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Kozi Checks & Balances TaxTactics News

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December 20.2024

2 Minutes Read

Exploring the Economic Impact of Extending the Tax Cuts and Jobs Act

TCJA extension analysis with Yuan and Dollar comparison.

Overview of Economic Analyses by CBO and JCT

The Congressional Budget Office and the Joint Committee on Taxation have released their analyses on extending the individual provisions of the Tax Cuts and Jobs Act (TCJA), set to expire at the end of 2025. These analyses are fundamental in understanding the economic implications and form part of the crucial discussions in next year’s tax policy debates.

JCT Models and Predictions

The JCT uses three main macro models to predict the economic outcomes: the Macroeconomic Equilibrium Growth Model, the Overlapping Generations Model, and the Dynamic Stochastic General Equilibrium Model. These models offer a dynamic view by projecting how extensions might affect GDP over a budget window from 2025 to 2034. JCT's findings suggest extending TCJA would reduce revenue but could provide a GDP boost, ranging from 0.2% to 0.9%, depending on the chosen model.

CBO’s Take: Growth Versus Deficit

While JCT finds a growth scenario with TCJA extension, the CBO cautions that the potential benefits could be neutralized by increasing deficits that might hinder private investments. Their analysis serves as a critical balance, ensuring policymakers consider both the economic benefits and fiscal responsibilities.

Future Implications

With current budget rules necessitating a weighted average of model results, the future of TCJA’s extension will require careful consideration of each model’s strengths and potential bias. An average GDP growth prediction of 0.5% leaves room for dynamic revenue feedback, possibly trimming extension costs significantly. Such insights highlight the importance of a nuanced approach to tax legislation, signaling a pivotal shift in fiscal policy strategies going forward.

Tax Deduction Deep-Dives

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11.20.2025

Why Delaware’s Decoupling from OBBBA May Harm Economic Growth

Update Delaware's Economic Direction: The Risks of DecouplingThe ongoing debate about Delaware's possible detachment from the One Big Beautiful Bill Act (OBBBA) has raised eyebrows among many, including policymakers and business leaders alike. Governor Matt Meyer's call for a special session to discuss decoupling some tax codes reflects concerns over projected revenue shortfalls. Yet, this proposed decoupling could jeopardize the state’s attractiveness as a business destination.The Importance of Full Expensing for Economic HealthThe OBBBA introduced significant provisions such as allowing businesses to take immediate deductions for research and development costs and for machinery. This approach, known as full expensing, facilitates investment by businesses and can lead to improved productivity, higher wages, and increased job creation. Economists argue that maintaining these benefits is crucial for the long-term growth of the Delaware economy.Criticism of Decoupling: Business Impact and Future ProjectionsCritics of the decoupling proposal highlight that reverting back to the amortization of R&D expenses—spread over five years—could be a setback for many startups and innovative companies in Delaware. According to experts, the move may impose a significant burden on businesses that depend on upfront deductions to ease cash flow during crucial growth stages. Representative Jeff Hilvosky emphasized the necessity of tax policies that enable investment decisions crucial for creating jobs.The Legislative Landscape: A Divided HorizonAs it stands, the Delaware House passed the decoupling bill despite widespread opposition from key business groups such as the Delaware State Chamber of Commerce. Advocates fear that aligning state tax policies against the federal landscape could further endanger Delaware's competitive edge, particularly when it comes to attracting businesses and startups. If neighboring states continue to adopt more favorable tax structures, Delaware risks losing its status as a corporate haven.Framing the Future: Evaluating Long-term ConsequencesThe debate surrounding the OBBBA concludes with broader implications not just for Delaware, but as a microcosm of national tax policy discussions. A careful consideration of the potential consequences of decoupling reveals that short-term savings could lead to long-term losses in tax revenue, innovation, and employment. It is essential for Delaware to consider how these changes impact not only the current budgets but also the future landscape for economic growth.

11.19.2025

Why Tariff Dividends Could Weaken the Economy: An In-depth Analysis

Update Why Tariff Dividends May Burden the Economy: A Critical Examination The U.S. economy is bracing for a significant policy shift as President Trump's proposal for $2,000 "tariff dividends" for low- and middle-income Americans raises questions about fiscal viability. While the intention behind these payments is to support financially strained households, a closer look reveals that the implementation of such dividends could cost considerably more than the revenue generated from new tariffs. Understanding the Financial Landscape of Tariff Dividends According to recent analyses, the cost of implementing these dividend designs could range from $279.8 billion to a staggering $606.8 billion. In stark contrast, the tariffs themselves are estimated to generate about $158.4 billion in 2025, with another $207.5 billion in 2026. Thus, even the most frugal dividend plans would quickly exhaust the incoming revenue, leaving little to offset budget deficits or fund public services. Tariff Dividends vs. Revenue Generation: The Numbers Don't Add Up The proposal models three key options for the $2,000 payments. Each option, however, reflects a systemic flaw: the total projected cost of providing dividends would outstrip revenues from tariffs almost universally. For instance, if we consider a situation where both tax filers and their dependents qualify for the payments, the costs jump even higher, indicating a financial shortfall that policymakers need to address. Judging the Real Costs: Adding Up the True Impact The term "tariff" itself denotes taxes imposed on imported goods. These additional burdens can cause price hikes for consumers and constrain businesses, leading to diminished economic activity overall. The new tariffs, while designed to generate revenue, also risk shrinking tax bases due to the indirect taxpayer burden they present—a reality often overlooked in budgetary forecasts. A Broader Economic Perspective on Tariff Revenue From another viewpoint, the intricacies of tariff revenue reveal a reality where simply pouring funds back to citizens could aggravate the federal deficit. Estimates suggest that implementing a recurring dividend could inflate the national debt significantly over the upcoming decade—potentially pushing it beyond 134% of GDP by 2035. Such outcomes could hinder overall economic resilience as the nation struggles with historical deficit levels. Moving Towards Economic Stability In light of these findings, a more rational approach may involve reallocating tariff revenues to reduce national debt rather than issuing dividends directly to taxpayers. By prioritizing debt reduction, these revenues can contribute to creating a more stable economic environment, rather than exacerbate existing fiscal concerns. In conclusion, while the notion of tariff dividends may seem initially appealing, the long-term economic implications warrant a cautious and critical assessment. With the stakes this high, steering conversations towards alternative solutions could significantly benefit the nation’s fiscal future.

11.15.2025

Is OBBBA the Largest Tax Cut in History? A Deep Dive Analysis

Update Understanding the OBBBA: A New Era in Tax Cuts In the summer of 2025, Congress passed the One Big Beautiful Bill Act (OBBBA), heralded by some as the "largest tax cut in American history." This significant legislation aims to extend the Tax Cuts and Jobs Act (TCJA) and implement various tax reductions proposed by the administration. While the OBBBA features a projected $5 trillion reduction in federal tax revenues from 2025 through 2034, it ranks as the sixth-largest tax cut in the U.S. history relative to GDP, with an average revenue reduction of 1.4% over a ten-year budget window. Comparative Analysis: How OBBBA Falls Short of the Largest Tax Cuts Historical perspective reveals that the OBBBA, despite its size, does not surpass the Economic Recovery Tax Act of 1981 or the Revenue Acts of 1945, 1948, and 1964, which collectively reduced tax revenues by over 2% of GDP. These acts were pivotal in easing the financial burdens post-World War II and stimulating economic growth in subsequent decades. In contrast, the OBBBA, above all, maintains a modest impact in proportion to the overall economic landscape, ranking lower than many expect based on its ambitious title. Tax Benefit Distribution: Who Wins and Who Loses? While the act aims to provide widespread tax relief, studies indicate that not all taxpayers will benefit equally. Recent analyses reveal that nearly half of American households may experience minimal tax cuts of less than $100 annually. The bulk of substantial tax cuts tends to flow to upper-middle-income households, emphasizing a disparity that raises questions about the OBBBA’s claim to be the "largest" tax relief legislation. Specifically, a significant portion of tax breaks is targeted at higher-income earners who can capitalize on new deductions and credits, contrasting sharply with low-income households that might see little to no effect. Future Implications for Taxpayers and Businesses One essential takeaway from the OBBBA is its dual approach of extending tax cuts while introducing significant spending reductions alongside. This complex interaction could shape future fiscal policies and taxpayer experiences as the IRS grapples with implementing these changes amidst a diminishing workforce. These adjustments might also impact how taxpayers plan for their fiscal responsibilities moving forward, especially in sectors heavily influenced by the new tax laws. Conclusion: Is the OBBBA Really a Game Changer? While its proponents argue that the OBBBA represents a significant shift in tax policy towards favorable taxation for businesses and families alike, a closer examination suggests a more measured view. As the act becomes entrenched in public finance, its effectiveness may be judged not just by its fiscal scale but by its equitable distribution of benefits. The ongoing debates surrounding its implementation will likely influence the next steps in U.S. tax reform. Stay informed on how the OBBBA might affect you or your business by reaching out to a tax advisor for personalized insights.

Exploring the Economic Impact of Extending the Tax Cuts and Jobs Act

Overview of Economic Analyses by CBO and JCT

JCT Models and Predictions

CBO’s Take: Growth Versus Deficit

Future Implications

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