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Kozi Checks & Balances TaxTactics News

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December 10.2025

2 Minutes Read

Unpacking the OBBBA: A Close Look at Debt, Deficits, and Tax Revenue

How Does the OBBBA Impact Debt, Deficits, and Tax Revenue?

Understanding the OBBBA's Fiscal Impact and Future Trends

The One Big Beautiful Bill Act (OBBBA), set against a backdrop of rising national debt and ongoing economic challenges, is entering the fiscal dialogue with significant implications for the future of U.S. economic health. As projections suggest that public debt could soar to 124% of GDP by 2034, it's essential to unpack how this legislation interacts with existing fiscal dynamics.

What Does the OBBBA Entail?

At its core, the OBBBA represents a substantial tax cut—estimated at $5 trillion over the next decade. While this sounds promising as it aims to stimulate economic growth by reducing individual income tax rates, it adds a layer of complexity due to its potential to escalate national deficits. According to recent modeling, even accounting for spending reforms, the OBBBA is projected to increase the deficit by approximately $3.8 trillion, which puts additional strain on the already rising debt levels.

Implications for Tax Revenue and Deficit Spending

The act's design ensures it is impactful, but it poses questions regarding sustainability. It's projected to boost GDP modestly by 1.2%, enhancing economic conditions but creating a higher deficit-to-GDP ratio. When considering historical trendlines of revenue—which is expected to average around 18% of GDP—there's a clear indicator that if spending cuts are not balanced effectively, we could face severe fiscal cliffs that threaten financial stability.

Potential Tariff Benefits Against Debt Increase

Moreover, the introduction of new tariffs under the Trump administration may offset some costs of the OBBBA, providing an additional $2.1 trillion in revenue, reducing the net increase in deficits to about $1.4 trillion. However, these tariffs also carry their own economic implications, potentially leading to tariff-induced inflation and challenges for consumer spending, complicating the economic landscape further.

Future Outlook and Recommendations

Lawmakers are encouraged to consider healthcare and old-age programs that significantly contribute to the nation’s debt as they navigate impending fiscal policies. Crafting a bipartisan fiscal commission could be a prudent step towards addressing these critical long-term issues. Ensuring that the economic growth promised by the OBBBA is sustainable is vital for protecting the fiscal health of the country and avoiding a crisis that might necessitate drastic adjustments in the future.

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12.09.2025

Navigating the NCTI Tax Surprise: What States Are Missing

Update Why State Taxation of NCTI Might Surprise You The new tax on net controlled foreign corporation-tested income (NCTI) is making waves in state tax codes across the nation, yet many taxpayers might find themselves blindsided by unexpected charges. Despite prior exclusions of the global intangible low-taxed income (GILTI) tax in states like Iowa, Kansas, New Hampshire, and Tennessee, the transition to NCTI could see these states unwittingly start taxing this income due to how they have defined their exclusions. Lawmakers might be caught off guard as legislation evolves, potentially revealing a hidden tax burden in state funding. Decoupling from GILTI: A Double-Edged Sword The effort to decouple from GILTI in some states was initially a relief for taxpayers, reflecting a policy aimed at avoiding unnecessary taxation on foreign income. Yet, as outlined in the recent changes proposed by the One Big Beautiful Bill Act (OBBBA), states risk falling into a trap of implementing a new tax regime that could be even more burdensome. Without explicit efforts to adjust for NCTI, states could inadvertently adopt a tax that encompasses all income associated with foreign subsidiaries, even when those entities are subject to hefty foreign taxes. The Tax Code Complexity: Understanding the NCTI Landscape For the average taxpayer, decoding the intricacies of NCTI taxation can feel daunting. Under the OBBBA, the rules have shifted considerably, leading to questions about how states will interpret their tax codes. For instance, while some states have excluded GILTI by names, such as the exclusion from certain IRC sections, NCTI's introduction adds a new layer of complexity, particularly with regards to how much foreign income can be taxed without appropriate credit provisions in place. The Impacts of State Taxation: Implications for Businesses Taxing NCTI at the state level could push businesses operating in high-tax foreign jurisdictions to rethink their strategies. Companies might consider shifting more of their operations outside states that adopt aggressive taxation on foreign income, thereby potentially diminishing their local economic contributions. Furthermore, the lack of foreign tax credits at the state level could deter businesses from settling or expanding their bases of operation in states that seek to tax NCTI, creating long-term implications for economic growth and job creation. What Can Taxpayers Do? As the discussion surrounding NCTI unfolds, taxpayers should remain vigilant and proactive. It is beneficial to consult with tax professionals who understand these nuances and can help navigate potential challenges. Taxpayers might find opportunities to voice their concerns to state lawmakers before any hasty implementations take place. Engaging in dialogues surrounding the equity of taxing international income will ensure that the implications of these decisions are well understood by all parties involved. Stay Updated on the Evolving Tax Landscape As taxpayers face new challenges brought about by NCTI, staying informed will be critical. Subscribing to tax updates or seeking regular counsel from trusted financial advisors will equip individuals and businesses alike with the knowledge necessary to navigate this shifting terrain effectively.

12.04.2025

Why Modernizing PL 86-272 is Crucial for Today's Digital Economy

Update Modernizing PL 86-272: Adapting to Today's Economy Since its inception in 1959, Public Law 86-272 has stood as a crucial defender for businesses engaged in interstate commerce, shielding them from state income taxes when their activities are limited to soliciting orders for tangible goods. As we embrace a more digital marketplace, it's clear that the law needs a facelift to accommodate the nuances of modern commerce, including service and digital product sales. Understanding the Evolution of Commerce The original intent of PL 86-272 was to facilitate commerce without the complex tax burdens that could stifle businesses, especially small and medium-sized enterprises. However, today's realities—where software and digital tools drive engagement—demand a broader understanding of what "soliciting orders" entails. For example, when a company uses chatbots to provide customer support, is that merely solicitation? This evolving definition could shape tax obligations for many businesses operating online. A Patchwork of State Reactions States are responding differently to these changes. For instance, New York recently upheld its interpretation of PL 86-272 to include online interactions, which could subject businesses to income tax liabilities for activities that were previously considered protected. California’s legal struggles reflect the ongoing debate, as courts have challenged new guidance regarding digital business activities. This patchwork approach creates uncertainty for businesses trying to remain compliant while adapting their practices to fit into this broader interpretation. Potential Consequences of Inaction If Congress doesn't modernize PL 86-272 to encompass the service economy and address the complexities of digital commerce, businesses may face unpredictability and rising compliance costs. The law must protect those engaged in modern selling practices just as it did for traditional merchants decades ago. Without legislative updates, the landscape may grow murky, and small businesses could be disproportionately impacted by increased scrutiny and compliance requirements. Updating PL 86-272 isn't just a bureaucratic necessity—it's a vital step toward ensuring fair commerce in America. By embracing modernization, lawmakers can provide clarity and confidence for businesses navigating an increasingly interconnected digital world.

12.03.2025

How Tax Policy Can Significantly Reduce Smoking Harm

Update Tax Policy: A Vital Tool Against Smoking Tobacco harm reduction has emerged as a pivotal topic within excise tax policy discussions globally. New products such as e-cigarettes and heated tobacco products offer consumers alternatives that might significantly decrease the health risks associated with traditional smoking. While no form of nicotine consumption is without risk, these new alternatives present a reduced harm situation, as research indicates that their use correlates with a decline in traditional cigarette consumption. The Role of Excise Taxes in Reducing Tobacco Use Excise taxes on tobacco products are historically recognized as one of the most effective means of controlling tobacco use. As mentioned in various studies, including one from the World Health Organization (WHO), significant increases in tobacco taxes lead to a reduction in consumption, particularly among youth and low-income demographics. These groups are more sensitive to price increases, which aids in preventing initiation and encourages cessation. Rethinking Tax Structures for Alternative Tobacco Products To maximize the potential benefits of taxation on alternative tobacco products, policymakers need to shift towards specific excise taxes rather than ad valorem taxes, which are based on the products' sales price. Specific taxes provide clearer alignment with health goals, tackling the quantity of tobacco consumed rather than the price. This method can significantly ease the tax administration process and promote healthier consumption behaviors by making these products less financially attractive. Addressing Common Misconceptions Many arguments against increasing tobacco taxes focus on concerns regarding economic impact, personal freedom, and the efficacy of taxes in altering consumer behavior. However, evidence clearly demonstrates that higher taxes not only deter smoking but also generate significant revenue which can be reinvested into public health initiatives. Additionally, the idea that taxes disproportionately harm low-income smokers has been refuted by studies showing that the overall health and economic gains from reduced tobacco use outweigh these concerns. The Path Forward for Tobacco Harm Reduction Implementing robust taxation policies combined with comprehensive strategies can lead to a significant decrease in smoking rates, potentially avoiding millions of premature deaths attributed to tobacco-related diseases. By understanding the nuances of new tobacco products and aligning tax structures accordingly, governments can better manage the public health implications of nicotine consumption. We encourage readers to advocate for strong tobacco control measures, including excise taxes that effectively reduce smoking rates, particularly among vulnerable populations. Your voice can help shape a healthier future.

Unpacking the OBBBA: A Close Look at Debt, Deficits, and Tax Revenue

Understanding the OBBBA's Fiscal Impact and Future Trends

What Does the OBBBA Entail?

Implications for Tax Revenue and Deficit Spending

Potential Tariff Benefits Against Debt Increase

Future Outlook and Recommendations

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