US Taxpayers Put Off Tax Payments In Anticipation of Overhaul

The U.S. government is said to be facing a cash crunch as a result of wealthy individuals and businesses choosing to postpone their tax payments in the hope that the Trump administration will soon announce the promised big tax cuts.

A news report quoting tax professionals and federal data has highlighted that several taxpayers are putting off investment decisions hoping to pay less tax at a later stage.

In a statement Brent Lipschultz, partner at the global accounting firm PwC said,

Clients do not want to overpay. [They want ]to pay the government less now, knowing that they could be paying a lot less in the future

This however is impacting the cash position of the Treasury Department according to latest data. It currently has available $177 billion but government spending is far exceeding receipts. Governments usually borrow to cover the difference between earnings and spending. However there are limits placed on the amount of debt that can be taken and this limit is set by the Congress.

CBS News

The U.S. government has been close to reaching the established debt ceiling since March 2017 according to media reports and the Treasury department may soon start running out of options to raise the cash necessary to honor its commitments. Treasury Secretary Steven Mnuchin has urged the Congress to raise the debt limit by August, much earlier than expected. The Treasury Department is however yet to notify Congress of when exactly the department will run out of funds, which has increased uncertainty.

The shortage in cash levels is worse than what had been predicted earlier this year. A Congressional Budget Office (CBO) report released in May had pointed out that revenues were lower by 3 percent over what had been estimated by the CBO at the beginning of the year.

In its report, the CBO said that taxpayers had projected more income to later years than previously estimated,expecting the government to reduce taxes.Taxpayers are putting off selling investments that have appreciated hoping to pay less net investment income tax after the cuts.

Capital gains tax is based on income with affluent taxpayers paying nearly 23.8 percent. Trump has proposed that this be lowered to 20 percent, while House Republicans want it set even lower.

However the government’s efforts to overhaul the tax code has run into problems due to competing priorities within the Republican party. Tax changes were earlier expected to be released by August, but the government is now targeting December as the deadline for introducing the new tax laws.

---