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TaxBuzz Top 5 - Analysts Struggle to Understand Effect of Trump Tax Cuts, Boston Considers "Sugar Tax" & More

TaxBuzz Top 5 - Analysts Struggle to Understand Effect of Trump Tax Cuts, Boston Considers "Sugar Tax" & More

Each Friday, TaxBuzz brings you the top five tax and accounting headlines you need to know from the workweek. We know life can get busy and you don't always have time to scroll through your news feed to stay informed.

We weed through all of the week's stories to showcase the most important updates in the tax and accounting world.

1. Analysts Struggle to Assess Long-Term Impact of 2017 Trump Tax Cuts

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Credit: Scott Olson/Getty Images--2500

The economic impact of the 2017 Trump administration tax overhaul remains unclear as Congress debates extending key provisions set to expire this year. Economists face challenges analyzing the law’s long-term effects due to the COVID-19 pandemic and inflation, which disrupted traditional metrics.

The law, which slashed the corporate tax rate from 35% to 21% and lowered individual tax rates, was designed to boost investment, productivity, and wages. While corporate investment rose in the short term, the New York Times reports that economists like Alan Auerbach of UC Berkeley argue that the limited two years of pre-pandemic data make it nearly impossible to assess dynamic, long-term outcomes.

In the same NYT article, research from Harvard, Princeton, and the University of Chicago estimates the corporate tax cuts could make the economy 1% larger over a decade, adding roughly $750 per worker—far less than the $4,000 promised by the Trump administration. Despite these gains, the law is projected to add $1.5 trillion to the deficit over ten years.

Critics point to the law’s disproportionate benefits for the wealthy. A Joint Committee on Taxation study found that corporate savings primarily went to top earners, while the bottom 90% of employees saw little to no wage increases. Additionally, inflation-driven revenue growth has complicated claims that the tax cuts “paid for themselves.”

As policymakers weigh renewal, they must grapple with incomplete data and the challenge of balancing economic growth with fiscal responsibility.

2. Newsom Extends Property Tax Deadlines for LA Fire Victims

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Credit: Apu Gomes/Stringer/Getty Images

In an official announcement, Governor Gavin Newsom has extended property tax deadlines for Los Angeles County residents affected by the recent wildfires, providing crucial financial relief. Under an executive order, penalties, costs, and interest for 2025 late payments are waived, with the new deadline set for April 10, 2026.

The extension applies to specific ZIP codes, including 90049, 90272, and 90265, among others. Affected property owners can also request disaster reassessments through the Los Angeles County Assessor’s Office within 12 months, potentially reducing their tax burdens by reflecting damage in their property values.

Businesses in impacted areas benefit as well, with the California Department of Tax and Fee Administration (CDTFA) extending sales and use tax filing deadlines to April 30, 2025. The CDTFA is also waiving penalties and offering flexible payment plans to support recovery efforts.

Governor Newsom heavily emphasized the state’s commitment to aiding those impacted by the fire. “California is here for the survivors. Whether it’s streamlining housing or relieving financial burdens, we’re ensuring these communities get the help they need,” he said.

These measures are part of a broader initiative to support recovery and rebuilding in wildfire-stricken communities like Pacific Palisades and Altadena, alleviating immediate financial challenges for residents and business owners.

3. Nigeria's Tax Reform Faces Regional Opposition Amid Conditional Support

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Credit: Manuel Augusto Moreno/Getty Images

Nigeria's proposed tax reform, aimed at streamlining tax codes and increasing revenue, has is facing major contention from northern state governors. The reform, per Bloomberg, suggests altering the distribution of Value Added Tax (VAT) revenues, allowing states that generate more VAT to receive a larger share, while reducing allocations based on population. Northern states, which are generally more populous but economically less productive than their southern counterparts, argue that this change would exacerbate existing regional inequalities. In a Financial Times report, Inuwa Yahaya, chair of the Northern Governors Forum, expressed concerns that the reform "could jeopardize the wellbeing of our people."

The north-south divide in Nigeria has long influenced the nation's politics, with the predominantly Muslim north and Christian south exhibiting significant economic disparities. Poverty and illiteracy rates are higher in the north, where annual GDP per capita is approximately $292, less than half of that in the south. Currently, 50% of VAT distributed to states is shared equally, 30% is allocated based on population size, and 20% by their tax contribution. The proposed reform would adjust this to 60% based on contribution, reducing the population quota to 20%.

Despite the opposition, Senate President Godswill Akpabio, an ally of President Bola Tinubu, has indicated that the bills will eventually pass, asserting that critics have not fully understood them. Waziri Adio, executive director at Agora Policy, suggested the need for stakeholder consultation, stating, "Reforms are as political as they are technical. You need the buy-in of the various stakeholders.

4. Mississippi House Approves $1.1 Billion Tax Overhaul

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Credit: CRobertson/Getty Images

On January 16, 2025, the Mississippi House of Representatives passed House Bill 1, a comprehensive tax reform plan aimed at eliminating the state income tax over a decade. The legislation, authored by Republican Rep. Trey Lamar, received bipartisan support, passing with an 88-24 vote; nine Democrats joined the GOP majority, while seven Democrats voted "present."

Key Provisions of House Bill 1 (via Mississippi Today):

  • Income Tax Elimination: The plan proposes reducing the current 4% income tax rate to 3% in the next fiscal year, followed by annual reductions of 0.3% until the tax is fully eliminated over approximately ten years.
  • Grocery Tax Reduction: The state's 7% sales tax on groceries would be gradually reduced to 2.5% over the same period, aiming to alleviate the tax burden on essential goods.
  • Gasoline Tax Introduction: To offset revenue losses from the income and grocery tax cuts, the bill introduces a new 5% tax on gasoline sales, projected to generate approximately $400 million annually. This revenue is designated for the Mississippi Department of Transportation to support road and bridge infrastructure projects.
  • Local Sales Tax Adjustment: The legislation proposes ending the state's 18.5% sales tax diversion to municipalities, redirecting the full sales tax collected to the state budget. To compensate local governments, a general 1.5% local sales tax would be implemented, with provisions allowing municipalities and counties to opt out.

In an Associated Press report, House Speaker Jason White expressed optimism about the bill's passage, stating, "I think it's a good, strong vote for us and it'll be a strong position for me as speaker to advocate for its passage and advancement on the other (Senate) end of the building."

The bill now advances to the Mississippi Senate for consideration. While proponents argue that the tax cuts will stimulate economic growth and make the state more competitive, critics caution that the plan could lead to significant revenue shortfalls, potentially impacting essential public services. The debate mirrors broader national discussions on tax policy, as several states and the federal government contemplate similar measures.

5. Boston Considers Sugar Tax to Combat Health Crisis

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Credit: Denis Tangney Jr./Getty Images

Boston officials are exploring a new sugar tax proposal to tackle rising obesity and diabetes rates while generating revenue for public health initiatives. The measure, introduced during a recent City Council meeting, would impose a tax on sugar-sweetened beverages, including sodas, energy drinks, and some fruit juices.

The proposed tax rates range from 1 to 3 cents per ounce, depending on the sugar content of the beverage. Revenue generated from the tax would fund programs promoting nutrition education, access to healthy foods, and citywide health equity initiatives. Councilmember Michelle Wu, a proponent of the measure, stated, “This is about addressing the public health crisis we’re facing and ensuring that Boston residents have the tools and resources to lead healthier lives.”

Supporters like Wu argue that the tax could discourage the consumption of sugary drinks, which have been linked to increased risks of obesity, Type 2 diabetes, and heart disease. Similar taxes in cities like Philadelphia and Berkeley have reportedly reduced soda consumption and raised millions for community health programs.

However, critics, including beverage industry representatives and small business owners, warn the tax could disproportionately impact low-income families and hurt local businesses. They also question whether such taxes effectively address broader dietary issues. The City Council will hold public hearings in the coming weeks to gather input from residents, health experts, and industry stakeholders, CBS News reports.

If approved, Boston would join a growing list of U.S. cities implementing sugar taxes to curb consumption and improve public health outcomes.

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