Taxation

The new tax bill, “Tax Reform 2.0,” is here, and it makes permanent the $10,000 cap on the state and local tax deduction (SALT) created by the Tax Cut and Jobs Act (TCJA) in December 2017.

The United States used to tax multinational corporations (MNCs) on the basis of their worldwide income, except that most foreign source income would only be taxed when actually repatriated to the United States. This structure naturally created considerable incentive to strip income out of the United States and then not to repatriate it.

Some first impressions, including pondering how this decision intersects with NCAA v. Murphy

In the end, not a single justice would stand up for the rule of Quill, which rule was that a state can only impose a use tax collection obligation on a vendor if it has a physical presence in the state. All the justices agreed that it was the wrong rule, even apparently, when first imposed in 1967. So then why was this a 5–4 decision?

In Wayfair, the Supreme Court overturned the bright-line physical presence rule imposed by Quill. A state can now require an out-of-state vendor to collect the use tax even if that vendor does not have a physical presence within the state. The underlying standard governing when states can impose a use tax collection obligation remains the same: there must be a “substantial nexus.” But what constitutes a substantial nexus? The Court does not give any general guidance, but does make it clear that this standard was satisfied in this case.

Here is the Why and the How (roughly)

(Spoiler Alert: I fail)

(This expedient could possibly even improve state public finance in the long term.)

There have been numerous important discussions of how states might respond to the repeal of the SALT deduction. David Kamin lists some of them here; he also notes that these possible (likely?) responses should be taken into account by the JCT because they will reduce the revenue gains that the federal government is expecting.

The California Supreme Court currently has at least two cases relating to California's fiscal constitution on its current docket;[1] two were decided this summer.[2] The phrase "fiscal constitution" is a term of art that designates all the many provisions of the constitution that dictate how governments can raise and spend money.

There is a strong legal argument that insurers are owed cost-sharing reduction (CSR) payments, notwithstanding the refusal of the current Congress and the President to make the payments. Alas, assuming this is correct, these payments will come too late for current customers and insurers, thereby inflicting real damage to individuals and perhaps permanent damage to the ability of the health insurance system to provide affordable coverage on the individual market.

The California constitution subjects tax increases proposed by a local government to vote at a general election, but does this requirement also apply to an initiative measure proposed by the people themselves? The particular provision of the California constitution at issue, Article XIIIC, section 2(b), added by Proposition 218 in 1996, does not indicate whether or not it also applies to initiative measures.