Tax Tracker | Direct File, Sports Teams, SALT, Credit Unions, Energy Subsidies

Links for the 2025 tax debate.

Before diving into the latest tax updates, don’t miss my conversation on May 8 with Norbert Michel (no relation) and Megan McArdle of the Washington Post. We will discuss Norbert’s new book: How Populist Policies Are Threatening the American Dream. Register and live stream the event here.

Here’s this week’s tax highlights:

Tax Day recap. April 15 is now behind us, and despite breathless reporting that “tax revenue could drop by 10 percent amid turmoil at IRS,” it seems that tax revenues are set to outpace expectations. Higher tax collections will push the debt limit X-date further into the summer. Treasury is expected to update Congress with its X-date projection next week.

Congress is back next week. Here’s the reconciliation state of play. On April 10, the House narrowly approved the Senate’s budget framework to advance President Trump's legislative agenda, including tax cuts and ambiguous commitments for at least $1.5 trillion in spending cuts. The very different spending and tax targets in the House and the Senate mean there are still significant hurdles to overcome between the two chambers.

As Romina Boccia and Dominik Lett put it, “Lawmakers have a choice. Accept the Senate’s resolution under pressure or insist on a better path—one that doubles down on the House’s stronger fiscal framework, goes big with spending cuts, and protects Americans from the hidden costs of debt and inflation.” Lawmakers in the House and the Senate who care about spending cuts should work from a united front, so they have leverage to demand fiscal responsibility.

Punchbowl News has a handy chart with the House committees’ planned markup dates, which includes a dissatisfying “later in May” for Ways and Means. They also have reporting on some items the committee is considering, including SALT and taxes on sports teams (more on these below).

Related links:

• Cato Institute Poll: Americans Want Congress to Pair Tax Cuts with Significant Spending Reforms

  House Budget Committee

• Bond Markets Are Flashing Red, and Congress Must Heed the Warning

  Paul Winfree, National Review

Treasury to end Direct File? The Associated Press reports that “the Trump administration plans to eliminate the IRS’ Direct File program, an electronic system for filing tax returns directly to the agency.” However, in a follow-up statement, Treasury said they are still deciding what will become of the “failed program.”

As I noted in my recent New York Post op-ed, the IRS set up the Direct File program without congressional authorization, consolidating additional power and responsibility at an agency already struggling to meet its basic functions. It is a case study in bureaucratic overreach and government waste. Rolling back Direct File is a win for taxpayers. The next step? Congress should end automatic withholding.

Related Links:

• TIGTA Audit of IRS Provides More Reasons for DOGE to Eliminate the Wasteful and Unauthorized “Direct File”

  John Kartch, Americans for Tax Reform

• The IRS Wants to Prep Your Tax Return

  Wall Street Journal Editorial Board

The right answer is no deductions for any state and local taxes (SALT), for anyone. The idea of a business SALT cap may still be in the offing, according to recent reporting. In my piece, “The Case for Repealing the Corporate SALT Deduction,” I argue that capping business SALT deductions is a worthy reform as part of a pro-growth tax reform package. And the last Tax Tracker included a comprehensive list of what other folks are writing about business SALT.

On the individual side, check out Policy Engine’s SALT calculator to see how the current law alternative minimum tax (AMT) creates an effective SALT cap of about $20,000 for most higher-income taxpayers. Here’s our SALT explainer.

There’s a right way and a wrong way to raise taxes on sports teams. President Trump asked Congress to eliminate “special tax breaks for billionaire sports team owners,” and Republicans are looking for ways to deliver. One idea is to limit team owners’ ability to deduct the cost of buying a team. As the Tax Foundation explained a few years ago, the current law deductions for sports teams are not a loophole. They “are a normal and proper part of the income tax system.” As I’ve written before, a better way to meet Trump’s ask is to limit access to tax-exempt muni bonds for stadium financing. Of course, eliminating the entire muni bond tax subsidy should be the goal.

Taxes don’t just transfer resources to the government—they shrink the economy. The Mercatus Center’s Jack Salmon reviews the empirical literature on taxes and growth. He concludes, “that tax increases are associated with a significant, negative, and persistent impact on economic growth. My preferred estimates suggest that in the short term, output falls by about 75 cents for every $1 increase in tax, while the full economic impact is likely to be around $2 for every $1 in additional taxation.”

It is time to tax credit unions like their competitors. Writing for Arnold Ventures, Scott Hodge explains, “After 90 Years of benefiting from taxpayer subsidies while competing with community banks, it is time that credit unions pay income taxes as the modern financial institutions they have become.” Ensuring that similarly situated taxpayers are treated alike should be a fundamental principle of any tax reform effort.

Repealing energy subsidies is key to permanent pro-growth tax reform (event recap). Last week, the Competitive Enterprise Institute’s Paige Lambermont joined us on Capitol Hill, where we explained how eliminating Inflation Reduction Act energy subsidies is not just good tax policy but would also strengthen energy markets and bring down prices. You should be able to watch a recording of the event here soon.