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SO WHERE ARE WE AT? Upon further review, the bipartisan infrastructure agreement announced last week and the Democrats’ efforts to hike taxes on the rich and boost safety net programs are no longer explicitly linked.
Well, at least from President Joe Biden’s perspective — he backed away over the weekend from the idea that he wouldn’t sign the bipartisan deal without the other initiatives that are especially being sought by progressives.
For the time being, Biden’s statement defused the situation with Republicans, or at least with key GOP members of that negotiating group. Both Sens. Rob Portman (R-Ohio) and Mitt Romney (R-Utah) went on the Sunday shows to essentially say “no harm, no foul,” after Biden reiterated his support for the bipartisan agreement, as our Burgess Everett reported.
And yet: Biden can say that his signing of a bipartisan infrastructure deal isn’t contingent on other big parts of his domestic agenda becoming law at the same time. But that two-track process, as lawmakers have come to calling the negotiations, will continue to be linked at the hip for the foreseeable future — for instance, just ask Senate Budget Chair Bernie Sanders (I-Vt.).
MORE ON THAT IN A BIT, but welcome to the hey, we’re almost halfway through 2021 version of Weekly Tax. Plus, if you think the U.S. has some unlikely rises to leadership spots in Congress — just check out Belize.
One way to give it a go: Today marks a dozen years since the physicist Stephen Hawking held a time travel party — for which he didn’t send out invitations until the next day, so that future time travelers might be able to find their way there. (Though: If there is time travel in the future, wouldn’t they have been at the party anyway?)
Help us ponder very weighty topics, like the best potential tax breaks for time travel.
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A message from Initiative to Accelerate Charitable Giving:
Now is the time to invest in America’s charitable organizations. Getting more money to charities faster is a result all Members of Congress can agree with. Read more.
BACK TO THE BIG STORY OF THE DAY: So the question then remains — how much of the rest of Biden’s ambitious agenda could Democrats get across the finish line.
Sanders has been floating a platform that would number around $6 trillion, and he’s not alone among Democrats in saying that the party shouldn’t limit itself by insisting that everything be paid for — which, as it happens, was eventually where Republicans landed before the Tax Cuts and Jobs Act in 2017.
For instance, House Budget Chair John Yarmuth (D-Ky.) just said as much to The Wall Street Journal. And while Democrats will still be sorting out just how ambitious they can be on both taxing and spending, they’ll also be trying to pass the budget required for them to proceed without Republican votes — which in and of itself will be far from an easy task, as our Sarah Ferris and Caitlin Emma just reported.
The man in the middle: Sen. Joe Manchin (D-W.Va.) — who will have a lot of influence over how that question is answered — told ABC’s “This Week” on Sunday that he wanted much of the same things as his fellow Democrats, like a more robust child tax credit and higher taxes on corporations and capital gains.
He just doesn’t want the same kind of sweep as progressives, saying again he was more comfortable with a 25 percent corporate rate (instead of Biden’s preferred 28 percent) and adding an endorsement of a 28 percent top rate on capital gains (instead of potentially pushing it up into the 40s).
“If Republicans don’t want to make adjustments to a tax code which I think is weighted and unfair, then I’m willing to go reconciliation,” Manchin said.
But crucially, here’s where Manchin said he wasn’t willing to go — to a $5 trillion or $6 trillion package when Democrats can only find the offsets for more like $2 trillion.
A SEMI-RELATED NOTE: Practically everything seems to be interconnected on tax policy right now, so consider this an early calendar notice to check back in later on a potential year-end tax deal, too.
Now to be clear, so much is up in the air on how and how much — not to mention when — Democrats will be able to raise taxes, and that will certainly influence any potential push for a deal in December that would likely include none of the pain that would come with tax increases.
Here’s what’s on the table — because of the 2017 tax law, companies will start facing a less generous policy for deducting the interest on their debt next year, and less generous write-offs for research and development expenses.
Some Democrats will certainly be concerned about the R&D changes, though not so much on the higher taxes on business interest. But in any event, it would seem difficult for them to basically enact what would be seen as more business tax cuts without a good reason, especially if Democrats are still toiling away at hiking taxes on businesses, too.
One idea floating around K Street is that Democrats could seek an extension of the monthly child allowance that Biden signed into law this year as a trade for staving off the new treatment of interest and research costs.
Democrats sure seem likely to seek to try and extend the expanded child tax credit as part of budget reconciliation. But under this other school of thought, Democrats could try and save the space in a reconciliation measure and essentially get that child credit expansion for free at the end of the year, especially given that Congress historically hasn’t paid for tax extender packages.
Now, let’s also be clear about all the potential hurdles here. If Democrats haven’t gotten the job done on tax increases by the time December rolls around, that will take up all the oxygen around the Hill.
But if they have, there’s certainly a chance that there won’t be enough bipartisan goodwill to get an extenders package done. (Plus, how much desire will there be to be more proactive on extenders? Not to mention: How much of the current chatter is K Street trying to nudge this toward existence?)
A TWEAK HERE, A TWEAK THERE: President Jair Bolsonaro has pared back the ambitions of a potential income tax overhaul in Brazil, Bloomberg reports. Brazil is working to simplify a very complex tax system, of which the individual income part is just some of the problem. But with Bolsonaro up for re-election next year, he’s also trying to make sure that revamping the tax system doesn’t cause too much pain. For instance: A 20 percent tax on dividends will be paired with an exemption for small businesses, while tax breaks for health care and education were not only spared — but also enhanced. Bolsonaro also pushed to increase the number of people not paying income taxes. Anyone making under 1,903 reais a month (around $385) currently is exempt from taxes, and the president pushed to increase that threshold to 2,500 reais — not the 2.400 planned by his economic team. Economy Minister Paulo Guedes has said the changes will cut taxes for some 30 million Brazilians, while the overall tax burden is supposed to stay basically flat.
KEEP CHIPPING AWAY: The Republicans who control the Arizona legislature keep working to roll back a voter referendum from last year that hikes taxes on the rich to pay for more education initiatives, as The Associated Press reports. Both the state Senate and House already approved a budget last week that sets the top tax rate for individual income at 4.5 percent, essentially blocking the 3.5 percent surtax on individual income above $250,000 a year for single filers and a half-million for married couples. The Arizona House then took that one step further on Friday, by creating a new tax category for businesses that will shield many companies from the surcharge, too. If approved by the Senate, that new category would basically allow higher earners with income from pass-through businesses to pay the same tax rates as other top earners. (Also worth noting, given what’s happening in Washington: Republicans have passed those changes with a single-vote majority in both chambers.)
WaPo: “Bipartisan infrastructure deal could make it harder for tax cheats to elude IRS.”
Reps. Suzan DelBene (D-Wash.) and Jackie Walorski (R-Ind.) propose expanding tax credit for affordable housing.
Oregon follows the federal government’s lead, allows companies to deduct expenses paid for with forgiven Paycheck Protection Program loans.
Stephen Hawking guest-starred on a range of television shows, including “The Simpsons” and “Star Trek: The Next Generation.”
A message from Initiative to Accelerate Charitable Giving:
America’s charitable organizations have stepped up to do more during the pandemic and ensuing economic downturn.
But over the years, the charitable giving landscape has changed and charitable giving laws no longer work as intended to increase the flow of resources to working charities. As a result, more than $1 trillion meant for charities sits on the sidelines.
Now more than ever, we must restore the connection between charitable tax benefits and benefits to charities.
The Accelerating Charitable Efforts (ACE) Act reforms our charitable giving laws by restoring this connection. This bipartisan legislation is a step forward in ensuring our charitable giving laws work as intended and charities receive additional resources to help communities all across America. Read more.
