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TRAIN KEEPS ROLLING ON: The G-20 finance ministers gave their backing to the global tax deal at their meeting over the weekend, checking another box as negotiators try to finalize the details by this fall.
And as our Melissa Heikkilä reported, this weekend’s proceedings shouldn’t come as any huge shock after more than 130 countries backed the agreement through the Organization for Economic Cooperation and Development.
But it’s also worth pointing out: A new global minimum tax of 15 percent and new rules seeking to tax companies based more on where their sales and business are located aren’t expected to go into effect until 2023, even as Treasury Secretary Janet Yellen and other key finance officials around the globe hurry to put the final touches on an agreement by October.
That also takes us back to Congress — where a global tax deal is no slam dunk for approval, as both key figures in and outside the U.S. have acknowledged.
Yellen herself said in a news conference at the end of the Venice meeting that the first pillar of the OECD talks, which deals with shifting how and where the profits of multinationals are taxed, is moving at a more methodical pace than Pillar Two, the global minimum tax.
President Joe Biden and his administration plan to deal with the minimum tax, and a variety of other potential tax hikes on the rich and businesses, in the coming months through budget reconciliation.
But Pillar One? “Maybe it will be ready in the spring of 2022 and we will try to determine at that point what’s necessary for implementation,” Yellen said, after directly being asked whether those changes would require getting two-thirds majorities in the Senate to alter tax treaties.
MORE ON THAT IN A BIT, but welcome to the post-“two teams in the G-7 just played in the final of a major soccer tournament” edition of Weekly Tax. (Always have to feel bad for the players who miss key penalties in a shootout.)
Oh, an infrastructure debate. Wonder what that’s like: Today marks 68 years since President Dwight Eisenhower — well, technically, Vice President Richard Nixon — rolled out his plan for an interstate highway system, at a conference of governors in Lake George, N.Y.
Got a good tip? Send it off the exit ramp.
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BACK TO CONGRESS: It’s a bit of hardened conventional wisdom, but that doesn’t make it untrue — the closer a big vote in Congress gets to an Election Day, the harder it can become.
In other words, it’s understandable to think the administration would face a heavy lift getting Pillar One changes through Congress next year, especially as key Republicans keep rolling out increasing doubts about the agreement.
One potential boost, as Ben Koltun of Beacon Policy Advisors told The Wall Street Journal’s Richard Rubin, would be for the corporate community to put its shoulder behind the changes next year. (Another potential bonus — perhaps some distance between the battle over the partisan tax changes that Democrats want this fall and a vote on changing the allocation rules wouldn’t be a bad thing.)
Still, experts will say it’s not clear the business world will unite behind the Pillar One changes — the Big Tech companies that have been targeted by unilateral digital taxes might have more incentive to get on board than other industries, and companies in other sectors could get wrapped up among the 100 or so big corporations that would be affected by the changes.
And yet: There is a sense from both Republicans and Democrats that the old rules governing what countries get to tax what profits might need to change.
Sen. Mike Crapo of Idaho and Rep. Kevin Brady of Texas, the top Republican tax writers in Congress, pressed Treasury to make sure that Pillar One changes don’t disproportionately come down on the U.S.
But they also noted: “Congress has been open to a modest global profit allocation formula, applied neutrally, to replace the patchwork of unilateral digital taxes that target Americans.”
Further G-20 reading: “Brussels set to delay digital levy plan after G20 backs tax deal,” according to The Financial Times.
Plus: “France pushes for 25% target for taxing multinationals’ super-profits,” via Reuters.
And: “Swiss See Opening for Tax Competition as G-20 Talks Advance,” from Bloomberg.
ABOUT THOSE PARTISAN CHANGES: The Senate heads back to Washington this week — and with August just around the corner, Democrats definitely have progress to make on getting a budget passed and kicking off the reconciliation process.
Something else to consider: With Senate Budget Chair Bernie Sanders (I-Vt.) on board, the chances seem pretty decent for Democrats to offer at least some relief to the $10,000 cap on state and local tax deductions that Republicans put into place in the 2017 tax law.
Democrats seeking to scrap the cap, like Reps. Josh Gottheimer of New Jersey and Tom Suozzi of New York, say that will help protect their states’ tax base by keeping more wealthy people from seeking out lower-tax states like Florida.
But there is some conflicting research on that front, and the Democratic nominee for mayor in New York, Eric Adams, doesn’t seem to see it that way.
“We are not going to allow Miami and other places to take our businesses,” Adams said on ABC’s “This Week,” adding that “65,000 New Yorkers pay 51 percent of our income taxes. You speak with them, the tax is not the problem. Public safety is the problem. We’re going to let them know that this city is going to be safe.”
NO TIME FOR THAT: The U.S. is far from the only country in the G-7 dealing with domestic tax pressures as it tries to clinch a global agreement — take Germany, for instance. Armin Laschet, the front-runner for succeeding Chancellor Angela Merkel in a couple months, just came out against tax cuts after September’s general election, Reuters reports. “We don’t have the money,” said Laschet, the premier of North Rhine-Westphalia (the most populous state in Germany) and who just won a battle to take over for Merkel as head of the Christian Democratic Union. To be fair, Laschet doesn’t sound particularly keen on tax hikes, either — saying over the weekend that would be a bad idea, given how much Germany just spent to assist businesses during the pandemic. The best plan for Germany, Laschet stressed, was to get back to the way things were before the coronavirus, when a strong economy allowed the country to run budget surpluses without the need for tax hikes.
NO NEED TO DAWDLE: Officials in Maui aren’t waiting around to implement a new tax on tourists, The Associated Press reports. Hawaii lawmakers reversed a veto from Gov. David Ige last week on a bill that revamped how the state taxes hotel visits — giving more authority to its handful of counties to enact their own 3 percent levies, while allowing the state government to keep the full proceeds of the 10 percent hotel tax. For Maui, this new system — which replaces a set-up in which the state sent a portion of hotel tax revenues to the counties — could lead to a twofold or threefold bump in revenues. (The chair of the Maui County council projected that the $23 million the island got under the last system would bump up to between $50 million and $70 million going forward.) And why might Maui be in the biggest rush? The previous system was weighted by population, which helped Oahu. But the new one will allow the counties with the most visitors — like Maui — to bring in more money.
The monthly child tax credit payments are almost here.
Gov. Mike Parson of Missouri vetoes measure that would lower taxes for medical marijuana companies.
University of Southern California professor pleads guilty to filing false tax return, in case linked to college admissions scandal.
Fort Ticonderoga, which gets its name from an Iroquois word meaning “between two waters,” is between Lake Champlain and Lake George.