A divided Congress isn’t going to make another round of sweeping changes to the tax law this year, but there are plenty of important tax issues that are likely to come up. Tax Policy Center Senior Fellow Howard Gleckman lists seven to watch. Here’s a look at some of the items on Gleckman’s list:
Will Congress fix the 2017 tax law? Rep. Kevin Brady (R-TX), who chaired the tax-writing House Ways and Means Committee in the last Congress, released a draft bill Wednesday to correct technical issues and other errors in the 2017 tax law. One popular fix would correct a drafting error that raised the tax burden on restaurants and retail establishments making renovations. Democrats may also look to modify the 2017 law’s $10,000 cap on the state and local tax deduction.
Individuals face their first filing season under the new law. Taxpayers will experience the full effects of the individual income tax changes brought about by the 2017 overhaul, potentially leading to confusion. “They may have some unpleasant surprises such as the SALT cap and the loss of personal exemptions; and some happy ones such as the bigger standard deduction and the demise of the Alternative Minimum Tax for nearly everyone,” Gleckman says. “The ongoing shutdown of the IRS won’t make it any easier.”
Dealing with expiring tax provisions. A number of provisions in the Tax Cuts and Jobs Act are due to expire by the end of the year (see page 12 here) and Congress may address a few dozen tax extenders that it didn’t deal with last year, Gleckman says.
States face some tax questions. Some states have yet to set rules for online sellers in the wake of a Supreme Court decision allowing them to require such retailers to collect sales taxes. States will also have to decide how to address the revenue impact they see from the GOP tax overhaul. “The 2017 law’s repeal of the federal personal exemption generated a revenue windfall for states that piggyback on federal tax law,” Gleckman says. “But it will result in tax increases for many large families—one that probably is politically unsustainable.” Sports betting and legalized pot sales will be new sources of revenue for some states.
New Democratic tax plans. With the 2020 campaign already underway, new tax proposals from candidates eyeing the Oval Office are bound to emerge. Which will win support from the party and the public?