dominic Perrotet announced in June that public healthcare workers would receive the bonus to thank them for their increased workload due to COVID-19.

It came four months after thousands walked off the job to protest staffing levels that had pushed an already stretched system to its limit during the pandemic.

But according to Diane Lang, NSW Nurses and Midwives Association’s delegate at Bega’s South East Regional Hospital, the promised $3,000 had since been cut in half for many staff.

She said the reduced payment came at a time when many nurses were doing overtime and extra shifts to cover staff shortages caused by the latest wave of infections.

A close up of a woman wearing sunglasses.
Diane Lang says the thank you payment has been taxed significantly for some nurses.(ABC South East NSW: Adriane Reardon)

“For many nurses, completing overtime and ensuring the health system did not collapse during a wave of COVID and influenza cases placed them in a higher tax bracket than usual,” Ms Lang said.

“All those people who have done all those extra shifts and all that overtime have paid a lot of tax.

“We knew we had to pay tax, but we were under the impression it was going to be paid separately to our wages, so there’s a lot of angry nurses out there at the moment.”

NSW Health has been contacted for comment.

Taxed for hard work

Genevieve Stone is the secretary of the union’s branch at Wollongong Hospital where nurses were “heartbroken” after the full amount failed to land in their bank accounts.

“What we found is the nurses who worked overtime in that pay period were the ones who were taxed the most, and got the least amount of money,” she said.

“The pandemic has been dragging on for a ridiculous amount of time, and I think we were all hoping for a morale boost in the way of this payment.

“We were hoping to be more heard and appreciated, but that hasn’t happened.”

The front of a building with a sign saying Wollongong Hospital
The union says those who worked hardest were taxed the most and earned less.(ABC Illawarra: Tim Fernandez)

Ms Stone said a pay rise in line with inflation would be “much more beneficial” to the workforce than a one-off payment, with both senior and junior staff leaving the profession in waves.

“We’re always called martyrs and angels, but that overshadows that we are highly skilled workers,” she said.

“We go to university, we’ve got medical knowledge, we do manual labor and we deserve to be valued.

“We are haemorrhaging nurses.”

a man wearing glasses standing behind a microphone
NSW Premier Dominic Perrottet had planned to thank employees for their hard work during the pandemic.(abcnews)

Industrial action planned

A nurse for more than 40 years, Jill Telfer is the secretary of the union’s branch at Tamworth Hospital.

She said that while some of the tax could be returned next financial year, many nurses were still “very disappointed”.

“I wasn’t the greatest thank you I’ve ever received,” Ms Telfer said.

“What dropped into our pay was $2,700 as we had super taken out automatically and we were also taxed, so I received about $1,700, but many received much less than that.

“The payment was just like a pat on the head, because we are desperate to change our situation in our public hospitals.

“We would prefer we were offered a fair pay rise.”

Ms Telfer said further industrial action was planned and many, including herself, were considering an early retirement.

“I know good friends who have got positions elsewhere because they didn’t want to keep doing this,” she said.

“We were short staffed before COVID, but now it’s even worse and it’s just got to be fixed.”

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Categories
Australia

The 60 millionaires who paid no tax and the richest and poorest postcodes revealed

The 60 millionaires who paid no tax and the richest and poorest postcodes revealed

Sixty people earned more than $1 million yet paid no tax in 2019-20, Australia’s highest earners live in Perth, and the country’s lowest incomes have been recorded in regional New South Wales.

The Australian Taxation Office’s (ATO) latest taxation statistics are based on the tax returns of almost 15 million Australians for 2019-20.

Analysis of the data by the Australia Institute reveals there were 60 Australians who earned more than $1 million in that financial year who did not pay a cent of income tax, compared to 66 the year before.

On average these 60 individuals earned $3.5 million each.

Managing your tax affairs is an allowable tax deduction. Some of those who earned more than a million dollars but paid no tax claimed this deduction.

“Some people earning a million dollars or more paid on average $80,000 each to manage their tax affairs, which reduced their taxable income below the tax-free threshold,” Australia Institute senior economist Matt Grudnoff said.

Headshot of Matt Grundoff.
Matt Grudnoff says Australia’s tax system is full of complexity and loopholes.

Another allowable deduction is litigation costs for managing your tax affairs.

Of those earning a million dollars but paying no tax who claimed this deduction, the average amount claimed was $250,000.

“Our taxation system is full of complexity and the latest tax statistics show that some people on very large incomes are able to pay very smart people very large sums of money to take advantage of that complexity to reduce the amount of tax they have to pay, Mr Grudnoff said.

“This highlights the need in Australia for a Buffett rule, which sets a minimum rate of tax based on people’s gross income. This would prevent high-income earners from using lots of deductions to avoid paying tax.”

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