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Yahoo
21 hours ago
- Business
- Yahoo
Opinion - The ‘big, beautiful' bill creates a $5 billion tax shelter for private school donors
The budget reconciliation bill passed by the House last month, the 'One Big Beautiful Bill Act, ' contains an unconventional provision establishing an unprecedented tax shelter designed to shift resources from public schools to wealthy people and private schools. The provision allocates $5 billion a year in federal tax credits for donors to organizations that provide private and religious school vouchers. While the bill cuts benefits for other charitable donations, it triples the tax benefit for private school voucher donations. This unique dollar-for-dollar rebate is something no other charity has ever gotten from the federal government. Other donors may be taken aback to learn that policymakers have singled out private schools for a reward three times larger than what can be received for gifts to pediatric cancer research, flood clean-up or assisting veterans exposed to chemicals. More alarming still, this provision creates a profitable tax shelter for wealthy people who agree to help funnel public funds into private schools. This is because rich donors will avoid the capital gains tax entirely if they make a gift of stock. Savvy tax advisors will instruct stockholders to avoid selling and to instead donate those holdings, getting a one-for-one return from the federal government — while avoiding hundreds of thousands or millions of dollars in capital gains taxes. This is the quintessential definition of a tax shelter, encouraging affluent people with no interest in school vouchers to direct contributions this way, not out of conviction but for profit. Usually, when policymakers do this, it is an inadvertent by-product of hasty legislative decisions, not an intentional giveaway. This, too, is a norm being broken with this bill. The provision expands vouchers nationwide, even in states — such as Kentucky, Nebraska and Colorado — where voters recently rejected vouchers at the ballot box. American voters have actually said no to vouchers in every state where they've been put on the ballot, which may be why voucher proponents are sneaking a big expansion into a must-pass federal bill. Vouchers, in addition to being unpopular, expensive. My organization, the Institute on Taxation and Economic Policy, estimates that this provision alone would as drafted reduce federal tax revenue by $23.2 billion over the next 10 years, or by $67 billion if it is extended beyond its four-year expiration date, as Republicans would likely attempt to do. Because state income taxes largely piggyback on federal law, this provision would reduce state revenue by between $459 million and $1.1 billion over the decade, depending on extension. Of the 10-year state and federal tax cuts from this provision, between $2.2 billion and $5.3 billion would be in the form of capital gains tax avoidance, depending on extension. Had this provision been in effect in 2021, for example, Elon Musk could have cut his capital gains tax bill by $690 million. In all, while cutting tax benefits for charities across the board, the reconciliation bill creates an unprecedented giveaway that would enrich the wealthiest Americans, particularly those whose income comes from stock. It would weaken public budgets and public schools, siphoning money to private schools that are allowed to reject many students. Combined with other enormous cuts to public programs and tax cuts for the rich, this is an untenable combination. Amy Hanauer is executive director of the Institute on Taxation and Economic Policy. Copyright 2025 Nexstar Media, Inc. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.
The Hill
a day ago
- Business
- The Hill
The ‘big, beautiful' bill creates a $5 billion tax shelter for private school donors
The budget reconciliation bill passed by the House last month, the 'One Big Beautiful Bill Act, ' contains an unconventional provision establishing an unprecedented tax shelter designed to shift resources from public schools to wealthy people and private schools. The provision allocates $5 billion a year in federal tax credits for donors to organizations that provide private and religious school vouchers. While the bill cuts benefits for other charitable donations, it triples the tax benefit for private school voucher donations. This unique dollar-for-dollar rebate is something no other charity has ever gotten from the federal government. Other donors may be taken aback to learn that policymakers have singled out private schools for a reward three times larger than what can be received for gifts to pediatric cancer research, flood clean-up or assisting veterans exposed to chemicals. More alarming still, this provision creates a profitable tax shelter for wealthy people who agree to help funnel public funds into private schools. This is because rich donors will avoid the capital gains tax entirely if they make a gift of stock. Savvy tax advisors will instruct stockholders to avoid selling and to instead donate those holdings, getting a one-for-one return from the federal government — while avoiding hundreds of thousands or millions of dollars in capital gains taxes. This is the quintessential definition of a tax shelter, encouraging affluent people with no interest in school vouchers to direct contributions this way, not out of conviction but for profit. Usually, when policymakers do this, it is an inadvertent by-product of hasty legislative decisions, not an intentional giveaway. This, too, is a norm being broken with this bill. The provision expands vouchers nationwide, even in states — such as Kentucky, Nebraska and Colorado — where voters recently rejected vouchers at the ballot box. American voters have actually said no to vouchers in every state where they've been put on the ballot, which may be why voucher proponents are sneaking a big expansion into a must-pass federal bill. Vouchers, in addition to being unpopular, expensive. My organization, the Institute on Taxation and Economic Policy, estimates that this provision alone would as drafted reduce federal tax revenue by $23.2 billion over the next 10 years, or by $67 billion if it is extended beyond its four-year expiration date, as Republicans would likely attempt to do. Because state income taxes largely piggyback on federal law, this provision would reduce state revenue by between $459 million and $1.1 billion over the decade, depending on extension. Of the 10-year state and federal tax cuts from this provision, between $2.2 billion and $5.3 billion would be in the form of capital gains tax avoidance, depending on extension. Had this provision been in effect in 2021, for example, Elon Musk could have cut his capital gains tax bill by $690 million. In all, while cutting tax benefits for charities across the board, the reconciliation bill creates an unprecedented giveaway that would enrich the wealthiest Americans, particularly those whose income comes from stock. It would weaken public budgets and public schools, siphoning money to private schools that are allowed to reject many students. Combined with other enormous cuts to public programs and tax cuts for the rich, this is an untenable combination. Amy Hanauer is executive director of the Institute on Taxation and Economic Policy.
Newsweek
4 days ago
- Business
- Newsweek
Child Tax Credit Could Be Stripped From Millions of Children
Based on facts, either observed and verified firsthand by the reporter, or reported and verified from knowledgeable sources. Newsweek AI is in beta. Translations may contain inaccuracies—please refer to the original content. A new budget proposal that would impose new restrictions on the federal Child Tax Credit could eliminate the benefit for millions of U.S. citizens or legally resident children, policy experts have said. Proposed under the One Big Beautiful Bill Act, the rule would require both the tax filer and their spouse to have Social Security numbers in order to claim the Child Tax Credit (CTC) for their children. As a result, children with mixed-status parents — for instance, one parent who is a U.S. citizen and another who is not — would lose eligibility for the credit, according to Carl Davis, research director at the nonpartisan Institute on Taxation and Economic Policy (ITEP). Policy experts and researchers from the Center for Migration Studies have estimated that around 4.5 million children — primarily in California, Texas, and Florida — could lose access to CTC if the rule changes are implemented. "The proposal now is actually to tighten the eligibility rules even more and to say, 'We basically don't care if the child is a citizen or not — we need every person in the household to be a citizen or otherwise have legal status in order for the credit to be paid out,'" he told CBS News. A new budget proposal that would impose new restrictions on the federal Child Tax Credit could eliminate the benefit for millions of U.S. citizens, policy experts have said. A new budget proposal that would impose new restrictions on the federal Child Tax Credit could eliminate the benefit for millions of U.S. citizens, policy experts have said. GETTY Why It Matters The CTC, first introduced in 1997, offers families up to $2,000 for every eligible child under the age of 17 with a valid Social Security number. Under current rules, only the child's Social Security number is required, not the parents'. The credit is a key tool in reducing child poverty across the U.S., helping families cover essential expenses such as food, clothing, and school supplies. What To Know Under the new Republican legislation, part of the One Big Beautiful Bill Act, parents would only be eligible to claim the CTC if both the filer and their spouse possess Social Security numbers. The stipulation would bar eligibility for families with undocumented parents or parents on non-working visas, as well as families where only one parent can obtain a Social Security number. Most undocumented migrants are already barred from most federal tax credits. Analysts warn that the policy would largely impact U.S. citizens and legally resident children living with non-citizen parents. In addition to the CTC, the proposal would tie the eligibility requirement to other tax benefits, such as provisions that eliminate taxes on worker tips and overtime pay. Shelby Gonzales, vice president for immigration policy at the Center on Budget and Policy Priorities, argued that the bill would "treat children differently based on the immigration status of their parents." Republicans plan to boost the CTC to $2,500 for 2025 through 2028. GOP lawmakers backing the proposal contend that increasing the credit and adjusting it for inflation would provide relief to American families, while the new restrictions would prevent taxpayer benefits from going to households with undocumented members. What People Are Saying House Ways and Means Committee Chairman Jason Smith said the bill would "increase the Child Tax Credit, the standard deduction and the Death Tax exemption," aiming to restrict access for undocumented immigrants. Carl Davis, research director at ITEP, told CBS News: "We basically don't care if the child is a citizen or not — we need every person in the household to be a citizen or otherwise have legal status in order for the credit to be paid out." George Carrillo, former director of social determinants of health for Oregon and CEO of the Hispanic Construction Council,told Newsweek that the bill "strives to deliver immediate financial relief to many American families," but also "raises concerns about fairness and long-term impact." "Immigration-related provisions restricting access to tax credits disproportionately harm vulnerable communities, while a $4 trillion debt increase raises questions about fiscal responsibility and passing burdens onto future generations," he said. Shelby Gonzales, vice president for immigration policy at the Center on Budget and Policy Priorities, told CBS News: "It seems to say, if your parents don't meet this criteria regarding their immigration status, then you will be treated differently as a child than all other children in the U.S. who were born of two parents that meet the qualifications." What Happens Next The budget package passed the House by a narrow margin and is under review in the Senate, where some lawmakers have voiced opposition on fiscal grounds. The bill could undergo substantial changes as the legislative process continues.
Yahoo
27-05-2025
- Business
- Yahoo
‘Big Beautiful Bill' mostly benefits Nevada's wealthiest
() The tax benefits in the 'One Big Beautiful Bill' will only be big and beautiful for Nevadans' wealthiest households, according to a new analysis by the Institute on Taxation and Economic Policy. The progressive think tank released a state-by-state analysis of the tax provisions of the 'Big Beautiful Bill Act' passed Thursday by House Republicans. They found that in Nevada, the richest 1% — households making $796,500 or more a year — would see an average tax benefit of $82,590 in 2026. That's equivalent to 2.4% of their average annual income, which is $3.5 million. Households just under them — the 4% of households making between $293,500 and $796,500 — would see a tax benefit of $14,150. That's equivalent to 3.1% of their average annual income. Meanwhile, Nevada households in the bottom 20% – those making less than $27,700 a year — would see a tax benefit of $130. That represents 0.8% of their average annual income. The middle 20% of households — those making between $50,800 and $84,400 — would see a benefit of $1,390. That's equivalent to 2.1% of that group's average annual income. Here's the tax change across all income levels: Altogether, ITEP estimates that in Nevada more than a quarter of the tax benefit would go to the top 1% of income earners, and more than two-thirds of the tax benefits would be felt by the top 20% of households. Nationwide, the richest 1% would receive $121 billion in net tax cuts in 2026. The middle 20% — 'a group that is 20 times the size of the richest 1%,' ITEP emphasizes — would receive half that much. ITEP in its report noted that 'high-income people in states with less robust tax systems overall do the best.' Nevada is one of 22 states where the richest 1% would receive an average net tax cut of more than $75,000. The think tank also noted in the analysis that it expects the effects of President Donald Trump's tariff policies to offset 'most of the tax cuts' for the bottom 80% of Americans, and for the bottom 40% 'the tariffs impose a cost that is greater than the tax cuts they would receive under this legislation.' At the national level, for instance, the poorest 20% of households can expect to see their take-home pay increase by 1% as a result of the changes. But that's more than offset by a roughly 2.4% decrease in spending power due to the effects of the Trump administration's tariffs. The law's provisions are also relatively favorable toward wealthy overseas investors. 'Foreign investors who own shares in U.S. companies would benefit more than the poorest fifth of Americans,' ITEP's authors wrote. 'These foreign investors would enjoy $23 billion in tax cuts in 2026 compared to just $4 billion for the bottom 20% of Americans.' Because Republicans are using a procedural known as 'reconciliation,' the bill cannot be filibustered in the Senate. Republicans control 53 Senate seats, meaning they can lose three votes and still pass the bill with a tie-breaking vote from Vice President JD Vance. Minnesota Reformer reporter Christopher Ingraham contributed to this report.
Yahoo
14-05-2025
- Business
- Yahoo
The Republican Tax Bill Screws the Working Class
Donald Trump received 56 percent of the working class vote in 2024, according to exit polls, up from 51 percent in 2020 and 49 percent in 2016. The bond between the president and these voters is sadomasochistic. The more Trump skews government policy against the working class (defined here conventionally as people who lack a college degree), the more votes Trump receives from it. Honoring this special relationship, the House Republicans' latest tax plan (text; section-by-section summary) is the budgetary equivalent of a cat o' nine tails. Time for a safeword. I propose 'bullshit.' The most notable thing about the House plan is that it doesn't include the very modest tax increase on income above $2.5 million, from 37 percent to 39.6 percent, that's recently been bandied about. Trump has danced around the idea of a millionaire tax, first telling Time's Eric Cortellessa that 'I actually love the concept but I don't want it to be used against me politically,' then saying 'It would be very disruptive, because a lot of the millionaires would leave the country' (no they wouldn't, but never mind), then finally saying 'Republicans should probably not do it, but I'm OK if they do!!!' The through line is I want everyone to think I'm for higher taxes on the rich but for the love of God don't do it. Far from increasing taxes on the rich, the House bill cuts them by extending Trump's 2017 income-tax cut, which reduced the top marginal rate from 40 percent to 37 percent on income above $731,201 for married couples filing jointly and above $609,351 for single taxpayers. According to the nonprofit Institute on Taxation and Economic Policy, 65 percent of the cuts go to the top 20 percent in the income distribution (i.e., households that earn more than $153,000) and 28 percent go to the top one percent (households that earn more than $787,712). Even more skewed, ITEP found, was a provision in the 2017 bill that gave a 20 percent deduction on 'pass through' income; that is, income from a small business. Small businesses tend to receive favorable tax treatment because of what former TNR editor Michael Kinsley has called an anthropomorphic fallacy that small businesses are 'owned by small people.' In fact, 92 percent of this benefit goes to the top 20 percent in the income distribution and 55 percent (i.e., most of it) goes to the top one percent. Half of the benefit goes to millionaires. During the 2024 campaign, Trump promised working-class voters that he'd eliminate taxes on tips and on overtime, and the House bill includes these proposals. I argued then that these were trivial changes intended to distract from Trump's lousy regulatory record on tips and overtime. In the case of tips, Trump wouldn't support eliminating the $2.13 hourly subminimum wage for tipped employees and instead giving them a $7.25 hourly minimum like everyone else. The $7.25 minimum is of course scandalously low—and Trump did nothing about that in his first term. In the case of overtime, Trump extended eligibility in his first term to about one million workers; Biden set that regulation aside and expanded overtime to four million workers. Biden's rule was blocked after the election by two reactionary federal judges in Texas. The Trump Labor department filed an appeal, but only as a placeholder while Labor Secretary Lori Chavez-DeRemer finds out how much overtime coverage the White House will stomach. In the meantime, the appeals court has issued a 120-day stay. I noted last summer that exempting tips from taxable income would have little effect because tipped workers don't pay much income tax in the first place. Thirty-seven percent of them earned sufficiently low incomes that they paid no income tax at all. The Joint Committee on Taxation confirms this by estimating that the lost revenue would only be about $40 billion over the next decade. Partly that's because the tax break would expire after four years, when you-know-who will be out of office. But it's also because tipped workers seldom earn enough income to pay very much in taxes. As expected, the tax holiday does not apply to the overwhelmingly regressive payroll tax that all workers pay. To most people, the income tax is virtually indistinguishable from the payroll tax; you typically have to earn about $200,000 to pay more in income tax than in FICA tax. Under the House plan, an existing FICA tax credit for tips would be extended for the first time to beauty parlors—but that tax credit is for employers, not employees. Exempting overtime pay from taxable income is much more expensive than doing so for tips. It will cost $124 billion over the next decade, according to the Joint Committee on Taxation. As with the tax holiday for tips, this one will be short-lived, expiring after four years, and workers will still have to pay FICA tax on their overtime pay. Also, you don't get the income-tax exemption if you earn more than $80,000, which happens to be below the household median. Trump also promised to exclude Social Security benefits from taxation, even though the median net worth for people aged 65 to 74 is more than twice that for the general population. People aged 70 and over own about one-third of the nation's total wealth—and Baby Boomers like me, the youngest of whom are 51, own 52 percent. Hurray! So why did Trump promise us a tax break? Because America is a gerontocracy—dominated by older politicians, yes, but also by older voters. Not dominated enough, alas, for my age cohort to have denied Trump the White House; a little-noted fact about the 2024 election was that the Republican candidate for president failed to win the over-65 vote for the first time in a generation. Trump's Social Security tax holiday was too expensive for the House to consider, so instead it expanded by $4000 an existing over-65 tax deduction of $29,200 for married couples filing jointly and $14,600 for single people. None of which we over-65s particularly deserve. But the expansion is only for four years and it's unavailable to couples earning $150,000 or more and single seniors earning $75,000. That keeps its cost down to $72 billion. In sum: If you're working class, this tax bill has very little for you and quite a lot for people much richer than you. Think of it as a studded collar for your next visit to the dungeon, you naughty things. But I recommend, instead, that you recite your safe word, because, really, haven't you had enough of this bullshit?
