Latest news with #HouseBudgetCommittee
Yahoo
18 hours ago
- Business
- Yahoo
Proposed federal tax changes could mean $170M or more cut to Missouri state revenues
Missouri Senate Appropriations Chairman Lincoln Hough, right, discusses a budget item May 8 with House Budget Committee Chairman Dirk Deaton during negotiations over the fiscal 2026 budget (Rudi Keller/Missouri Independent). Along with hundreds of millions in potential new costs for Missouri taxpayers, an analysis of the budget bill backed by Congressional Republicans and President Donald Trump shows it would also cut state revenue as tax changes at the federal level are reflected in state returns. Exactly how much is uncertain. The review by Jared Walczak, vice president of state projects at the conservative-leaning Tax Foundation, estimates it will be at least $170 million and could be as much as $429 million if state lawmakers pass tax cuts that mirror provisions in the legislation approved in the U.S. House. Dylan Grundman O'Neill, senior state tax policy analyst at the left-leaning Institute on Taxation and Economic Policy, said Walczak's estimate is sound. O'Neill said he is working to estimate how much Missouri's revenues would be reduced further from the bill's increase in the limit on the itemized deduction for state and local taxes. Cuts to food aid endorsed by Congressional GOP could cost Missouri $400 million The potential reduction in state revenue caused by federal changes, coupled with the new exemption for capital gains income and expanded property tax credit for some retirees and people with disabilities passed by the Missouri legislature earlier this year, could cause the coming fiscal year to be the fourth in a row where revenue growth does not keep up with inflation. And the prospect that those federal tax changes and state tax cuts will put the squeeze on Missouri's budget hangs like a shadow over the legislature as it reconvenes this week to consider whether to set aside almost $1.4 billion in state taxes over the next 30 years to finance professional sports stadiums in Kansas City 'We know the state budget years ahead are going to be challenging, and the amount of general revenue that we have is something that I'm taking very seriously as a businessman, and what it's going to take in future years,' said Missouri Gov. Mike Kehoe. The state budget for the coming fiscal year, awaiting action by Kehoe, would spend $15.8 billion in general revenue while collections are estimated at $13.6 billion. The budget's draw on the state's surplus and uncertainty about future collections is why a spending bill also on the special session agenda has only $50 million more in general revenue, Kehoe said last week. Missouri's state income tax is linked to the federal tax system. The state tax form starts with the adjusted gross income calculated on the federal return and grants filers the same standard deduction. The approximately 10% of taxpayers who itemize deductions are allowed to keep most of what they report to the IRS and add some deductions for Social Security and other payroll taxes. The bill approved by the U.S. House includes a temporary $1,000 increase for the federal standard deduction, $15,000 for single filers this year. That would reduce Missouri revenue by about $124 million, Walczak said. The new deduction for interest on motor vehicle loans would be added to the federal form in a way that reduces the adjusted gross income amount. That change is estimated to reduce state revenue by $46 million, he said. 'They're putting that above the line there,' he said. 'I don't understand why. I don't think anyone knows why they choose to do it this way.' It would require action by state lawmakers to reverse the effect, Walczak said. 'A state could choose to have a modification where they add back the subtracted amount for auto loans, but they would have to choose to do that,' he said. For most taxpayers, income derived from tips and overtime would be exempt from the income tax entirely. Like reversing the auto loan deduction, making Missouri law mirror that benefit would have to be done by the legislature, Walczak said. The two exemptions would reduce Missouri state revenues by about $259 million. 'We put those numbers there because there are states that are saying that they want to follow the federal government and exempt tips and overtime,' he said. 'So we wanted to show what it would cost if they did that.' The change in the $10,000 cap on the deduction for state and local taxes to $40,000 is one of the hardest pieces of the federal bill to estimate, O'Neill said. Federal Medicaid cuts could leave Missouri with huge budget shortfall Before the cap was put in place by Congress in 2017, more than 30% of taxpayers itemized their deductions. When the standard deduction was doubled — and when mortgage loan rates were low — the rate of itemizers plummeted. The deduction covers state and local income and property taxes. Missouri's current tax forms subtract state income tax payments from the amount claimed, for those under the cap, allowing the rest. Itemizers who claim the maximum calculate the share of the tax payments that come from income tax, and subtraction a pro-rated amount from the $10,000 limit. For example, the owner of a home in Columbia that the assessor appraises at $1.5 million pays just under $20,000 in property taxes. If income taxes are 90% of the total state and local taxes included on that person's federal form, the owner would retain a $1,000 deduction for their state return under current law. With the cap increased to $40,000, the taxpayer would retain a $4,000 deduction. The net effect on state taxes would be a $141 cut for that taxpayer. 'The more the congressional bill raises that cap, the more relevant that provision becomes for states,' O'Neill said. 'Missouri is one of the states that has relatively high exposure to that change because of its rolling conformity to the federal tax code.' The Institute on Taxation and Economic Policy estimates that Missouri taxpayers would see their federal tax bills drop by $9.1 billion, with more than one-fifth of that total going to the 1% of Missouri taxpayers who have an income greater than $689,300. Filers in that group would receive an average tax cut of $58,490. Taxpayers in the lowest 40% of filers would receive one-twentieth of the tax cuts under the bill. The new costs imposed by the bill include a possible $400 million annually to maintain the food benefits program known as SNAP. Missouri would have to pick up an estimated 25% of the cost of providing the aid because Missouri's error rate on payments was 10% in 2023, which would mean the highest cost share. Missouri will end the current fiscal year with an unobligated general revenue balance of $2.6 billion, the state budget office estimated when Kehoe's spending proposal was released in January. Even after spending $1 billion of the accumulated balance, it is historically large and almost $900 million more than was predicted a year earlier. Two factors played into that increase — revenues in fiscal 2024 that were almost $300 million more than anticipated and a gap between budgeted amounts and actual costs, mainly due to understaffing. Kehoe's January budget anticipates the surplus would fall to $1.4 billion by the end of the coming fiscal year in June 2026. In the coming special session, Kehoe will be under pressure to allow more money to be spent in the appropriations bill. 'I don't believe that it's the government or the state's job to accumulate a billion dollars to look at in the bank,' said state Sen. Lincoln Hough, the Springfield Republican who chairs the Senate Appropriations Committee. 'I agree with a healthy reserve. I'm fine with that. But this billion and a half dollars that we have sitting in the bank while we've got hospitals that are closing down and child care facilities that need support… it's the whole list of projects.' There should be some allowance for lawmakers to add items to the bill, he said. 'I'm not naive enough to think we're going to put together a $513 million capital improvements package and drop that,' Hough said. The budget revenue estimate made in December anticipates a slight decline in revenue in the current year and a slight increase in the coming year. That estimate was made before lawmakers passed the tax cut worth about $285 million in the coming year by official estimates but forecast to be much more by the Institute on Taxation and Economic Policy. Missouri House Minority Leader Ashley Aune, a Kansas City Democrat, supports the legislation to keep the Chiefs and Royals in the state. She also said there should be more for the appropriations bill. 'We need to be concerned about where we're spending our dollars, but I also think that we have to be doing it responsibly,' Aune said. But she is also concerned about the revenue impact of the federal budget bill and the tax cut awaiting action from Kehoe. 'We are in a position right now where we are seeing revenues dwindling,' Aune said. 'With everything that has been passed recently, it has the potential to put Missouri in a much more difficult position.' SUPPORT: YOU MAKE OUR WORK POSSIBLE
New York Times
5 days ago
- Business
- New York Times
Ray Dalio's Prescription for Avoiding Fiscal Catastrophe
Ray Dalio's fix Ray Dalio calls it the '3 percent solution,' and it's gaining attention with White House officials and senior Republicans as a potential fix to America's fiscal woes even as the party pushes ahead with a mega spending bill that's roiling the bond markets. For the past couple of weeks, advance copies of Dalio's forthcoming book, 'How Countries Go Broke: The Big Cycle' — and Dalio himself — have been making the rounds with policymakers in Washington and investors in New York. The hedge fund mogul has been warning for some time that America's soaring deficits risk economic calamity, and Dalio recently met with the chairman of the House Budget Committee, Representative Jodey Arrington of Texas, and its members. What's the solution? It aims to bring the annual deficit-to-G.D.P. ratio down to 3 percent, from around 7 percent. According to Dalio, this can be accomplished only by pulling 'three levers' — cutting spending, raising tax revenue, and the corresponding lowering of interest rates. 'The 3 percent solution is very practical,' he told me by email. 'It has worked many times in many places, most recently in the U.S. from 1991 to 1998.' Dalio argues the interest rates lever is the most consequential. The problem: Everyday interest rates are tied to the budget. We're seeing that connection play out in real-time. The bond market has started charging a higher interest rate to buy U.S. government debt as confidence in the government's fiscal discipline sours. If Congress can get serious, Dalio argues, it will send a huge signal to the markets. Treasury Secretary Scott Bessent had made a similar argument. But he has recently gone quieter on that message as the bill, which is expected to add significantly to the deficit over the next decade, advanced through the House. A fiscally responsible budget would ease volatility in the bond market. Any economic slowdown caused by reduced spending could be offset by lower interest rates, which is what a heavily indebted nation needs most. The challenge: All three levers need to work in tandem. Both parties have shown little interest in meaningfully cutting spending. Raising taxes, too, is a nonstarter. The upshot is a stalemate in Washington and higher interest rates. 'All the political decision makers on both sides of the aisle that I spoke with agree that we are likely headed for a terrible outcome if the deficit isn't cut down to about 3 percent of G.D.P.,' Dalio continued. 'So I feel it's like being on a boat headed for the rocks in which everyone agrees that we will crash if we don't change our course, but they're too hung up arguing which way to turn.' The question is, even if he is right — which he probably is — what would actually push lawmakers to act and avoid the rocks? 'The forcing mechanism will likely be a debt crisis and all that goes with it,' he wrote. Nvidia beats financial expectations despite limits on Chinese exports. Shares in the chipmaker are up 6 percent in premarket trading after it reported a 69 percent jump in quarterly revenue, to $44.1 billion. But Jensen Huang, Nvidia's C.E.O., warned that restrictions on sales to China would hurt America's global tech dominance. JetBlue and United form an alliance. The airlines announced a deal in which customers can earn frequent flier miles on each other's flights. The partnership will allow United to return to Kennedy International Airport amid continuing troubles at its New York-area hub at Newark Liberty International Airport, and perhaps more important allows the two to collaborate without having to strike a merger or deeper alliance. The Trump administration seeks to revoke visas for Chinese students. Secretary of State Marco Rubio said officials would 'aggressively' crack down on existing visas, especially for those studying unnamed 'critical fields,' and step up scrutiny of future applicants from China. The administration has already halted interviews for student visa applicants. Separately, President Trump suggested a cap on international students enrolling at Harvard. Why tariffs uncertainty is far from over Global markets are rallying on Thursday as investors cheer a big blow to President Trump's trade fight — even if economists warn that it hardly removes all of the risks. The dollar and S&P 500 futures are up after the U.S. Court of International Trade ruled unanimously that many of Trump's biggest tariffs — primarily those imposed under the International Emergency Economic Powers Act — are illegal and gave the administration up to 10 days to wrap up the paperwork needed to end them. That particular law, the court ruled, 'does not authorize the president to impose unbounded tariffs.' The administration sharply criticized the ruling and vowed to appeal it; the matter could end up being decided by the Supreme Court. Here's what was struck down: And some experts say the government may have to reimburse companies that have had to pay tariff duties on the above. What wasn't: The ruling throws trade negotiations with other countries into limbo. Why should anyone offer Washington any concessions until this is resolved? Investors view this as good news. Companies with big tariffs exposure — including Adidas, Puma and Stellantis — rose sharply on Thursday. In fact, stocks have rallied in recent weeks on investors' belief that the worst of the trade war is over. A lower overall tariff rate will be better for corporate profits, kick-start hiring and investment and could persuade the Fed to lower interest rates. Wall Street has lowered the odds of a recession since Trump began pausing and rolling back some of his levies. Is it too soon to celebrate? 'The Trump administration has other authorities it can use to impose tariffs similar to those the court struck down,' Alec Phillips, a political economist at Goldman Sachs, wrote in a research note last night. They include reclassifying the levies under different trade laws, such as by using Section 232 of the Trade Expansion Act of 1962, which underpins the levies on steel, aluminum and auto imports that remain in place. There's plenty at stake: The ruling potentially deprives the government of about $200 billion in annual tariffs revenues, he estimates. The Musk-Trump situationship Elon Musk is ending his formal work as President Trump's chief cost-cutter, seemingly driven by frustration with Washington gridlock and pressure from investors to refocus on the companies that made his fortune. But we don't knowhow big any Musk-Trump rift is. And Musk will still need to retain some influence in the Trump administration to help out his businesses. Musk is stepping back from Washington and politics to some degree. He noted on X last night that 'my scheduled time as a Special Government Employee' was coming to an end. That's after he publicly criticized Republicans' budget bill, which Trump has championed. And Musk told Ars Technica, 'I think I probably did spend a bit too much time on politics.' But Musk's influence in Washington appears shakier. Trump has pressed ahead with tariffs despite Musk pushing back publicly, if gingerly. And while he said that his Department of Government Efficiency team's approach has become 'a way of life throughout the government,' Musk has acknowledged that the initiative has faced 'an uphill battle.' Trump's recent trip to the Middle East underscores that reality. Musk had sought to derail a big A.I. data center deal struck by one of his archrivals, Sam Altman of OpenAI. The Wall Street Journal reports that Musk had warned executives at the Emirati tech investor G42 that Trump wouldn't sign off on the plan unless his xAI was included in the transaction. In the end, Trump officials pressed ahead — and Musk's company was left out. (A reminder: Musk's move appears to be what Altman said at last year's DealBook Summit that the Tesla chief wouldn't do: 'I believe pretty strongly that Elon will do the right thing and that it would be profoundly un-American to use political power to the degree that Elon would hurt competitors and advantage his own businesses.') Musk still needs to stay on Trump's good side. SpaceX and Starlink have benefited heavily from a seeming lock on space-related contracts. Tesla's bet on autonomous vehicles, which is reportedly poised to begin a crucial real-world test next month, depends on Trump regulators relaxing rules on the technology. And Musk, like other A.I. entrepreneurs, is continuing to push for looser oversight. 'You call that chickening out?' — President Trump, bristling on Wednesday at a reporter's 'nasty' question about the so-called TACO trade, short for 'Trump Always Chickens Out' in trade fights. The Fannie and Freddie trade Hedge fund managers who have bet big on Washington relinquishing control of Fannie Mae and Freddie Mac may have reason to smile this week. Over-the-counter shares of the mortgage finance giants briefly surged on Wednesday after President Trump posted on social media that he was 'working on TAKING THESE AMAZING COMPANIES PUBLIC.' Trump said that the U.S. government would still guarantee loans made by Fannie and Freddie if they're no longer under Washington control, a backstop that could help limit volatility in the mortgage market. That said, it's unclear what a guarantee might look like in practice. Here's who stands to gain: Big shareholders could see a 'windfall' from privatization, said Lawrence White, an economics professor at the N.Y.U. Stern School of Business. But that's a big if, he added, since it's unclear whether Trump will actually follow through. (The president made a similar promise in his first term, and it never happened.) The context: Fannie and Freddie have been under government control since the federal government bailed them out in 2008. At the time, canny investors saw an opportunity, buying up shares in both at rock-bottom prices. It's been a long wait. Even as the housing market bounced back, consecutive administrations took no action to re-privatize the companies. Trump seems to see it as a priority, but the administration is 'going to need congressional cooperation,' White said. Risks loom. Removing the conservatorship could have ripple effects that affect borrowers with lower incomes or credit scores, 'resulting in less access to credit and a harder path to homeownership,' Bharat Ramamurti, a senior adviser at the American Economic Liberties Project, said in a brief released on Thursday. A rise in mortgage rates would be probable too, but the magnitude would depend on how privatization is carried out, said Laurie Goodman, the founder of the Housing Finance Policy Center at the Urban Institute. Deals Tech and artificial intelligence Best of the rest
Yahoo
22-05-2025
- Business
- Yahoo
New analysis shows GOP tax bill would decrease resources for poorest Americans
WASHINGTON - Republicans' massive bill to enact President Donald Trump's agenda would help the wealthiest Americans while diminishing resources for the poorest, according to a preliminary analysis from the nonpartisan Congressional Budget Office. On average, the bill to enact sweeping tax cuts, fund Trump's deportation plans and increase defense spending would increase resources for the average U.S. household, the CBO found. But resources would decrease by about 2% by 2027 for people in the lowest tenth (decile) of the income distribution and increase for people in the highest tenth of the income distribution due to cuts in Medicaid and the Supplemental Nutrition Assistance Program. That loss would grow to 4% by 2033, CBO estimated. In comparison, household resources for Americans in the top ten percent would increase by about 4% by 2027 and 2% in 2033, mainly due to tax cuts. According to a 2022 CBO report, the baseline household income for Americans in the lowest tenth of the distribution is $32,200, after taxes and transfers. That figure increases to $444,600 for Americans in the highest tenth of the distribution. The analysis was requested by Brendan Boyle of Pennsylvania, the top Democrat on the House Budget Committee, and House Minority Leader Hakeem Jeffries. 'This is what Republicans are fighting for—lining the pockets of their billionaire donors while children go hungry and families get kicked off their health care,' Boyle said in a statement. But Texas Republican Jodey Arrington, chairman of the House Budget Committee, shrugged off Democratic concerns about CBO's analysis in a statement. "First, they're not measuring economic benefits to low-income earners, they're measuring federal resources distributed. For instance, there are fewer transfer payments to people on welfare if you prohibit illegal immigrants from accessing these programs and enact common sense work requirements to stop trapping people in dependence," he said. "Second, when you allow Americans from every walk of life to keep more of their income, you lift millions out of poverty, just as we witnessed in President Trump's first term," he added. The report comes as House Republicans are gearing up to pass a sweeping policy bill geared at advancing Trump's legislative priorities. The bill would make the 2017 tax cuts permanent, boost border security funding and implement stricter requirements for SNAP, among other things. Republicans have argued that average Americans would benefit from the bill's proposals, which would prevent a tax increase on all income brackets and, they contend, eliminate "waste, fraud and abuse" from benefit systems like Medicaid and SNAP. They point to policies like a temporary end to tax on tips and overtime, a new tax deduction for seniors and a boosted child tax credit, as indications they are fighting for working-class families. "Everything (Trump) does – and every policy he fights for – is rooted in what Americans have told us over the past two years," House Ways and Means Chairman Rep. Jason Smith, R-Missouri, wrote in a Fox News opinion piece on May 21. "These are communities that have long been overlooked, who have struggled to gain a foothold in an economy rigged against them." House Speaker Mike Johnson, R-Louisiana, is expected to hold a vote on the bill Wednesday. Trump visited Capitol Hill on Tuesday to rally support around the bill, and told his allies not to 'f--- around' with Medicaid. Another analysis from the Urban Institute, a Washington, D.C.-based think tank, in mid-May found that low-income families stand to lose hundreds if not thousands of dollars in income while wealthy ones will gain even more. The analysis is based on the assumption that the tax cuts are extended while there are $880 billion in cuts to Medicaid and $230 billion in cuts to SNAP. This article originally appeared on USA TODAY: CBO: GOP tax bill would decrease resources for poorest Americans
Axios
22-05-2025
- Politics
- Axios
Arkansas congressman Steve Womack to seek reelection
Republican U.S. Rep. Steve Womack of Rogers will seek reelection in 2026, his campaign announced Tuesday. The big picture: The former Rogers mayor represents Arkansas' 3rd Congressional District, which covers the northwest corner of the state, east to Alpena and south to Greenwood, covering most of Fort Chaffee. Womack serves as chair of the House Appropriations Subcommittee on Transportation, Housing and Urban Development and formerly served as chair of the House Budget Committee and the Financial Services and General Government Subcommittee on Appropriations. He was first elected to congress in 2010 and is a retired Colonel in the Arkansas Army National Guard with 30 years of service. What he's saying:"I'm running for reelection in Congress because I believe now, more than ever, our country needs strong, principled leadership."
Bloomberg
21-05-2025
- Business
- Bloomberg
Let's Abolish the 1 a.m. Meeting
This is Bloomberg Opinion Today, a devilishly complex mandate of Bloomberg Opinion's opinions. Sign up here. Full transparency: It's kind of hard to write a newsletter about a bill that keeps changing! I'll do my best, but just to give you an idea of what we're working with, the House Budget Committee needed to break up their 3,976-page report on the 1,116-page Big Beautiful Bill into nine separate documents because of 'file size limitations.' My Chrome tabs are buckling under the pressure:
