With help from Aaron Lorenzo

WELCOME TO TAX SEASON: The political debate over last years expansion of the Child Tax Credit might be at a standstill right now.

But those monthly child payments have their fingerprints all over this current tax filing season, throwing a range of wrinkles at millions of families, as Pro Taxs Brian Faler reported.


This wont be a surprise to policymakers. But for regular taxpayers, refunds might be bigger or smaller, whether they know why or not.

The millions of taxpayers who opted out of the monthly payment option believe us, no easy feat will likely be getting more money out of the IRS this year. Families that had a baby in 2021 could expect a little extra from the IRS or perhaps quite a bit more, since those new additions might also get stimulus checks, too.

But the expanded CTC will eat into the refunds for the many, many taxpayers who unquestionably like to get big payments from the government come tax season. (This despite tax practitioners saying that a big refund just means that youre giving the government an interest-free loan.)

Its possible that could put Democrats in a bit of an awkward spot with at least some of those taxpayers, in a similar way to what Republicans faced when refunds briefly declined in size after their 2017 tax law.

Generally speaking, those who took the monthly payments will at least see a modest decrease in their refund. Look at it this way: The expanded CTC offered at most $3,600 a child so $1,800 at tax time, and $1,800 through monthly payments. The credit maxed out at $2,000 a child before the Democrats expansion. (For whatever its worth, early IRS statistics suggest that the number of returns sparking a refund is down ever so slightly.)

And then there are refund issues caused by specific family situations like divorced parents who might take turns claiming children on their tax returns.

MORE ON your favorite tax topics in a bit, but first thanks for joining the Local quarterback returns for more games in low-tax state edition of Weekly Tax. (Sticking to sports: The New York Mets have their own tax now?)

Huh, o.k.: Today marks four years since a preliminary NASA study found the astronaut Scott Kelly returned from a year in space with a different genetic expression than his identical twin, the fellow astronaut and future senator Mark Kelly. (Worry not: About a year later, Nature reported that the Kelly twins are back to being nearly identical.)

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You can also reach us on Twitter at @berniebecker3, @aaronelorenzo, @tobyeckert, @Brian_Faler, @POLITICOPro and @Morning_Tax.

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RATCHETING UP THE PRESSURE: American officials arent done when it comes to trying to find ways to make life difficult for Russia not by a longshot.

Heres an example: Senate Finance Chair Ron Wyden (D-Ore.) announced on Friday that he wants to strip away the tax benefits that American companies can get when doing business in Russia and Belarus, and the tax advantages that allies of President Vladimir Putin in either country receive from any income tied to the U.S., as Pro Taxs Aaron Lorenzo reported.

Theres still a lot to flesh out there, as Wyden and his staff acknowledge. Plus, its not clear yet whether this is an idea that could gain support from Republicans.

The proposal would give Treasury Secretary Janet Yellen more authority to identify those supporters of Russias invasion of Ukraine that should lose their tax goodies, as Wyden put it.

Among the issues that still need to get worked out: The tax code currently doesnt allow companies to take the preferential tax rate from the levy on Global Intangible Low-Taxed Income, or GILTI, or foreign tax credits on income earned in four separate countries Iran, North Korea, Syria and Sudan.

That blacklist is for countries that dont have diplomatic relations with the U.S. or are considered supporters of terrorism, and Wydens proposal is to add to it any countries participating or offering certain levels of support to the Ukraine invasion.

Normally, it takes six months between when a country is added to that list and when any tax advantages are taken away. But Wyden believes that time span could be reduced, because of Russias actions in Ukraine.

One more question to consider there: How exactly would the U.S. decide what countries are materially supporting Russias invasion, which could conceivably open up further countries to these tax sanctions?

CHECK IT OUT: For POLITICOS 15th anniversary, were hosting unfiltered one-on-one conversations about the next 15 years. In the first installment of our series, former Treasury Secretary Larry Summers sits down with the billionaire hedge fund manager Ray Dalio.

Inflation, political polarization, competition with China they all came up in Summers and Dalios conversation. But theres some tax stuff in there, too.

Dalio, for instance, argued that polarization was playing a role in why people are relocating within the U.S. and that, at the very least, its far more than just those in high-tax areas seeking low-tax locales.

And both Summers and Dalio both stressed that the U.S. needs to raise more in tax revenues, and that policymakers would be smart to look at a carbon tax something thats long seemed like it had more support from experts than from elected officials.

Around the World

WERE DOING THIS: The new government in Chile plans to make a tax overhaul a top priority, Reuters reports. Finance Minister Mario Marcel said the new administration planned to send a proposed tax revamp to Congress within months and that it would focus less on corporations, and more on individuals, natural resources and green taxes. The left-wing Gabriel Boric won Chiles presidency last year, and has vowed to boost services, redistribute wealth and generally move away from a more market economy. But Marcel told Reuters that Chile really couldnt raise taxes further on businesses without hurting the countrys competitiveness. (In fact, Borics choice of Marcel, who previously led Chiles central bank, was viewed as a sign that the new administration might not rock the boat as much on fiscal matters, at least initially.) The new government hopes an overhaul of the tax code will help increase tax collections by five percentage points of gross domestic product. Chile is the worlds top producer of copper, and the finance minister said that administration wants to build on existing congressional proposals on mining royalties.

Around the Nation

OFF THE BOOKS: A judge in Arizona has officially found that a tax on high earners in the state is null and void, The Associated Press reports. The ruling from Judge John Hannah of the Maricopa County Superior Court wasnt unexpected the state Supreme Court had paved the way for the finding last summer. Arizona voters approved Proposition 208, which would have used the extra revenue collected from top earners to fund education initiatives, in 2020 over the opposition of the states Republican governor and GOP-led legislatures. But Arizonas Supreme Court ruled in August that the tax ran afoul of the state constitution if it allowed education spending to top a legal spending cap, something both supporters and opponents believed would happen. Education advocates said they would look for ways to challenge the ruling, but they dont seem to have many promising options. The tax approved by voters added an extra 3.5 percent surcharge on individual income above $250,000 and $500,000 for married couples. Republican officials have sought ways to undercut the tax since it was approved.

DONT MISS POLITICOS INAUGURAL HEALTH CARE SUMMIT ON 3/31: Join POLITICO for a discussion with health care providers, policymakers, federal regulators, patient representatives, and industry leaders to better understand the latest policy and industry solutions in place as we enter year three of the pandemic. Panelists will discuss the latest proposals to overcome long-standing health care challenges in the U.S., such as expanding access to care, affordability, and prescription drug prices. REGISTER HERE.

Quick Links

A BBB update: You will see the wrath Progressives warn Biden against cutting down agenda.

The Hill: Democrats divided over proposal to suspend federal gas tax. 

WSJ: Courts Threaten to Undercut IRS Efforts to Go After Tax Shelters.

Also WSJ: New Tax Rules Force Faster Payouts for Some IRA Holders.

Minneapolis Star-Tribune: Businesses brace for tax hike as unemployment debate drags at Capitol.

Did you know?

At 36, President Gabriel Boric of Chile is the second-youngest state leader in the world behind Giacomo Simoncini, the 27-year old captain regent of San Marino.