“You Got to Know When to Fold ‘Em”
Gambling with the Highway Trust Fund: The House always wins? As expected, the House rejected the Senate’s four-and-a-half month $8 billion highway funding patch passed earlier this week. The House returned its own 10-month $10.8 billion patch—the one that includes pension smoothing—back to the Senate. The Senate approved it last night by a vote of 81 to 13 and avoided being the chamber to force the Department of Transportation to cancel road and bridge repairs today. Next year’s Congress will be the one to review long-term highway funding and the federal gasoline tax. Or not.
With REITs like these, who needs inversions? Spinning off tangible assets into Real Estate Investment Trusts: For corporations that own lots of tangible assets and want to reduce taxes, it may be a full house. And it comes without the political baggage of inversions, though it could have a more severe impact on the nation’s revenues. TPC’s Howard Gleckman explains how REIT spinoffs pound another nail in the coffin of the corporate income tax.
The ABLE Act could see life on the House floor. The Ways & Means Committee approved the ABLE Act, and promises to say how it would pay for it before it goes to the House floor. Under the bill, individuals could set up tax-exempt accounts to pay certain expenses for people with disabilities. Expenses include higher education, a primary residence, transportation, getting and keeping a job, and health and wellness. The state-managed accounts would not limit the beneficiary’s eligibility for Medicaid and most other means-tested federal programs. The bill would cost $2 billion over 10 years, according to the Joint Committee on Taxation.
In Oregon, a bit of a buzzkill. The state’s Legislative Revenue Office estimates that legal marijuana sales will generate only about $16 million in tax revenue, about 58 percent less than the $38.5 million estimated by an economics firm. Both estimates are on shaky ground, as it’s hard to guess how many Oregonians are users, and how many will start buying the drug from legal retailers.
In Colorado, legalized marijuana sales have a created segregated black market. The state’s legal market has higher prices than the underground market, in part thanks to high taxes. “I don’t know who is buying for recreational use at dispensaries unless it’s white, middle-class people and out-of-towners,” said one local activist. The Washington Post reports that with sales and local taxes at nearly 33 percent, a $30 purchase can include $7.38 in taxes. The state argues that the black market will shrink over time as more legal dispensaries and growers enter the market.
Colorado will not have a sales tax holiday this weekend, but a dozen other states will. Consumers won’t have to pay sales tax this weekend on a variety of back-to-school items in states including: Alabama, Arkansas, Florida, Georgia, Iowa, Louisiana, Missouri, New Mexico, Oklahoma, South Carolina, Tennessee, and Virginia. In 2014, sales tax holidays are estimated to cost states at least $300 million. Spending does go up during these holidays, but consumers would have bought the sales-tax-free products at some point anyway. This includes out-of-state residents who visit for the tax holiday. Wealthier consumers’ spending climbs the most.
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