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TaxBuzz Top 5 - CA Tax Collections Fall $30 Billion, Airlines Could Pocket Millions, & More

TaxBuzz Top 5 - CA Tax Collections Fall $30 Billion, Airlines Could Pocket Millions, & 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. CA Tax Collections Fall $30 Billion In a Year

Credit: gchutka/Getty Images

California, the fifth largest economy in the world by the numbers, is facing fiscal problems after tax collections have fallen by $30 billion in just one year. According to one new report, this loss is larger than the combined tax collections of 16 states, and it comprises 46% of the $66 billion decline in all 50 states.

In Q2 2023, California collected $58.5 billion in tax dollars. That comes to 15% of the $401 billion taken in by all states. It also remains the highest intake in the U.S. California's Q2 numbers are trailed by New York at $31 billion, Texas at $25 billion, New Jersey and Illinois at $19 billion, and Florida at $17 billion.

Nonetheless, the sum is significantly lower than last year. 

One of the reasons for the loss is likely the Golden State's mass exodus of high-income earners during the COVID-19 pandemic. California lost $29 billion in 2021 and $18 billion in 2020 as people relocated to more tax-friendly states like Florida and Texas. 

CNBC previously assessed that it's likely that higher-tax states -- including California and New York -- will continue to see high earners leave. This trend can largely be attributed to the rise of remote work. E.J. McMahon, founding senior fellow at the Empire Center, told the outlet, “When we get the data for 2021-22 and 2023, the outflow is certain to have slowed to some extent, which does not in my view, mean migration will have ceased to be a problem.”

2. Airlines Could Keep Millions of Dollars In Taxes Per Day Starting Sunday

Beginning Sunday, October 1, 2023, airlines could keep millions of dollars in taxes per day if the Federal Aviation Administration’s authority to collect taxes on airline tickets and fuel expires. 

Politico notes that the "FAA’s statutory authorization — which primarily allows it to collect and spend tax revenues used to run the aviation system — is due to expire at 11:59 p.m. Saturday. By coincidence, that is the same moment that the agency and the rest of the federal government would shut down unless lawmakers reach a last-ditch spending deal."

It is important to point out that planes will not be grounded, and FAA air traffic controllers will continue working without pay if the shutdown occurs. However, in this case, the FAA could neither draw from the trust fund that fuels part of its spending nor collect the aforementioned taxes on airline ticket sales. FAA authorities estimate they will lose $54 million in excise taxes per week if Congress is unable to reach an agreement.

“So, it’s effectively kind of like a tax holiday for airline charges that never come in to improve airports and other critical needs. It’s right alongside the other forms of disruption that we don’t need right now,” Transportation Secretary Pete Buttigieg said during a press conference Politico attended on September 27.

3. Mass. Lawmakers Reveal $1 Billion Tax Relief Plan

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Lawmakers in Massachusetts have revealed a tax relief plan designed to give $1 billion back to families throughout the state.

The Associated Press provides details about the proposal, which would be fully phased-in by the 2027 fiscal. Beacon Hill legislators have proposed over a dozen tax-specific measures, including eliminating estate taxes for estates valued at under $2 million and increasing the state's child tax credit from $180 to $330 per eligible dependent in the current tax year, and to $440 for the 2024 tax year.

The increased child tax credit alone is estimated to benefit 565,000 Massachusetts households and would be the largest state-run child tax credit in the nation.

WCVB shared thoughts from Governor Maura Healey (D), who stated, "As I said on the campaign trail and from day one of this administration — tax relief is essential for making Massachusetts more affordable, competitive and equitable. I thank Senate President Spilka, Speaker Mariano, Chairs Rodrigues and Michlewitz and the Legislature for taking this important step. This is a comprehensive tax package that delivers relief to families and businesses, including through our proposed Child and Family Tax Credit, and I look forward to reviewing the details and delivering for Massachusetts."

4. Full Energy Tax Credit Only Available For Homes That Are 100% "Zero Energy Ready"

The U.S. Department of the Treasury has confirmed that builders can only claim the full amount of new new energy-efficient home tax credits worth up to $5,000 per dwelling if homes are 100% capable of supporting solar power, electric heat pumps, electric vehicles, and other efficiency enhancements.

This guidance comes as part of a larger clarification initiative regarding various Inflation Reduction Act tax measures.

Reuters notes that the "45L" tax credit for energy-efficient homes acquired between the years of 2023 through 2032 ranges from $500 to $5,000 per residence. Homes that meet lower Energy Star efficient appliance standards are eligible for the lower end of the spectrum, while those that comply with Department of Energy Zero Energy Ready Home requirements can receive the maximum sum.

For homes in multi-family buildings to qualify for the total $5,000 credit, builders are also required to pay "prevailing wages" to their workers, per IRS guidelines.

5. Impeachment Witness Testifies Prosecutor "Likely Intervened" In Hunter Biden Probe

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Last week, amid his ongoing legal drama, Hunter Biden, son of President Joe Biden (D) and First Lady Dr. Jill Biden, sued the Internal Revenue Service. Per a CNBC report, Biden, 53, and his legal team allege that the IRS has engaged in criminal activity by “repeatedly and intentionally” sharing his tax return information.

Three days before Biden's lawsuit was filed, he was indicted on three federal gun charges. This comes after a tentative plea deal fell apart in July 2023.

Now, Eileen O’Connor, former assistant attorney general for the Justice Department’s Tax Division, has testified that a prosecutor overseeing the younger Biden's tax probe "likely intervened" to protect the President from Justice Department scrutiny. O'Connor's testimony came during the first House Oversight impeachment hearing on Thursday, September 28.

The impeachment inquiry, which was formally opened earlier in September without a full House vote,  is the culmination of the Oversight Committee's months-long investigation into Biden’s alleged foreign influence peddling. This situation continues to develop.

Which headline this week are you most interested in?

Feature Image Credit: DustyPixel/Getty Images

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