Latest news with #JointCommitteeonTaxation
Politico
4 days ago
- Business
- Politico
A $715 billion tax cut turns into a $4.5 trillion sales job
Early polling shows the package is not popular, though most taxpayers won't begin to benefit from the tax cuts until they file their returns next spring. Many are in line for extra-large refunds because Republicans made a number of provisions, including an enlarged Child Tax Credit and a more generous deduction for state and local taxes, retroactively available for the current tax year. During congressional consideration, Senate Republicans were adamant that the correct way to tally the cost of their plan was by comparing the changes to what the government was currently doing, not what was carved into law, as budget scorekeepers normally do. So, by that light, extending current tax policies into next year should cost nothing, and not even be seen as a reduction in taxes. The only tax cuts that counted, Republicans said, were new provisions like Trump's proposals to reduce levies on tips, overtime, auto-loans and seniors, along with enhancements of existing breaks, like a $200-per-child increase in the Child Tax Credit. The tactic drastically reduced the sticker price of the plan, no small deal given concern over federal red ink. And it made it much easier for lawmakers to make many of their provisions a permanent part of the tax code. Otherwise, under the Senate's internal rules, they would have had to find a lot more pay-fors to cover the cost of making permanent breaks for business investment, research and interest expenses. But that current policy baseline now not only makes their tax cuts look less consequential, it also shrinks the anticipated benefits to their constituents. Under the conventional baseline that Republicans spurned, people making between $60,000 and $80,000 would see their taxes fall by an average 12 percent in 2027, the official Joint Committee on Taxation said in an analysis last week. But those people would only get a 4.2 percent cut under a current policy baseline. Nevertheless, days after Trump signed the bill into law, Senate Republicans bragged on X that they had just cut taxes by $4.3 trillion. And lawmakers are now routinely claiming to have passed the largest-ever tax cut, though with a $715 billion price tag, the legislation is not significantly bigger than tax cuts passed during the coronavirus outbreak. The more conventional $4.5 billion estimate moves the legislation up the all-time-biggest-tax-cut list, though there were still larger ones, such as Ronald Reagan's 1981 tax cuts and when Harry Truman cut wartime taxes in 1945.
Miami Herald
15-07-2025
- Business
- Miami Herald
How the 'Big Beautiful Bill' boosts QSBS benefits for startup employees and founders
How the "Big Beautiful Bill" boosts QSBS benefits for startup employees and founders QSBS benefits got an update in Trump's new budget law. Range shares how that could impact startup founders, investors, and employees. The new GOP budget legislation includes a massive win for startup employees and founders: dramatically expanded Qualified Small Business Stock (QSBS) benefits that could save qualifying investors from paying 28% capital gains taxes on millions of dollars in returns. The changes increase the maximum tax exclusion from $10 million to $15 million while allowing partial benefits after just three years instead of the current five-year minimum. For the tech sector specifically, this represents the most significant expansion of startup investment incentives in over a decade. The Joint Committee on Taxation estimates these changes will provide an additional $17.2 billion in tax benefits over the next decade. What Changes with QSBS Under the GOP Tax and Spending Package The GOP budget legislation restructures Qualified Small Business Stock benefits in three key ways: Reduced Holding Period with Tiered Benefits: Previously, you had to hold QSBS for five years to get any tax exclusion. The new rules create a graduated schedule: 50% exclusion after 3 years (effective tax rate: 14%)75% exclusion after 4 years (effective tax rate: 7%)100% exclusion after 5+ years (tax-free) Higher Exclusion Limits: The maximum tax-free gain increases from $10 million to $15 million (or 10 times your investment, whichever is higher). Both limits will be indexed for inflation starting in 2027. Raises the Maximum Gross Asset Threshold For Companies: The gross asset threshold rises from $50 million to $75 million, meaning more mature startups remain QSBS-eligible longer. How These Changes Amplify the QSBS Tax Exemption The expanded QSBS rules create three fundamental improvements that benefit anyone holding qualifying startup equity: More Companies Qualify for Tax Exclusion The gross asset threshold increase from $50 million to $75 million means companies can maintain QSBS eligibility deeper into their growth cycles. This expansion particularly helps employees at Series B and C companies who previously lost qualification and extends the window for later-stage hires to capture these benefits. Earlier Exit Flexibility with Meaningful Tax Savings The tiered approach transforms QSBS from an all-or-nothing proposition into a graduated benefit system. Rather than losing all tax advantages if you sell before five years, you could capture a 50% exclusion after three years and 75% after four years. This change removes the penalty for circumstances beyond your control, like acquisitions or liquidity needs. Substantially Higher Tax-Free Gains The exclusion cap jumping from $10 million to $15 million means 50% more capital gains could be sheltered from taxes. For high-growth companies where individual equity stakes can reach eight or nine figures, this expansion captures significantly more wealth preservation. Who Might Benefit Most from These Changes These changes can particularly impact several key groups: Serial Entrepreneurs and Angel Investors gain the flexibility to recycle capital between ventures without waiting for arbitrary holding periods, while still capturing substantial tax Employees with Stock Options face less pressure around exercise timing, knowing they'll receive meaningful tax advantages even if their company exits before the traditional five-year Capital and Private Equity professionals can optimize portfolio exits around business fundamentals rather than tax calendars, while still preserving significant tax advantages for their investments. Real-World Example: Million-Dollar Tax Savings Consider this scenario: You exercise $100,000 worth of startup options that grow to $5 million over four years, then your company gets acquired. Under Previous Rules: You'd pay the full 28% QSBS rate on all gains (about $1.37 million in taxes) because you didn't hit the five-year threshold. Under New Rules: You'd get 75% exclusion after four years, paying taxes on only 25% of gains (about $343,000 in taxes)-saving over $1 million. Keeping an Eye on Evolving Tax Legislation With the "Big Beautiful Bill" signed into law, the new exemption structure applies only to QSBS acquired after the enactment date, making timing important for current equity holders considering exercise decisions. This expansion comes at a particularly relevant moment for the tech sector. As artificial intelligence and other emerging technologies drive new startup formation, the enhanced QSBS benefits create stronger incentives for both founding teams and early employees to take entrepreneurial risks. The proposed changes acknowledge that the original $10 million and $50 million thresholds, established in the early 1990s, no longer reflect today's startup economics. This is just one example of how tax policy and financial regulations are constantly in flux. That's one of the reasons why it can be easy to miss out on new wealth strategy opportunities as they emerge. The expanded QSBS tax exemption doesn't require new risk-taking or complex restructuring to make startup equity positions more valuable from a tax perspective, as long as investors know how to time option exercising and stock sales to take advantage of the exclusion. This story was produced by Range and reviewed and distributed by Stacker. © Stacker Media, LLC.
New York Post
14-07-2025
- Business
- New York Post
Why free snacks at the office could soon get scrapped — thanks to new Trump tax law
A popular workplace perk — free office snacks — may be on the chopping block after President Donald Trump's newly signed tax law eliminated a long-standing deduction for employer-provided meals. Starting Jan. 1, US companies will no longer be able to deduct the cost of snacks, coffee or on-site lunches provided to employees. The change, which received little attention during the legislative process, is part of Trump's Big Beautiful Bill that he signed into law on July 4. 4 Free office snacks may soon be a thing of the past for companies after passage of a new tax-and-spending bill. Franci Leoncio – The legislation maintains the scheduled expiration of the food deduction, a move originally set in motion by Trump's 2017 tax law, which had halved the deduction and scheduled its full elimination at the end of this year. The loss of the deduction affects a perk that has become emblematic of modern office culture. Initially popularized during Silicon Valley's dot-com boom, the freebies have become common-place across various sectors, including Wall Street banks and tech companies. According to the Society for Human Resource Management, 44% of US employers now offer free snacks — double the rate from a decade ago. Eliminating the deduction is expected to generate $32 billion in new tax revenue from employers through 2034, according to the Joint Committee on Taxation. But the practical impact on companies remains unclear, as many have yet to disclose whether they will cut back on employee food offerings or absorb the additional cost. Tech and finance, two of the most lucrative sectors in the economy, stand out for the generous office perks that are offered to its employees. 4 President Trump's 'Big Beautiful Bill' was signed into law after the Republican-led Congress managed to get it across the finish line. AFP via Getty Images Google sets the standard with gourmet cafeterias, all-day meals and snack kitchens. Meta and Apple also offer free snacks and on-site meals, with Apple focusing on health and wellness. LinkedIn adds catered meals and sends snack boxes to remote staff, while Indeed provides unique, around-the-clock snack options. In finance, JPMorgan Chase offers 24/7 'Snack Spots' and healthy options, and Goldman Sachs provides stocked pantries and after-hours meal stipends. Every morning, the NY POSTcast offers a deep dive into the headlines with the Post's signature mix of politics, business, pop culture, true crime and everything in between. Subscribe here! Some sectors, however, were spared. Alaska's fishing industry secured an exemption in the final version of the bill, a move aimed at securing the support of Sen. Lisa Murkowski (R-Alaska). Maine's lobstermen, by contrast, did not receive similar treatment after Sen. Susan Collins (R-Maine) declined to support the legislation. The bill ultimately passed with Vice President JD Vance casting the tie-breaking vote. Restaurants also retained their long-standing ability to deduct the cost of meals provided to staff. But the benefit is now off-limits for most other employers, including hospitals, factories and office-based businesses that have traditionally offered free or subsidized food as a means of boosting morale and encouraging longer hours. 4 The newly signed law eliminates corporate tax deductions for on-site meals and snacks. New Africa – Free food has long been viewed by companies as a tool for improving workplace culture. Google co-founder Sergey Brin is famously quoted as instructing office designers to ensure no employee was more than 200 feet from food, underscoring the belief that snacks and casual eating spaces help facilitate collaboration and productivity. Despite the looming cost increase, some in the food services sector are not anticipating a major disruption. Ali Sabeti, chief executive officer of San Francisco-based corporate catering firm ZeroCater Inc., said his company weathered the 2017 reduction in the deduction without losing clients — and he expects the same this time. 4 The elimination of the deduction in Trump's new law takes effect on Jan. 1. REUTERS 'It's pretty inelastic,' Sabeti told Bloomberg News. 'When you take a tax deduction away, the cost is going to go up, but companies will continue to spend, just like if you took away a deduction on a laptop.' 'The Trump administration's rapid deregulation and The One, Big, Beautiful Bill's pro-growth provisions like full equipment expensing will help turbocharge economic and investment growth — growth that will yield better pay, benefits, and perks for American workers than any one-off deduction,' White House spokesperson Kush Desai told The Post.
CNBC
08-07-2025
- Business
- CNBC
Here's what the endowment tax in Trump's 'big beautiful bill' may mean for your college tuition
The "one big beautiful" tax-and-spending package President Donald Trump signed on Friday included several significant changes for higher education — among them, an increased tax on the endowment income of the nation's top colleges. Instead of the existing flat 1.4% tax rate, there is now a new multi-tiered rate of up to 8%, with larger endowments subject to the highest rate. (Schools with fewer than 3,000 tuition-paying students are exempt, regardless of their endowment size.) The Joint Committee on Taxation estimates this endowment tax will bring in $761 million over 10 years. Higher education experts say the new, higher tax rates could lead to revenue shortfalls and cause some schools to raise tuition prices, cut financial aid or both. More from Personal Finance:Trump aims to slash Pell GrantsIs college still worth it? It is for most, but not allWhat to know before you tap your 529 plan The exemption for schools with fewer than 3,000 tuition-paying students scaled back the plan from earlier versions of the GOP's marquee legislation. "It's not an endowment tax anymore, it's a research university tax," said Rick Grafmeyer, a partner at Capitol Tax Partners in Washington. According to a recent analysis from Forbes, at least 11 colleges and universities — including many of the nation's top research institutions — will have their endowment earnings taxed at an 8% or 4% rate in 2026, while five will pay a 1.4% tax. Previously, 56 universities paid about $380 million under that endowment tax rate. Yale University warned that the tax hike would have immediate consequences for the school's bottom line. "Although the endowment tax is lower than what the House passed originally, it still means that Yale will pay an estimated $280 million in the first year it is in effect, and likely more in subsequent years," Yale's President Maurie McInnis said in a statement on July 3. Earlier versions of the proposal called for tiered rates as high as 21%. The university announced before the bill passed that it had already implemented a temporary hiring freeze, lowered annual salary increases for faculty and staff members and delayed several construction projects at the school in anticipation of the tax increase and other federal actions. Higher endowment taxes, along with restrictions on international student enrollment and major cutbacks of federal and state funds, put many colleges in a precarious financial position, according to Robert Franek, editor in chief of The Princeton Review. "Colleges, both private and public, are facing unprecedented fiscal challenges this year and en masse," Franek said "Most concerning, for prospective students, is these factors may cause tuitions to be higher and reduce the amount of financial aid schools award," he added. At some colleges, the higher endowment tax exceeds the college's total financial aid budget, according to higher education expert Mark Kantrowitz, "making it difficult for colleges to continue to award very generous financial aid." Typically, when it comes to offering aid, wealthier institutions have more money to spend. Those generous aid packages remove the most significant financial barrier to higher education and help attract lower-income applicants. Tuition hikes are likely to follow the higher endowment tax, other experts also say. "We're already seeing evidence that institutions are raising their sticker prices more than they have been in the past," Phillip Levine, a fellow at the Brookings Institution and professor of economics at Wellesley College, told CNBC. College tuition has surged by 5.6% a year, on average, since 1983, significantly outpacing other household expenses, a recent study by J.P. Morgan Asset Management found. Going forward, "it doesn't seem like 5% or 6% is out of line or beyond what schools are willing to do, and that's at [both] public and private institutions," Levine said. "And they're doing this because they're expecting revenue shortfalls."
Indian Express
05-07-2025
- Business
- Indian Express
The ‘beauty' of Trump's One Big Beautiful Bill may lie only in the eye of the beholder
President Donald Trump's initiation at the White House was a promise contrary to the new world vision of stable diplomatic ties, greener economies, free trade and reversing decades of tax cuts. Embarking on a journey to 'make America great again', Trump unveiled the One Big Beautiful Bill (OBBB). The Bill quickly turned friends into foes, not least among policy experts, who dread the large fiscal costs. The OBBB, now passed by both houses of Congress and soon to be a reality, proposes to raise the debt ceiling as well as extend tax cuts and deductions introduced by the Tax Cuts and Jobs Act, 2017, which are set to expire this year. The proposed tax cuts come at the cost of Medicaid, the food stamps programme and energy tax credits, all of which are expected to shrink. The Committee for a Responsible Federal Budget, a Washington-based non-profit, estimates that the tax changes, if temporary, will cost $3.4 trillion in primary deficits over the next decade and add $4.1 trillion to current debt. In sharp contrast, the Joint Committee on Taxation, at the request of the Senate GOP, has pegged the costs at a far lower $442 billion. This is mainly arrived at through innovative accounting. Under all estimates, the Bill seems set to deliver a positive macroeconomic impact, although the optimism gets pared down when considering the implications of these measures for low-income households and for the future of the green economy. The Joint Committee on Taxation estimates that the resources available to households in the lowest decile will decrease, whereas that for the top decile will increase. The reduction of taxes on overtime work and tips through 2028 is meant to ensure inclusivity. Yet this is quite insignificant in comparison to the fiscal impact of other tax measures. With Trump's assurance that America was going to drill away, the removal of tax benefits to the clean energy sector is hardly a surprise. The OBBB is set to close the existing commercial and consumer tax credits under the Inflation Reduction Act (IRA). The obsolescence of the measure could be ill thought-out as the American shale industry is at the mercy of OPEC. To 'make America great again', Trump advocated recklessly for inward-looking policies such as tariff hikes, taxes on remittances and immigration control, all of which are attempts to negotiate trade deals bilaterally. This includes the retreat from the global tax deal while getting countries like India and Canada to stall their efforts to apply a digital services tax. The proposals to apply additional income taxes on payments made to persons of a jurisdiction applying 'unfair foreign taxes' — such as a digital services tax or top-up taxes on payments taxed less than the global minimum rate — are clever negotiation tactics that seem to pay off making it a propitious time for large US corporations. Caught in the fire is the Federal Reserve, which has adopted a wait-and-watch approach. The tariff, if carried through, can set off inflationary effects that may transmit slowly and may be exacerbated where international oil prices spike again if tempers soar in West Asia. As the world watches the US manoeuvre through international political and domestic economic headwinds, there is no doubt that US debt is expected to rise, more so if defence budgets are to grow. But is the world willing to hold this debt? The US-Iran conflict has further convoluted diplomatic ties in the region and has economists guessing about what this may mean for the future. If political stress flares, central banks will have to resume an attentive position. If that be the case, the US will also have to rethink its borrowing plans and tax cuts. The yield of the 10-year US treasury is among the highest in its S&P rating class, and with the recent Moody's rating cut, the question is if it can borrow additionally at prevailing costs. A pause on interest rate reductions would raise the costs of borrowing. In spite of the elevated interest rates that pose a domestic fiscal problem, a third of US treasuries are held abroad and are largely with Japan, China and the UK. The willingness of these countries to buy the T-bills will also determine the US's prospects of delivering tax cuts. Given that the US is no longer playing a reliable arbiter, with policy driven by temperament, the currency of its government securities may not be unaffected. The promised return of economic glory may be delayed for the US and for now the beauty of the bill may only lie in the eye of the beholder. The writer is associate professor, NIPFP
