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To tax tips or not? That is a question that will confront lawmakers in states across the U.S. as they convene for work next year. President Donald Trumps administration is urging states to follow its lead by enacting a slew of new tax breaks for individuals and businesses, including deductions for tips and overtime wages, automobile loans, and business equipment. In some states, the new federal tax breaks will automatically apply to state income taxes unless legislatures opt out. But in many other states, where tax laws are written differently, the new tax breaks won’t appear on state tax forms unless legislatures opt in. In states that don’t conform to the federal tax changes, workers who receive tips or overtime for example will pay no federal tax on those earnings but could still owe state taxes on them. States that embrace all of Trump’s tax cuts could provide hundreds of millions of dollars of annual savings to certain residents and businesses. But that could financially strain states, which are being hit with higher costs because of new Medicaid and SNAP food aid requirements that also are included in the big bill Trump signed. Most states begin their annual legislative sessions in January. To retroactively change tax breaks for 2025, lawmakers would need to act quickly so tax forms could be updated before people begin filing them. States also could apply the changes to their 2026 taxes, a decision requiring less haste. So far, only a few states have taken votes on whether to adopt the tax breaks. States in general are approaching this skeptically,” said Carl Davis, research director at the nonprofit Institute on Taxation and Economic Policy. Trump’s treasury presses states to ‘immediately conform’ A bill Trump signed on July 4 contains about $4.5 trillion of federal tax cuts over 10 years. It creates temporary tax deductions for tips, overtime, and loan interest on new vehicles assembled in the U.S. It boosts a tax deduction for older adults. And it temporarily raises cap on state and local tax deductions from $10,000 to $40,000, among other things. The law also provides numerous tax breaks to businesses, including the ability to immediately write off 100% of the cost of equipment and research. Forty-one states levy individual income taxes on wages and salaries. Forty-four states charge corporate income taxes. Treasury Secretary Scott Bessent this month called on those states to immediately conform to the federal tax cuts and accused some Democratic-led states that haven’t done so of engaging in “political obstructionism. Though Bessent didn’t mention it, many Republican-led states also have not decided whether to implement the tax deductions. By denying their residents access to these important tax cuts, these governors and legislators are forcing hardworking Americans to shoulder higher state tax burdens, robbing them of the relief they deserve and exacerbating the financial squeeze on low- and middle-income households, Bessent said. But some tax analysts contend there’s more for states to consider. The tax break on tips, for example, could apply to nearly 70 occupation fields under a proposed rule from the Internal Revenue Service. But that would still exclude numerous low-wage workers, said Jared Walczak, vice president of state projects at the nonprofit Tax Foundation. Lawmakers need to consider whether these are worth the cost, Walczak said. Only a few states offer tax breaks for tips and overtime Because of the way state tax laws are written, the federal tax breaks for tips and overtime wages would have carried over to just seven states Colorado, Idaho, Iowa, Montana, North Dakota, Oregon, and South Carolina. But Colorado opted out of the state tax break for overtime shortly before the federal law was enacted. Michigan this fall became first and, so far, only state to opt into the tax breaks for tips and overtime wages, effective in 2026. The overtime tax exemption is projected to cost the state nearly $113 million and the tips tax break about $45 million during its current budget year, according to the state treasury department. Michigan lawmakers offset that by decoupling from five federal corporate tax changes the state’s treasury estimated would have reduced Michigan tax revenues by $540 million this budget year. Republican state Rep. Ann Bollin, chair of the Michigan House Appropriations Committee, said the state could not afford to embrace all the tax cuts while still investing in better roads, public safety, and education. The best path forward is to have more money in peoples pockets and have less regulation and this kind of moved in that direction, she said. Arizona could be among the next states to act. Democratic Gov. Katie Hobbs has called upon lawmakers to adopt the tax breaks for tips, overtime, seniors, and vehicle loans, and follow the federal government by also increasing the state’s standard deduction for individual income taxpayers. Republican state House leaders said they stand ready to pass the tax cuts when their session begins Jan. 12. Several states have rejected corporate tax breaks In addition to Michigan, lawmakers in Delaware, Illinois, Pennsylvania, and Rhode Island have passed measures to block some or all of the corporate tax cuts from taking effect in their states. A new Illinois law decoupling from a portion of the corporate tax changes could save the state nearly $250 million, said Democratic state Sen. Elgie Sims, chair of the Senate Appropriations Committee. He said that could help ensure continued funding for schools, health care and vital services. Illinois Gov. JB Pritzker, an outspoken Democratic opponent of Trump, also cited budget concerns for rejecting the corporate tax cut provision. He said states already stand to lose money because of other provisions in Trump’s big bill, such as a requirement to cover more of the costs of running the Supplemental Nutrition Assistanc Program. The decoupling is an effort to try to hold back the onslaught from the federal government to make sure that we can support programs like the one were announcing today, Pritzker told reporters at a December event publicizing a grant to address homelessness in central Illinois. David A. Lieb, Associated Press Associated Press writer John O’Connor contributed to this report.
Category:
E-Commerce
Visa and Mastercard have agreed to pay $167.5 million to settle a long-running class action lawsuit. The suit, which was first filed back in October 2011, accused the two major credit card companies of conspiring to keep ATM fees artificially high. If approved, the proposed settlement filed on Thursday in Washington will bring an end to “almost fourteen years of vigorously contested litigation.” The lawsuit alleged that both Visa and Mastercard “participated in an unlawful conspiracy” to block independent ATM operators from offering lower prices. The settlement, if approved, will have Visa and Mastercard pay millions to ATM users who say they were charged an unreimbursed access fee to withdraw cash from independent non-bank ATMs. Per a Guardian report, Visa is set to pay 53% of the settlement ($88.8 million) while Mastercard will contribute 47% ($78.7 million). Attorneys for the plaintiffs called the settlement an excellent result in light of the risks of continued prosecution. Attorneys for the defendants did not immediately reply to a Fast Company request for comment. Last year, Visa and Mastercard also agreed to pay $197.5 million to ATM users who claimed they were overcharged at bank-operated ATMs. At the time, the plaintiffs’ attorneys said the settlement will “deliver immediate and assured relief.” That settlement followed a 2021 settlement in which major bankssuch as JPMorgan Chase, Bank of America, and Wells Fargoagreed to pay $66 million to settle similar claims. Still, the lawsuits against the two major credit card companies are not over, as a third lawsuit, launched by independent ATM owners and operators, is pending against the companies. “The rules prevent ATM operators from passing on the savings to cardholders when their ATM transactions are handled by an ATM network other than Visa or Mastercard,” Jonathan Rubin, an attorney for the plaintiffs, said in 2023 when announcing that the lawsuit would continue to move forward. At the time, he added that the suit will ask the court to eliminate rules that all but eliminate competition. Despite Thursday’s settlement, the companies have denied any wrongdoing.
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E-Commerce
Ford is recalling more than 270,000 electric and hybrid vehicles in the U.S. because of a parking function problem that could lead to them rolling away. The Detroit automaker said that the recall includes certain 2022-2026 F-150 Lightning BEV, 2024-2026 Mustang Mach-E, and 2025-2026 Maverick vehicles. At issue is the integrated park module, which may fail to lock into the park position when the driver shifts into park. Ford said that it will implement a park module software update for free. Vehicle owners may contact Ford customer service at 1-866-436-7332 for additional information.
Category:
E-Commerce
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