Lunch Links: Alaska Cuts Budget; Puerto Rico Debt Restructing Begins; Illinois Approves Budget (Sort Of)

July 1, 2016

Today is July 1, the date in 1943 when federal income tax withholding first began, with taxpayers (or their employers) paying regularly throughout the year rather than paying their annual tax bill in one lump sum. To help pay for World War II, the income tax had recently been broadened to cover most Americans, and the Treasury Department argued that tax withholding was essential to make the tax work. Economist Milton Friedman was one of those Treasury officials who helped push it through, though he wished it had later been repealed.

Here are some interesting links I came across:

  • President Signs Puerto Rico Bill; Island Suspends Debt Payments Pending Restructuring: Puerto Rico today was supposed to make debt payments of $1.9 billion, which it doesn’t have. (Reuters)
  • D.C. and New York Bars Ask Treasury Not to Approve Debt-Equity Regulations: Until July 7, the U.S. Treasury Department is taking public comments on prop. Reg. section 1.385-3, new rules intended to counter corporate inversions. Some 170 pages of comments from the D.C. Bar’s Taxation section argue that the proposed rules are overbroad and unlikely to achieve Treasury’s goals. The 190 pages of comments from the New York Bar’s Tax Section ask that the rules be limited to just inverted corporations. (Internal Revenue Service / Tax Notes)
  • Alaska Cuts Budget, Dividend Checks: Gov. Bill Walker (I) line-item vetoed $1.29 billion of proposed spending, capped dividend checks mailed to residents at $1,000 each (down from $2,072 last year), and suspended $250 million of transportation projects. The state’s budget has been hard-hit by low oil prices. (Courthouse News Service)
  • New Jersey Suspends Transportation Projects as Gas Tax Deal Stalls: Gov. Christie (R) last night suspended work on all state transportation projects as the fund paying for them expired. Christie had cut a deal with some Democrats to raise the gas tax while cutting the sales tax, but other legislators balked since it would be an overall revenue cut. (Politico)
  • Kansas Transportation Secretary Resigns After Budget Redirected to Cover State Fiscal Gap: The “Bank of KDOT” will have transferred about $2 billion of road funding to the state’s general fund by the end of 2017. Gov. Brownback (R) announced the resignation of KDOT secretary Mike King, who has held the post since 2012. An unwise pass-through carveout has wreaked havoc on the state’s finances. (Kansas City Star / Slate / Tax Foundation)
  • Illinois Approves Budget (Sort Of): Illinois officials approved a stopgap 6-month state budget to ensure schools open on time in the fall. The spending is not paid for, so it will add to the $8 billion unpaid bill backlog. Gov. Rauner (R) pledged to continue fighting for long-term structural reforms, and Democratic leaders pledged to resist them. (Governing / Tribune News Service)

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