IS THAT SOME PUSHBACK? Just to be upfront about this — there is definitely solid bipartisan support for allowing companies to immediately write off their research expenses.
Dozens of House members from both parties urged their leaders last week to quickly enact such a provision, and the Senate overwhelmingly passed a nonbinding measure last week pressing negotiators on China competitiveness legislation, H.R. 4521 (117), to include immediate expensing for research.
But interestingly enough, some of the loudest opposition to that proposal right now is from the left, at a time when Democrats retain narrow majorities in Congress.
Four of the five senators who voted against that nonbinding measure calling for full research expensing caucus with the Democrats, including big-name progressives like Sens. Cory Booker (D-N.J.), Bernie Sanders (I-Vt.) and Elizabeth Warren (D-Mass.).
The progressive Institute on Taxation and Economic Policy followed up with a post shortly thereafter, calling it an “incredible reversal” that Democrats would consider a net corporate tax cut in the competitiveness measure after pushing so far unsuccessfully for a broader measure to hike taxes on the rich and corporations.
MORE ON EVERYTHING in a bit, but first thanks for coming to the “at least both names started with ‘P?’” version of Weekly Tax.
Make your obligatory Austin Powers reference here: Today marks 59 years since scientists at the Massachusetts Institute of Technology lobbed the first laser beam off the moon’s surface.
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LET’S SEE WHERE THIS GOES: Starting this year, companies have to write off their research expenses over at least five years — a change that Republicans made in their 2017 tax law (though many of them never really wanted to follow through on it.)
Supporters of allowing those costs to be deducted immediately note that would just be returning to a policy that was in place in the U.S. for decades before this January — and that forcing those expenses to be written off over at least five years puts American companies at a disadvantage against competitors from other countries with more generous R&D policies.
Chances are that Congress will bring back immediate expensing for research at some point in the near future. But business advocates and key supporters on the Hill — who include some Democrats in potentially tough races this fall — want that to happen on the soonest possible vehicle, and that could easily be this bipartisan China competition legislation currently being hammered out.
All of which is a long way of saying — keep an eye on the opposition from progressives and key Democrats to attaching the research provision to that broader competitions bill. Those skeptics have noted, among other things, that it’s off-key for Democrats to spend tens of billions on corporate tax cuts when they can’t keep the expanded Child Tax Credit on the books for more than a year.
In the end, that means it might be easier for Democrats to pass immediate expensing for research costs as part of legislation that includes lots more in the way of corporate tax increases – like some sort of offshoot of the now-stalled Build Back Better plan. (In fact, ITEP and other progressive groups have explicitly said as much.)
Of course, that assumes that Democrats can actually get their act together and pass a bill to raise taxes, and essentially do whatever else can get the OK from Sen. Joe Manchin (D-W.Va.).
And there’s definitely reason to think that Democrats might fall short — including that Democratic leaders might be approaching the situation too passively, as NBC News’ Sahil Kapur and Benjy Sarlin wrote, by waiting on Manchin to more explicitly write down what he wants to do to raise taxes, battle inflation and reduce deficits.
STATE FLY-AROUND: Texas and Florida are the two biggest states run by Republicans. But those two places have been comparative supportive players during all the talk of tax-cutting in the states — which to be clear, there has been a lot of in recent months, with more below and to come.
And to be fair, both Florida and Texas already don’t have income taxes. But both states also got a little further into the tax-cutting spirit in recent days.
In Texas, voters overwhelmingly backed a pair of amendments to the state constitution that will lead to residents getting marginally lower property tax bills, as the Austin American-Statesman reported.
And by overwhelmingly, we mean both amendments passed with around 85 percent. One would raise an exemption for school property district taxes, and the other would extend existing property tax relief to homeowners who are disabled or at least 65 years old.
Hundreds of miles to the east, Gov. Ron DeSantis of Florida signed some $1.2 billion worth of tax cuts into law on Friday, the Tallahassee Democrat reports.
Lots of those tax cuts are more targeted, including four sales tax holidays and scrapping the sales tax for diapers for a year.
The biggest chunk of tax relief won’t come until the fall, either — a pause on the state’s gas tax that will be in effect for October, when less tourists are heading to Florida and the month before DeSantis seeks a second term as governor. (Also, not for nothing; Federal relief funds will be helping cover the cost for the gas tax holiday.)
LET’S NOT DO THAT? The Dutch tech industry is going all out to save a tax break for expatriates, Bloomberg reports. Currently, the Netherlands allows expats to exempt 30 percent of their salaries from tax for five years. Meantime, tech executives in the country say that between 15 percent and 70 percent of their workforce come from other countries, so scrapping that tax benefit would make it more difficult for the industry to attract and keep top talent. Interestingly, Prime Minister Mark Rutte’s government hasn’t said that the tax exemption is in its sights, but business advocates like the Confederation of Netherlands Industry and Employers believe it’s on the chopping block as the government seeks to tighten up its finances. The Netherlands reduced the length of the expansion from eight years to five years back in 2018, when Rutte was also prime minister.
MORE TAX CUTS! Missouri lawmakers are still figuring out how to offer rebates to taxpayers, The Associated Press reports. Key state senators have endorsed a rebate plan that is similar to a measure that already passed the House, but also needs to be passed by the full Senate. Both the House and the Senate plan would offer maximum payments of $500 to single filers and $1,000 to married couples and wouldn’t make those rebates refundable — meaning that taxpayers couldn’t get a refund that exceeded their state income tax liability. But the plans do have key differences: Single taxpayers making more than $150,000 and joint filers making more than $300,000 wouldn’t get a payment under the Senate measure, after Democrats derided the rebates as a giveaway to the rich. (The House plan has no income restrictions at all.) The Senate bill also would limit the amount of total refunds to $500 million, prorating some payments to keep the total cost under that cap, while the House would allow double that number. The two chambers have until Friday to reconcile their differences.
Bloomberg: “Doubts Escalate Over Timeline for Implementing Global Tax Deal.”
The WSJ editorial board: “Spare America From Yellen’s Global Tax.’’
And an op-ed, too, from former Trump White House officials: “The 2017 Tax Reform Delivered as Promised.”
Charlotte Observer: “Tax errors took everything from a disabled Charlotte woman and left her sleeping in a parking deck.
Laser is an acronym for “Light Amplification by Stimulated Emission of Radiation.”