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Tag: National taxes

  • Harris calls for expanded child tax credit of up to $6,000 for families with newborns

    Harris calls for expanded child tax credit of up to $6,000 for families with newborns

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    U.S. Vice President Kamala Harris speaks at an event with U.S. President Joe Biden (not pictured) in Prince George’s County, Maryland, U.S., August 15, 2024. 

    Elizabeth Frantz | Reuters

    Vice President Kamala Harris on Friday unveiled an economic plan, including an expanded child tax credit worth up to $6,000 in total tax relief for families with newborn children.

    The Democratic presidential nominee’s plan aims to restore the higher child tax credit enacted via the American Rescue Plan in 2021, which provided a maximum credit of up to $3,600 per child, according to a fact sheet from the campaign.

    The 2021 credit was up to $3,000 or $3,600, depending on the child’s age and family’s income. Harris’ proposed tax break would increase for middle- to lower-income families for one year after a child is born.

    “We will provide $6,000 in tax relief to families during the first year of a child’s life,” said Harris during a policy speech in Raleigh, North Carolina.

    More from Personal Finance:
    Vance wants to raise the child tax credit to $5,000. Here’s why that could be difficult
    The expanded child tax credit failed in the Senate. Here’s what it means for families
    Trump and Harris both want no taxes on tips. Why policy experts don’t like the idea

    The plan comes less than one week after Sen. JD Vance of Ohio, former President Donald Trump‘s GOP running mate, floated a $5,000 child tax credit. 

    A Trump campaign official told CNBC: “Trump will consider a significant expansion of the child tax credit that applies to American families.”

    While Harris has followed President Joe Biden’s footsteps with her proposed child tax credit expansion, the $2,400 bonus for newborns is “different and somewhat surprising,” said Kyle Pomerleau, senior fellow and federal tax expert with the American Enterprise Institute. “That, to me, sounds very much like a response to JD Vance.”

    The Harris campaign did not immediately respond to CNBC’s request for comment.

    ‘Bipartisan momentum’ for the child tax credit

    Senate Republicans earlier in August blocked an expanded child tax credit that passed in the House with broad support. However, Republican lawmakers are expected to revisit the measure after the election.

    “There is bipartisan momentum behind expanding the [child tax credit],” said Andrew Lautz, associate director for the Bipartisan Policy Center’s economic policy program.

    There is bipartisan momentum behind expanding the [child tax credit].

    Andrew Lautz

    Associate director for the Bipartisan Policy Center’s economic policy program

    The size of the expansion and future credit design will hinge on which party controls the White House and Congress. But the House-passed bill and Senate negotiations could be a starting point, Lautz said.

    Future child tax credit expiration

    Without action from Congress, the maximum child tax credit will drop from $2,000 to $1,000 once Trump’s 2017 tax cuts expire after 2025.

    The American Rescue Plan temporarily increased the maximum child tax credit from $2,000 to either $3,000 or $3,600, depending on the child’s age. Families received up to half via monthly payments for 2021.

    The child poverty rate fell to a historic low of 5.2% in 2021, largely due to the credit’s expansion, according to a Columbia University analysis.

    If there’s a future child tax credit expansion, Pomerleau doesn’t expect it to be as large as the tax break that Harris or Vance have proposed.

    Amid the federal budget deficit, lawmakers are already wrestling with trillions in expiring tax cuts that are “prohibitively expensive,” he said.

    Expanding the child tax credit to $3,000 or $3,600 could cost an estimated $1.1 trillion over a decade, according to the Committee for a Responsible Federal Budget. Meanwhile, the expansion to $6,000 for newborns could cost $100 billion.

    The Harris campaign’s economic plan fact sheet said she would fulfill her “commitment to fiscal responsibility,” including calls for higher taxes on wealthy Americans and large corporations.

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  • Tim Walz vs. JD Vance: What the 2024 presidential running mates could mean for your wallet

    Tim Walz vs. JD Vance: What the 2024 presidential running mates could mean for your wallet

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    Democratic vice presidential candidate and Minnesota Governor Tim Walz (L), and Republican Vice Presidential candidate Sen. JD Vance (R-OH).

    Getty Images

    Housing

    Affordable housing is an important topic for many Americans and both Walz and Vance have addressed the issue.

    In May 2023, Walz signed housing legislation that included $200 million in down payment assistance. The bill also had $200 million for housing infrastructure and $40 million for workforce housing.

    “We expect Walz to be an advocate for demand-side approaches to housing,” Jaret Seiberg, analyst at TD Cowen wrote in a July statement. “These are the type of housing ideas we would expect in a Harris administration,” she wrote.

    Demand-side approaches to housing aim to help individual households by improving housing quality or reducing monthly housing costs.

    Meanwhile, Vance, who is also a proponent of affordable housing, highlighted the issue in his Republican National Convention acceptance speech and along the campaign trail.

    “Prior to running for Senate, Vance argued that one key to tackling poverty is to address affordable housing,” and he has opposed institutional ownership of rental homes and Chinese buyers for U.S. real estate, Seiberg wrote.

    Child tax credit

    Without action from Congress, trillions of tax breaks enacted by Trump are scheduled to expire after 2025, including the child tax credit, which will drop from $2,000 to $1,000 per child. 

    Congress in 2021 approved a temporary expansion of the child tax credit, including upfront monthly payments, which reduced the child poverty rate to a historic low of 5.2% for 2021, according to a Columbia University analysis.

    Following the federal policy, Minnesota enacted a refundable state-level child tax credit in 2023, which Walz described as “signature accomplishment.”    

    Minnesota’s new child tax credit is unusual in its narrowness, but it is the most generous in the nation for low-income households.

    Jared Walczak

    Vice president of state projects at the Tax Foundation

    “Minnesota’s new child tax credit is unusual in its narrowness,” said Jared Walczak, vice president of state projects at the Tax Foundation. “But it is the most generous in the nation for low-income households.” 

    However, a permanent federal child tax credit expansion could be difficult, particularly amid a divided Congress and increasing concerns over the federal budget deficit.

    Walz’s campaign did not respond to CNBC’s request for comment.

    Senate Republicans blocked a federal child tax credit expansion last week, and Sen. Mike Crapo, R-Idaho, the ranking member of the Senate Finance Committee, described the vote as a “blatant attempt to score political points.”

    Despite the failed procedural vote, Crapo voiced openness to negotiating a “child tax credit solution that a majority of Republicans can support.”

    Democrats scheduled the vote partially in response to Vance, who has positioned himself as a pro-family candidate. Vance was not present for the Senate vote, but has expressed support for the child tax credit.

    Vance’s campaign did not respond to CNBC’s request for comment. 

    Student loans

    Vance has spoken out against student loan forgiveness policies.

    “Forgiving student debt is a massive windfall to the rich, to the college educated, and most of all to the corrupt university administrators of America,” Vance, a Yale Law School graduate wrote on X in April 2022. “Republicans must fight this with every ounce of our energy and power.”

    Outstanding education debt in the U.S. stands at around $1.6 trillion. Nearly 43 million people — or 1 in 6 adult Americans — carry student loans. Women and people of color are most burdened by the debt.

    Vance does seem to approve of loan forgiveness in extreme cases. In May, he helped introduce legislation that would excuse parents from student loans they took on for a child who became permanently disabled.

    Jane Fox, chapter chair of the Legal Aid Society Attorneys union, UAW local 2325, said it was hypocritical and incorrect of Vance to frame debt relief as a benefit to those who are well off.

    “Student debt forgiveness is a working-class issue,” Fox said. “Those in the 1% who went to elite institutions and then worked in private equity as Senator Vance did rarely need debt relief.”

    Vance’s campaign did not respond to CNBC’s request for comment.   

    Meanwhile, Walz, a former school teacher, has supported programs to alleviate the burden of student debt on people, said higher education expert Mark Kantrowitz.

    He signed a student loan forgiveness program for nurses into law in Minnesota, Kantrowitz said, as well as a free tuition initiative for low-income students.

    “As my daughter prepares to head off to college next year, affordability and student loan debt are at the front of our minds,” Walz wrote on Facebook in 2018. “Every Minnesotan deserves a shot at a great education without being held back by soaring costs and student loan debt.”

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  • Your home sale may leave you in a tax shock. Here’s how to reduce your capital gains tax bill

    Your home sale may leave you in a tax shock. Here’s how to reduce your capital gains tax bill

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    Witthaya Prasongsin | Moment | Getty Images

    Despite a slump in U.S. home sales, many homeowners made a profit selling property in 2023. Those gains could trigger a tax bill this season, depending on the size of the windfall, experts say.

    In 2023, home sellers made a $121,000 profit on the typical median-priced single-family home, according to ATTOM, a nationwide property database. That’s down from $122,600 in 2022.  

    But sometimes profits exceed the IRS limits for tax-free gains and “it’s a shock” for sellers, said certified public accountant Miklos Ringbauer, founder of MiklosCPA in Los Angeles. 

    More from Smart Tax Planning:

    Here’s a look at more tax-planning news.

    Still, “the tax laws were written to encourage homeownership,” and many sellers qualify for a tax break, Ringbauer said.  

    Single homeowners can shield up to $250,000 of home sales profit from capital gains taxes and married couples filing jointly can exclude up to $500,000, provided they meet IRS eligibility.

    If you’ve owned the property for more than one year, profits above $250,000 and $500,000 are subject to long-term capital gains taxes, levied at 0%, 15% or 20%, depending on your 2023 taxable income. (You calculate “taxable income” by subtracting the greater of the standard or itemized deductions from your adjusted gross income.)

    Who qualifies for the capital gains exemptions

    There are strict rules to qualify for the $250,000 or $500,000 capital gains exclusions, Ringbauer warned. 

    The “ownership test” says you must own the home for at least two of the past five years before your home sale — but that’s only required for one spouse if you’re married and filing jointly.

    There’s also a “residence test,” which requires the home to be your primary residence for any 24 months of the five years before sale, with some exceptions. (The 24 months of residence can fall anywhere within the five year period, and it doesn’t have to be a single block of time.)

    Both spouses must meet the residence requirement for the full exclusion.

    A partial exclusion may also be possible if you sold your home because of a workplace location change, for health reasons or for “unforeseeable events,” according to the IRS.

    Generally, you can’t get the tax break if you received the exclusion for the sale of another home within two years of your closing date.

    How to reduce your home sale profits

    If your capital gain exceeds the IRS exclusions, it’s possible to reduce your profits by increasing your home’s original purchase price or “basis,” according to certified financial planner Assunta McLane, managing director of Summit Place Financial Advisors in Summit, New Jersey.

    You can increase your home’s basis by adding certain improvements you’ve made to the property to “prolong its useful life,” according to the IRS.

    For example, you could tack on the cost of home additions, updated systems, landscaping or new appliances. But the cost of repairs and maintenance generally don’t count.

    Of course, you’ll need detailed records to show proof of capital improvements, because “estimates don’t work when it comes to an audit,” Ringbauer said.

    After a home sale, the IRS receives a copy of Form 1099-S, which shows your closing date and gross proceeds. But you need paperwork to prove any changes to your home’s basis.

    Failing to keep home improvement records throughout ownership is a “common mistake,” McLane said.

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  • Rent or buy? Here’s how to make that decision in the current real estate market

    Rent or buy? Here’s how to make that decision in the current real estate market

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    Choosing whether to rent or buy has never been a simple decision — and this ever-changing housing market isn’t making it any easier. With surging mortgage rates, record rents and home prices, a potential economic downturn and other lifestyle considerations, there’s so much to factor in.

    “This is an extraordinarily unique market because of the pandemic and because there was such a run on housing so you have home prices very high, you also have rent prices very high,” said Diana Olick, senior climate and real estate correspondent for CNBC.

    By the numbers, renting is often cheaper. On average across the 50 largest metro areas in the U.S., a typical renter pays about 40% less per month than a first-time homeowner, based on asking rents and monthly mortgage payments, according to Realtor.com.

    In December 2022, it was more cost-effective to rent than buy in 45 of those metros, the real estate site found. That’s up from 30 markets the prior year.

    How does that work out in terms of monthly costs? In the top 10 metro regions that favored renting, monthly starter homeownership costs were an average of $1,920 higher than rents.

    But that has not proven to be the case for everyone.

    Leland and Stephanie Jernigan recently purchased their first home in Cleveland for $285,000 — or about $100 per square foot. The family of seven will also have Leland’s mother, who has been fighting breast cancer, moving in with them.

    By their calculations, this move — which expands their space threefold and allowing them to take care of Leland’s mother — will be saving them more than $700 per month.

    ‘You don’t buy a house based on the price of the house’

    “You don’t buy a house based on the price of the house,” Olick said. “You buy it based on the monthly payment that’s going to be principal and interest and insurance and property taxes. If that calculation works for you and it’s not that much of your income, perhaps a third of your income, then it’s probably a good bet for you, especially if you expect to stay in that home for more than 10 years. You will build equity in the home over the long term, and renting a house is really just throwing money out.”

    Mortgage rates dropped slightly in early March, due to the stress on the banking system from the recent bank failures. They are moving up again, although they are currently not as high as they were last fall. The average rate on a 30-year fixed-rate mortgage is 6.59% as of April — up from 3.3% around the same time in 2021.

    But that hasn’t significantly dampened demand.

    “As the markets kind of bubbled in certain parts of the country and other parts of the country priced out, we’ve seen a lot of investors coming in looking for affordable homes that they can buy and rent,” said Michael Azzam, a real estate agent and founder of The Azzam Group in Cleveland.

    “We’re still seeing relatively high demand” he added. “Prices have still continued to appreciate even with interest rates where they’re at. And so we’re still seeing a pretty active market here.”

    Buying a home is part of the American Dream

    The Jernigans are achieving a big part of the American Dream. Buying a home is a life event that 74% of respondents in a 2022 Bankrate survey ranked as the highest gauge of prosperity — eclipsing even having a career, children or a college degree.

    The purchase is also a full-circle moment for Leland, who grew up in East Cleveland, where his family was on government assistance.

    “I came from a single-mother home who struggled to put food on the table and always wanted better for her children … it was more criminals than there were police … It is not the type of neighborhood that I wanted my children to grow up in,” said Jernigan.

    The new homeowner also has his eye on building a brighter future for more children than just his own. Jernigan plans to purchase homes in his old neighborhood, renovate them and create a safe space for those growing up like he did.

    “I’m here because someone saw me and saw the potential in me and gave me advice that helped me. … and I just want to pay it forward to someone else” Jernigan said.

    Watch the video above to learn more.

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  • You can still score a 2022 tax break with pretax IRA contributions — here’s how to qualify

    You can still score a 2022 tax break with pretax IRA contributions — here’s how to qualify

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    There’s still time to make a pretax individual retirement account contribution for 2022 — and possibly trim your tax bill or boost your refund — if you qualify.

    For 2022, the IRA contributions limit was $6,000, with an extra $1,000 for investors age 50 and older, and the tax deadline this year is April 18 for most Americans.

    You can make your 2022 IRA contribution through the April tax deadline in 2023, as long as you designate the deposit for tax year 2022. But you need to know the IRA deductibility rules before making a contribution, experts say.

    More from Smart Tax Planning:

    Here’s a look at more tax-planning news.

    “The deductibility rules for pretax IRA contributions can be confusing,” said certified financial planner Kevin Brady, vice president at Wealthspire Advisors in New York.

    That’s because eligibility depends on three factors: your filing status, modified adjusted gross income and workplace retirement plan participation, he said.

    How to know if you qualify for the tax break

    Eligibility is simplest for a married couple filing together when both spouses don’t participate in a workplace retirement plan, according to Julie Hall, a CFP at Vision Capital Partners in Ann Arbor, Michigan.

    “They can both deduct and it doesn’t matter what their income is,” which may be appealing to higher earners, she said.

    However, it gets more complicated if either partner has retirement plan coverage at work and participates in the plan. “Participation” may include employee contributions, company matches, profit-sharing or other employer deposits.

    Depending on your filing status and income, you may be able to deduct all, part or none of your IRA contributions.

    The 2022 income thresholds for IRA deductibility

    “It’s important to understand there are deductibility limitations,” said Malcolm Ethridge, a CFP and executive vice president of CIC Wealth in Rockville, Maryland. With a workplace plan, some or all of your contributions may not be deductible, depending on earnings.

    For 2022, single investors with a workplace retirement plan may claim a tax break for their entire IRA contribution if their modified adjusted gross income is $68,000 or less.

    Although there’s a partial deduction before reaching $78,000, the tax break disappears after meeting that threshold.

    Even if you maxed out the plan at your current company, your income could still be low enough to make a tax-deductible [IRA] contribution.

    Malcolm Ethridge

    Executive vice president of CIC Wealth

    Married couples filing together can get the full benefit with $109,000 or less in income, and they can receive a partial tax break before hitting $129,000.

    You can see the full IRS chart for 2022 on IRA deductibility here.

    “Even if you maxed out the plan at your current company, your income could still be low enough to make a tax-deductible [IRA] contribution,” Ethridge said.

    How to know if a pretax IRA contribution makes sense

    Of course, just because you qualify for a deduction doesn’t mean you should make the pretax IRA contribution, Hall said.

    Before making the deposit, investors need to weigh their investment goals, along with their current tax brackets versus expected tax bracket in retirement, she said.

    Plus, you may consider your other buckets of retirement savings — and the tax consequences upon withdrawal, such as capital gains, regular income taxes or tax-free income. 

    “Yes, you can benefit from the deduction today,” Hall said. But you may opt for further tax diversification by adding more to another type of account, she said.

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  • IRS says many state rebates aren’t taxable at the federal level. Some may face filing struggle, tax pros warn

    IRS says many state rebates aren’t taxable at the federal level. Some may face filing struggle, tax pros warn

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    The IRS on Friday issued federal tax guidance for millions of Americans who received state rebates or payments in 2022.

    The announcement came about a week after the agency had urged those taxpayers to hold off on filing while it determined if the funds are taxable on federal returns.

    “The IRS has determined that in the interest of sound tax administration and other factors, taxpayers in many states will not need to report these payments on their 2022 tax returns,” the agency said in a statement.

    The agency said taxpayers in California, Colorado, Connecticut, Delaware, Florida, Hawaii, Idaho, Illinois, Indiana, Maine, New Jersey, New Mexico, New York, Oregon, Pennsylvania and Rhode Island won’t need to report these payments on their federal tax returns. Some Alaska taxpayers may also avoid federal levies on certain payments.

    Taxpayers in Georgia, Massachusetts, South Carolina and Virginia may also skip federal tax reporting for some payments. But eligibility may hinge on factors from your previous tax filings.  

    More from Smart Tax Planning:

    Here’s a look at more tax-planning news.

    Californians may still face filing challenges

    “This is the right ruling by the IRS,” said Adam Markowitz, an enrolled agent and vice president at Luminary Tax Advisors in Windermere, Florida. “It’s unfair to punish taxpayers this late in the game if they were going to change anything.”

    However, he said there may be challenges for California taxpayers because the state already issued them 1099-MISC forms for payments of more than $600, which reported the state’s “Middle Class Tax Refund” as a taxable payment to the IRS.

    More than 16.5 million California taxpayers have received the payment, according to the state’s Franchise Tax Board. Overall, more than 31.6 million residents benefited including taxpayers and their dependents.

    “The state of California really did everyone a disservice by issuing 1099-MISC [forms],” said Dan Herron, a San Luis Obispo, California-based certified financial planner at Elemental Wealth Advisors. He is also a certified public accountant.

    If the state doesn’t amend and reissue those forms to the IRS, it may cause a mismatch when California taxpayers file their federal returns, he said.

    Typically, a mismatch between tax forms and returns triggers automated notices, which may delay refunds or require taxpayers to contact the IRS to resolve.

    “I don’t know how the IRS system is going to handle that,” Herron added.

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  • Supreme Court OKs handover of Trump tax returns to Congress

    Supreme Court OKs handover of Trump tax returns to Congress

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    WASHINGTON — The Supreme Court on Tuesday cleared the way for the imminent handover of former President Donald Trump’s tax returns to a congressional committee after a three-year legal fight.

    The court, with no noted dissents, rejected Trump’s plea for an order that would have prevented the Treasury Department from giving six years of tax returns for Trump and some of his businesses to the Democratic-controlled House Ways and Means Committee.

    Alone among recent presidents, Trump refused to release his tax returns either during his successful 2016 campaign or his four years in the White House, citing what he said was an ongoing audit by the IRS. Last week, Trump announced he would run again in 2024.

    It was the former president’s second loss at the Supreme Court in as many months, and third this year. In October, the court refused to step into the legal fight surrounding the FBI search of Trump’s Florida estate that turned up classified documents.

    In January, the court refused to stop the National Archives from turning over documents to the House committee investigating the Jan. 6 insurrection at the Capitol. Justice Clarence Thomas was the only vote in Trump’s favor.

    In the dispute over his tax returns, the Treasury Department had refused to provide the records during Trump’s presidency. But the Biden administration said federal law is clear that the committee has the right to examine any taxpayer’s return, including the president’s.

    Lower courts agreed that the committee has broad authority to obtain tax returns and rejected Trump’s claims that it was overstepping and only wanted the documents so they could be made public.

    Chief Justice John Roberts imposed a temporary freeze on Nov. 1 to allow the court to weigh the legal issues raised by Trump’s lawyers and the counter arguments of the administration and the House of Representatives.

    Just over three weeks later, the court lifted Roberts’ order without comment.

    The Trump campaign did not immediately respond to a request for comment.

    The House contended an order preventing the IRS from providing the tax returns would leave lawmakers “little or no time to complete their legislative work during this Congress, which is quickly approaching its end.”

    Had Trump persuaded the nation’s highest court to intervene, he could have run out the clock on the committee, with Republicans ready to take control of the House in January. They almost certainly would have dropped the records request if the issue had not been resolved by then.

    The House Ways and Means panel and its chairman, Democrat Richard Neal of Massachusetts, first requested Trump’s tax returns in 2019 as part of an investigation into the Internal Revenue Service’s audit program and tax law compliance by the former president. A federal law says the Internal Revenue Service “shall furnish” the returns of any taxpayer to a handful of top lawmakers.

    The Justice Department under the Trump administration had defended a decision by then-Treasury Secretary Steven Mnuchin to withhold the tax returns from Congress. Mnuchin argued that he could withhold the documents because he concluded they were being sought by Democrats for partisan reasons. A lawsuit ensued.

    After President Joe Biden took office, the committee renewed the request, seeking Trump’s tax returns and additional information from 2015-2020. The White House took the position that the request was a valid one and that the Treasury Department had no choice but to comply. Trump then attempted to halt the handover in court.

    Then-Manhattan District Attorney Cyrus Vance Jr. obtained copies of Trump’s personal and business tax records as part of a criminal investigation. That case, too, went to the Supreme Court, which rejected Trump’s argument that he had broad immunity as president.

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  • UK’s self-billed ‘Scrooge’ promises tax rises, spending cuts

    UK’s self-billed ‘Scrooge’ promises tax rises, spending cuts

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    Britain’s Treasury chief, Jeremy Hunt, has warned a spending crunch and tax increases are on their way as he bids to fill the “black hole” in the country’s finances

    LONDON — Britain’s Treasury chief warned Sunday of a coming spending crunch and tax increases for cash-strapped Britons as he bids to fill the “black hole” in the country’s finances.

    Billing himself as a Scrooge figure ahead of Thursday’s Autumn Statement, when he will update Parliament on the government’s budget measures, Jeremy Hunt said he was forced to make “very difficult decisions” in his attempt to curb inflation and put the economy back on an even keel.

    He told British broadcasters that he was determined to make an expected recession as shallow as possible, and warned that everyone could expect to pay more tax.

    “I’m a Conservative chancellor and I think I’ve been completely explicit that taxes are going to go up, and that’s a very difficult thing for me to do because I came into politics to do the exact opposite,” he told the BBC, using his official title, Chancellor of the Exchequer.

    Hunt is seeking to make up to 60 billion pounds ($71 billion) in savings and extra revenue in a bid to tighten up public finances and undo some of the damage economists say was done by his predecessor, Kwasi Kwarteng, and former prime minister Liz Truss.

    According to the Resolution Foundation, a think tank, Truss and Kwarteng blew 20 billion pounds on unfunded cuts to national insurance and stamp duty, with a further 10 billion lost to higher interest rates and Government borrowing costs.

    Hunt said he would continue his predecessor’s pledge to help Britons with soaring energy bills, but added government departments could expect to see cuts.

    Earlier he told The Sunday Times in an interview “I’m Scrooge who’s going to do things that make sure Christmas is never canceled.”

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  • EU court sides with Fiat Chrysler in tax advantage case

    EU court sides with Fiat Chrysler in tax advantage case

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    LUXEMBOURG — The European Union’s top court on Tuesday overturned a decision requiring automaker Fiat Chrysler to pay up to 30 million euros ($30 million) in back taxes to Luxembourg.

    The European Commission, the EU’s executive arm and anti-trust regulator, had determined in 2015 that a 2012 Luxembourg tax ruling favored Fiat companies in Europe and was incompatible with state aid rules in the 27-nation bloc.

    A European court ruled in the commission’s favor in 2019, ordering the automaker to return the tax break. Fiat Chrysler, which last year merged with France’s PSA Peugeot to form Stellantis, asked the higher court to set aside the order.

    The Court of Justice of the EU said Tuesday that the commission failed to take into account the typical tax laws in Luxembourg when it was determining whether the automaker got a tax advantage and that the EU’s General Court “committed an error of law” in upholding that approach three years ago.

    EU competition commissioner Margrethe Vestager tweeted that Tuesday’s ruling was a “big loss for tax fairness.”

    “The Commission is committed to continue using all the tools at its disposal to ensure that fair competition is not distorted in the Single Market through the grant by Member States of illegal tax breaks to multinational companies,” she said in a statement.

    It comes as countries in Europe and around the world are working to enshrine into law a global minimum tax deal that more than 130 nations signed on to last year, designed to create a more equal footing in attracting and keeping multinational companies.

    It aims to deter multinationals from stashing profits in countries where they pay little or no taxes — commonly known as tax havens.

    Stellantis is “pleased that the Court of Justice has confirmed our view that the Commission was wrong to consider our tax ruling to be unlawful state aid,” spokeswoman Valerie Gillot said.

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  • New Zealand farmers hit streets to protest cow-burp tax plan

    New Zealand farmers hit streets to protest cow-burp tax plan

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    WELLINGTON, New Zealand — Farmers across New Zealand took to the streets on their tractors Thursday to protest government plans to tax cow burps and other greenhouse gas emissions, although the rallies were smaller than many had expected.

    Lobby group Groundswell New Zealand helped organize more than 50 protests in towns and cities across the country, the biggest involving a few dozen vehicles.

    Last week, the government proposed a new farm levy as part of a plan to tackle climate change. The government said it would be a world first, and that farmers should be able to recoup the cost by charging more for climate-friendly products.

    Because farming is so big in New Zealand — there are 10 million beef and dairy cattle and 26 million sheep, compared to just 5 million people — about half of all greenhouse gas emissions come from farms. Methane from burping cattle makes a particularly big contribution.

    But some farmers argue the proposed tax would actually increase global greenhouse gas emissions by shifting farming to countries less efficient at making food.

    At the protest in Wellington, farmer Dave McCurdy said he was disappointed in the small turnout, but said most farmers were working hard on their farms during a spell of good spring weather at a particularly busy time of year.

    He said farmers were good environmental stewards.

    “It’s our life, our family’s lives,” he said. “We’re not out there to wreck it, we wouldn’t make any money. We love our farms. That’s what annoys us. We’re painted at these bad guys, but a lot of farmers have spent generations looking after that land.”

    He said the proposed tax didn’t take proper account of all the trees and brush he and other farmers had planted, which helped trap carbon and offset emissions. He said if the proposed tax and herd reductions went ahead, it would be ruinous to many farmers.

    “I’m out,” he said. “Waste of time.”

    Farming remains vital to New Zealand’s economy. Dairy products, including those used to make infant formula in China, are the nation’s largest export earner.

    McCurdy said farmers had almost singlehandedly kept the economy afloat during the COVID-19 lockdowns, and now that the threat had passed and a recession was looming, the government was coming after them.

    New Zealand Prime Minister Jacinda Ardern has pledged the nation will become carbon neutral by 2050. Part of that plan includes reducing methane emissions from farm animals by 10% by 2030 and by up to 47% by 2050.

    The government had worked with farmers and other groups to try to come up with an emissions plan they could all live with. But many farmers have been incensed by the government’s final proposal, while environmentalists have said it doesn’t go nearly far enough.

    Farmer Matt Swansson said he’d “had a gutsful” of the government and would consider refusing to pay the new tax.

    He said on beautiful evenings on his farm, he thinks he has the best job in the world.

    “But when it’s rain, drizzle, and you get home and listen to the news,” Swansson said. “Why do you bother?”

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  • Maryland judge strikes down nation’s first digital ad tax

    Maryland judge strikes down nation’s first digital ad tax

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    ANNAPOLIS, Md. — The nation’s first tax on digital advertising was struck down as unconstitutional by a Maryland judge on Monday. It’s a law that attorneys for Big Tech have contended unfairly targets companies like Facebook, Google and Amazon in a separate federal case against the same law.

    Judge Alison Asti of Anne Arundel County Circuit Court said the Maryland law violates the U.S. Constitution’s prohibition on state interference with interstate commerce. She also ruled that it violates the federal Internet Tax Freedom Act, which prohibits discrimination against electronic commerce.

    The state estimated the tax on digital advertising could raise about $250 million a year to help pay for a sweeping K-12 education measure to expand early childhood education, increase teacher salaries, boost college and career readiness and help struggling schools.

    Raquel Coombs, a spokesperson for Maryland Attorney General Brian Frosh, said the attorney general’s office is reviewing the decision to determine next steps. Comptroller Peter Franchot’s office also is reviewing the decision, said spokesperson Susan O’Brien.

    Verizon Media Inc. and Comcast challenged the law in the state’s court. The law also is being challenged in federal court by the U.S. Chamber of Commerce. Oral arguments in that case are scheduled for Nov. 29.

    The Maryland law’s fate in the courts is being closely watched by other states that have also weighed a similar tax for online ads.

    The law was enacted last year by the Maryland General Assembly, which is controlled by Democrats, over the veto of Republican Gov. Larry Hogan.

    The law would have taxed revenue that the affected companies make on digital advertisements shown in Maryland.

    The tax rate would have been 2.5% for businesses making more than $100 million in global gross annual revenue; 5% for companies making $1 billion or more; 7.5% for companies making $5 billion or more and 10% for companies making $15 billion or more.

    Republican lawmakers cheered the judge’s ruling on Monday as “a huge win for Maryland’s small businesses who rely on affordable digital advertising to market their services.”

    “This is a refreshing check on Maryland’s Democratic Supermajority who has no problem creating new, one-of-a-kind taxes that violate the First Amendment and tax Maryland’s job creators out of business,” said Sen. Bryan Simonaire, the Senate minority leader, and Sen. Justin Ready, the Senate minority whip, in a joint statement.

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  • UK leader Liz Truss goes from triumph to trouble in 6 weeks

    UK leader Liz Truss goes from triumph to trouble in 6 weeks

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    LONDON — When Liz Truss was running to lead Britain this summer, an ally predicted her first weeks in office would be turbulent.

    But few were prepared for the scale of the sound and fury -– least of all Truss herself. In just six weeks, the prime minister’s libertarian economic policies have triggered a financial crisis, emergency central bank intervention, multiple U-turns and the firing of her Treasury chief.

    Now Truss faces a mutiny inside the governing Conservative Party that leaves her leadership hanging by a thread.

    Conservative lawmaker Robert Halfon fumed on Sunday that the last few weeks had brought “one horror story after another.”

    “The government has looked like libertarian jihadists and treated the whole country as kind of laboratory mice on which to carry out ultra, ultra free-market experiments,” he told Sky News.

    It’s not as if the party wasn’t warned. During the summertime contest to lead the Conservatives, Truss called herself a disruptor who would challenge economic “orthodoxy.” She promised she would cut taxes and slash red tape, and would spur Britain’s sluggish economy to grow.

    Her rival, former Treasury chief Rishi Sunak, argued that immediate tax cuts would be reckless amid the economic shockwaves from the coronavirus pandemic and the war in Ukraine.

    The 172,000 Conservative Party members -– who are largely older and affluent — preferred Truss’ boosterish vision. She won 57% of members’ votes to become leader of the governing party on Sept. 5. The next day, she was appointed prime minister by Queen Elizabeth II in one of the monarch’s final acts before her death on Sept. 8.

    Truss’ first days in office were overshadowed by a period of national mourning for the queen. Then on Sept. 23, Treasury chief Kwasi Kwarteng announced the economic plan he and Truss had drawn up. It included 45 billion pounds ($50 billion) in tax cuts -– including an income tax reduction for the highest earners — without an accompanying assessment of how the government would pay for them.

    Truss was doing what she and allies said she would. Libertarian think-tank chief Mark Littlewood predicted during the summer there would be “fireworks” as the new prime minister pushed for economic reform at “absolutely breakneck speed.”

    Still, the scale of the announcement took financial markets, and political experts, by surprise.

    “Many of us, wrongly, expected her to pivot after she won the leadership contest in the way many presidents do after winning the primaries,” said Tim Bale, professor of politics at Queen Mary University of London. “But she didn’t do that. She actually meant what she said.”

    The pound plunged to a record low against the U.S. dollar and the cost of government borrowing soared. The Bank of England was forced to step in to buy government bonds and prevent the financial crisis from spreading to the wider economy. The central bank also warned that interest rates will have to rise even faster than expected to curb inflation that is running at around 10%, leaving millions of homeowners facing big increases in mortgage payments.

    Jill Rutter, a senior fellow at the Institute for Government think tank, said Truss and Kwarteng made a series of “unforced errors” with their economic package.

    “They shouldn’t have made their contempt for economic institutions quite so clear,” she said. “I think they could have listened to advice. And I think one of the things that they got very wrong was to announce one part of the package, the tax cuts … without the spending side of the equation.”

    As the negative reaction grew, Truss began to abandon bits of the package in a bid to reassure her party and the markets. The tax cut for top earners was ditched in the middle of the Conservative Party’s annual conference in early October as the party rebelled.

    It wasn’t enough. On Friday, Truss fired Kwarteng and replaced her longtime friend and ally with Jeremy Hunt, who served as health secretary and foreign secretary in the Conservative governments of David Cameron and Theresa May.

    At a brief, downbeat news conference, the prime minister acknowledged that “parts of our mini budget went further and faster than markets were expecting.” She reversed a planned cut in corporation tax, another pillar of her economic plan, to “reassure the markets of our fiscal discipline.”

    Truss is still prime minister in name, but power in government has shifted to Hunt, who has signaled he plans to rip up much of her remaining economic plan when he makes a medium-term budget statement on Oct. 31. He has said tax increases and public spending cuts will be needed to restore the government’s fiscal credibility.

    Still, Hunt insisted Sunday: “The prime minister’s in charge.”

    “She’s listened. She’s changed. She’s been willing to do that most difficult thing in politics, which is to change tack,” Hunt told the BBC.

    The Conservative Party still commands a large majority in Parliament, and -– in theory -– has two years until a national election must be held. Polls suggest an election would be a wipeout for the Tories, with the Labour Party winning a big majority.

    Conservative lawmakers are agonizing about whether to try to replace their leader for a second time this year. In July, the party forced out Prime Minister Boris Johnson, who led them to victory in 2019, when serial ethics scandals ensnared his administration.

    Now many of them have buyer’s remorse about his replacement. Under party rules, Truss is safe from a leadership challenge for a year, but some Conservative legislators believe she can be forced to resign if the party can agree on a successor. Defeated rival Sunak, House of Commons leader Penny Mordaunt and popular Defense Secretary Ben Wallace are among the names being mentioned as potential replacements. Johnson, who remains a lawmaker, still has supporters, too.

    Junior Treasury minister Andrew Griffith argued Sunday that Truss should be given a chance to try to restore order.

    “This is a time when we need stability,” he told Sky News. “People at home are just tearing their hair out at the level of uncertainty. What they want to see is a competent government getting on with (the) job.”

    ———

    Follow AP’s coverage of British politics at https://apnews.com/hub/united-kingdom

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  • UK Treasury chief out as prime minister plans U-turn

    UK Treasury chief out as prime minister plans U-turn

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    LONDON — Embattled British Prime Minister Liz Truss fired her Treasury chief ahead of a hastily arranged news conference on Friday as she struggled to calm markets and hang on to her job following the release of a controversial economic plan.

    Kwasi Kwarteng’s departure comes after just over a month in the job — and three weeks after he announced a tax-cutting “mini budget” that sent the pound plunging to record lows against the dollar.

    Kwarteng tweeted his departure letter to Truss, saying “You have asked me to stand aside as your Chancellor. I have accepted.”

    He defended the government’s economic plan, saying the country faces an “incredibly difficult” situation and “following the status quo was not an option.”

    Truss is due to hold a news conference later Friday. She is under intense pressure to scrap some of the 43 billion pounds ($48 billion) in unfunded tax cuts that roiled financial markets and led the Bank of England to step in to prevent a wider economic crisis.

    Senior members of the Conservative Party were publicly advising the government to take action. The pound rose as much as 1.7% against the dollar on Thursday and bond markets stabilized amid expectations that Truss would revise the economic growth plan.

    Truss, a free-market libertarian, came to power last month pledging to cut taxes to spur growth. But her ability to deliver on that commitment is now in doubt.

    Analysts suggest the most likely change in her program would be to abandon a promise to halt her predecessor’s plan to increase corporation tax from 19% to 25%. That would reduce the bill for her program by about 18 billion pounds a year.

    James Athey, the investment director at abrdn, said that it now seemed certain that the government “is about to U-turn on its decision not to U-turn on its profligate tax-cutting policies.″ The rumors are calming markets, he said.

    “The risk now is that investors have forgotten that there are significantly more problems than just an ill-advised and ill-timed fiscal easing to deal with,″ he said. “Inflation is at multi-decade highs, government borrowing is huge as is the current account deficit. The housing market is likely to suffer a hammer blow from the jump in mortgage rates and the war in Ukraine rumbles on. We may well be through the worst of the volatility but I fear that the U.K. is nowhere near out of the woods.”

    Conservative lawmakers are agonizing over whether to try to oust their second leader this year. Truss was elected last month to replace Boris Johnson, who was forced out in July. Some reports suggest senior Conservatives are plotting to replace Truss with a joint ticket of Rishi Sunak and Penny Mordaunt, her two closest rivals in the summer contest for leadership of the party, though it’s unclear how that could be achieved.

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  • New Zealand proposes taxing cow burps, angering farmers

    New Zealand proposes taxing cow burps, angering farmers

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    WELLINGTON, New Zealand — New Zealand’s government on Tuesday proposed taxing the greenhouse gasses that farm animals make from burping and peeing as part of a plan to tackle climate change.

    The government said the farm levy would be a world first, and that farmers should be able to recoup the cost by charging more for climate-friendly products.

    But farmers quickly condemned the plan. Federated Farmers, the industry’s main lobby group, said the plan would “rip the guts out of small town New Zealand” and see farms replaced with trees.

    Federated Farmers President Andrew Hoggard said farmers had been trying to work with the government for more than two years on an emissions reduction plan that wouldn’t decrease food production.

    “Our plan was to keep farmers farming,” Hoggard said. Instead, he said farmers would be selling their farms “so fast you won’t even hear the dogs barking on the back of the ute (pickup truck) as they drive off.”

    Opposition lawmakers from the conservative ACT Party said the plan would actually increase worldwide emissions by moving farming to other countries that were less efficient at making food.

    New Zealand’s farming industry is vital to its economy. Dairy products, including those used to make infant formula in China, are the nation’s largest export earner.

    There are just 5 million people in New Zealand but some 10 million beef and dairy cattle and 26 million sheep.

    The outsized industry has made New Zealand unusual in that about half of its greenhouse gas emissions come from farms. Farm animals produce gasses that warm the planet, particularly methane from cattle burping and nitrous oxide from their urine.

    The government has pledged to reduce greenhouse gas emissions and make the country carbon neutral by 2050. Part of that plan includes a pledge that it will reduce methane emissions from farm animals by 10% by 2030 and by up to 47% by 2050.

    Under the government’s proposed plan, farmers would start to pay for emissions in 2025, with the pricing yet to be finalized.

    Prime Minister Jacinda Ardern said all the money collected from the proposed farm levy would be put back into the industry to fund new technology, research and incentive payments for farmers.

    “New Zealand’s farmers are set to be the first in the world to reduce agricultural emissions, positioning our biggest export market for the competitive advantage that brings in a world increasingly discerning about the provenance of their food,” Ardern said.

    Agriculture Minister Damien O’Connor said it was an exciting opportunity for New Zealand and its farmers.

    “Farmers are already experiencing the impact of climate change with more regular drought and flooding,” O’Connor said. “Taking the lead on agricultural emissions is both good for the environment and our economy.”

    The liberal Labour government’s proposal harks back to a similar but unsuccessful proposal made by a previous Labour government in 2003 to tax farm animals for their methane emissions.

    Farmers back then also vehemently opposed the idea, and political opponents ridiculed it as a “fart tax” — although a “burp tax” would have been more technically accurate as most of the methane emissions come from belching. The government eventually abandoned the plan.

    According to opinion polls, Ardern’s Labour Party has slipped in popularity and fallen behind the main opposition National Party since Ardern won a second term in 2020 in a landslide victory of historic proportions.

    If Ardern’s government can’t find agreement on the proposal with farmers, who have considerable political sway in New Zealand, it’s likely to make it more difficult for Ardern to win reelection next year when the nation goes back to the polls.

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  • UK scraps tax cut for wealthy that sparked market turmoil

    UK scraps tax cut for wealthy that sparked market turmoil

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    BIRMINGHAM, England — The British government has dropped plans to cut income tax for top earners, part of a package of unfunded cuts that sparked turmoil on financial markets and sent the pound to record lows.

    In a dramatic about-face, Treasury chief Kwasi Kwarteng said Monday that he would abandon plans to scrap the top 45% rate of income tax paid on earnings above 150,000 pounds ($167,000) a year.

    “We get it, and we have listened,” he said in a statement. He said “it is clear that the abolition of the 45p tax rate has become a distraction from our overriding mission to tackle the challenges facing our country.”

    The U-turn came after a growing number of lawmakers from the governing Conservative Party turned on government tax plans announced 10 days ago.

    It also came hours after the Conservatives released advance extracts of a speech Kwarteng is due to give later Monday at the party’s annual conference in the central England city of Birmingham. He had been due to say: “We must stay the course. I am confident our plan is the right one.”

    Prime Minister Liz Truss defended the measures on Sunday, but said she could have “done a better job laying the ground” for the announcements.

    Truss took office less than a month ago, promising to radically reshape Britain’s economy to end years of sluggish growth. But the government’s Sept. 23 announcement of a stimulus package that includes 45 billion pounds ($50 billion) in tax cuts, to be paid for by government borrowing, sent the pound tumbling to a record low against the dollar.

    The Bank of England was forced to intervene to prop up the bond market, and fears that the bank will soon hike interest rates caused mortgage lenders to withdraw their cheapest deals, causing turmoil for homebuyers.

    The cuts were unpopular, even among Conservatives. Reducing taxes for top earners and scrapping a cap on bankers’ bonuses while millions face a cost-of-living crisis driven by soaring energy bills was widely seen as politically toxic.

    Truss and Kwarteng insist that their plan will deliver a growing economy and eventually bring in more tax revenue, offsetting the cost of borrowing to fund the current cuts. But they also have signaled that public spending will need to be slashed.

    Kwarteng said the government was sticking to its other tax policies, including a cut next year in the basic rate of income tax and a reversal of a corporation tax hike planned by the previous government.

    The pound rose after Kwarteng’s announcement to around $1.12 — about the value it held before the Sept. 23 budget announcements.

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