IRS In “Crisis,” Taxing The CTC… And The Unvaccinated

National Taxpayer Advocate: 2021 was the “most challenging year ever” for taxpayers. National Taxpayer Advocate Erin Collins’s  2021 Annual Report to Congress said the agency is “in crisis.” The most serious problems: “taxpayer service and IT challenges, including processing and refund delays, inadequate taxpayer service, limited functionality of online taxpayer accounts, and the IRS’s inability…to develop effective procedures to communicate… by email. IRS answered only 11 percent of 282 million phone calls. It took “months” for the agency to process taxpayer responses to its notices. The report’s main recommendation: More funding. 

Should Congress make the Child Tax Credit (CTC) taxable? TPC’s Howard Gleckman says  a taxable CTC still would be tax-free for low-income households but the after-tax value of the credit would gradually decline with rising incomes. Making the CTC taxable would be unusual since government would be giving money with one hand and taking it back with the other. But it would not be unheard of.

South Carolina Gov. McMaster wants to cut state income taxes. This week McMaster released his budget, noting the state has a nearly $3 billion surplus along with $2.4 billion in funds from the American Rescue Plan Act. He’d cut the state’s income tax rate from 7 percent to 6 percent over five years. The reduction would reduce annual revenue by $177 million. 

Gov. Newsom may rethink California’s marijuana taxes. The governor’s budget supports cannabis tax reform and says he “plans to work with the Legislature to make modifications to California’s cannabis tax policy to help stabilize the market.”

Will  Quebec tax those not vaccinated against COVID-19? Premier Francois Legault is  planning a “significant” financial penalty on the 10 percent of residents who refuse to get jabbed. He says because the unvaccinated contribute to the strain on hospitals, they should pay a health contribution or tax. Last July, Quebec announced a CA$2 million lottery for those who chose to vaccinate. 

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https://www.taxpolicycenter.org/daily-deduction/irs-crisis-taxing-ctc-and-unvaccinated