Direct File For All, If States Want It
IRS wants to keep Direct File around for the long haul. The IRS announced its free tax-filing platform will be permanent and available to all 50 states and Washington, D.C. To participate, states and DC would need to create and link their own online filing platforms for state tax returns to the Direct File platform. Attorneys general in 12 Republican-led states have alleged that Direct File was not legally authorized and should be stopped. However, IRS Commissioner Danny Werfel expressed confidence that the program would ultimately garner bipartisan support. The Biden administration has budgeted $75 million for the program.
On Capitol Hill this week. Tomorrow, the House Ways & Means panel’s Social Security Subcommittee will hold a hearing on the future of the Social Security Trust Fund; that same day, the Work and Welfare Subcommittee will hold a hearing on reforming Unemployment Insurance. Also tomorrow, the Senate Appropriations Subcommittee on Financial Services and General Government will hold a hearing with Treasury Secretary Janet Yellen on the Treasury Department’s budget request. The Senate Finance Committee will also consider the nominations of James Ives to be Treasury’s Inspector General, and Rose Jenkins. Adam Landy, and Kashi Way as Judges on the United States Tax Court. On Wednesday the Senate Finance panel will hold a hearing on trade preference programs.
Proposed: A mansion tax in DC. The DC Council proposed a property tax rate increase on homes valued over $2.5 million, affecting an estimated 2,800 single-family homes and condominiums. The council is trying to find revenue in a tough budget year. It has also proposed an increase to employer payroll taxes. Per Axios, Mayor Muriel Bowser opposes the plan. The council will take its final vote on the budget next month.
A new tax credit for college students in Colorado. Democratic Gov. Jared Polis signed into law a new refundable income tax credit that aims to encourage enrollment in post-secondary education. The tax credit covers the costs of the first 65 credits of a student’s enrollment, excluding concurrent enrollment and prior learning.
The State Tax and Economic Review for the fourth quarter of 2023 is out. TPC’s Lucy Dadayan reports that total state government tax revenue collections rose by 4.5 percent in nominal terms and 1.8 percent in real terms in the fourth quarter of 2023 relative to a year earlier. “The fiscal outlook for state and local governments remains uncertain, with potential risks stemming from economic fluctuations and policy changes,” she writes. “If revenue collections deteriorate further, state policymakers will need to take additional steps to ensure stable and sustainable revenue streams for the upcoming fiscal year and beyond.”
Speaking of state tax revenue, Hawaii expects less of it this fiscal year. The Aloha State’s Council on Revenues projects the state will have $65 million less to spend this fiscal year than anticipated. But Hawaii is still expected to collect $9.5 billion in tax revenues. Democratic Gov. Josh Green is considering legislation to reduce state spending.
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