Democrats attempt to close in on $1.75 trillion spending plan as new political headaches loom – Tony Romm, Marianna Sotomayor and Rachel Roubein, Washington Post. "House and Senate Democrats on Tuesday insisted they are closing in on the finer details of a $1.75 trillion spending package that would overhaul the country’s health care, education, climate and tax laws, even as new political wrinkles threatened to impede their progress once again."
Offering a now-familiar refrain after weeks of false starts, House Speaker Nancy Pelosi (D-Calif.) told party lawmakers at a private morning meeting that negotiators are nearing a deal on a slew of outstanding items, including plans to combat climate change, reduce the cost of prescription drugs and rethink the immigration system.
On the opposite side of the Capitol, Senate Majority Leader Charles E. Schumer (D-N.Y.) sounded a similarly optimistic note, opening a day of debate in the chamber by touting recent work specifically on drug pricing. He said Democrats have nearly clinched a plan that would empower Medicare to negotiate the price of some drugs for seniors while addressing specific troubles in the system, including the rising cost of insulin…
The developments could open the door for the House to vote as soon as this week on the $1.75 trillion tax-and-spending measure as well as a separate, second package to improve the nation’s roads, bridges, pipes, ports and Internet connections. Behind the scenes, Pelosi has pushed Democrats to wrap up work on writing the bill as soon as possible, setting in motion a plan by which the chamber could vote perhaps on Thursday.
Manchin didn't sign off on framework, no 'rush' to get deal – Jordain Carney, The Hill. “Sen. Joe Manchin (D-W.Va.) said he didn’t sign off on a framework for a $1.75 trillion social spending bill before it was released from the White House and that he didn’t think there was a ‘rush’ to get a deal.”
’No,’ Manchin said, asked if he had signed off on the framework, adding that if he had, his current pushback wouldn’t be ‘genuine.’ ‘The White House knew exactly where I stood. There was a couple of concerns that we had that we needed to work through,’ Manchin said.
Senator Joe Manchin (D-W.Va.) is not the only lawmaker who wants to see the cost of Biden's economic agenda before voting on the bills that contain those provisions.
Several sources tell us that the group of middle-of-the-road Democrats is ready to block consideration of the BBB unless leadership gets a CBO score. We’re told at least five Democrats -- Reps. Stephanie Murphy (Fla.), Jared Golden (Maine), Kurt Schrader (Ore.), Jim Costa (Calif.) and Ed Case (Hawaii) -- could block action on the BBB without an analysis of the revenue and spending impacts. This echoes Manchin’s position.
Reminder: It only takes opposition from four Democrats for a bill to not pass the House.
If Democrats keep their word, it will take roughly two to three weeks for Congress to determine the reconciliation bill's cost. Meanwhile, the infrastructure bill's costs are known and could pass the House and be signed into law immediately. If lawmakers wait to know the reconciliation bill's cost, final votes on it will not occur for a few weeks. Think Thanksgiving.
Manchin outlines main concerns over Biden agenda but says deal possible by Thanksgiving – Manu Raju, Ted Barrett and Clare Foran, CNN. “Sen. Joe Manchin said Tuesday that he has chief concerns that will need to be addressed in order to secure his vote for the $1.75 trillion economic package -- climate change, taxes, Medicare and immigration -- while also expressing new optimism that a deal could ultimately be reached that would win his support on President Joe Biden's domestic agenda.”
Manchin, who hours earlier had said it would take ‘quite a while’ to get a deal, said Tuesday evening: ‘We have all next week. We're going to work into it next week -- as they are working. So if everyone works real hard, I've said, we can get it done before Thanksgiving. We're going to get something done.’
Democrats are coalescing around a plan that would delay the state and local tax deduction cap, known throughout D.C. as SALT, for five years, according to three sources familiar with the process.
The plan, still to be finalized, would lift the cap from years 2021-2025 and then go back in place from 2026-2031.
SALT-Cap Suspension for Five Years Emerges as Leading Option – Laura Davison, Bloomberg ($):
House Ways and Means Chairman Richard Neal said the conversation about the SALT 'keeps moving' and there is not yet a final strategy. Senate Majority Leader Chuck Schumer would also need to weigh in, Neal said.
'We’re gonna have to wait and see,' Neal said. 'It’s it’s fair to say it’s just the argument keeps on going.'
Representative Bill Pascrell, a New Jersey Democrat, said he’s not sure a deal can be reached in the House in time for a House vote on the Biden plan this week, as Speaker Nancy Pelosi has said she wants. He said there will be an 'uproar' from members if raising the SALT deduction limit isn’t in the bill that goes to floor and that House leaders have committed to including it in the tax and spending plan.
I'm not sure everyone is onboard with this idea:
SALT-Cap Suspension Plan Called ‘Unacceptable’ by Sanders – Laura Davison and Billy House, Bloomberg ($). “House Democrats are considering a five-year suspension of the cap on the federal state and local tax deduction before it’s reinstated in 2026, according to people familiar with the negotiations, a plan that Senator Bernie Sanders quickly declared ‘unacceptable.’ That temporary suspension has become the leading option in discussions about the SALT deduction limit. But the pushback from progressives like Sanders on extending the tax benefit to the ultra-wealthy likely will force proponents to reassess. His opposition is enough to block the bill in the Senate.”
‘I am open to a compromise approach which protects the middle class in high tax states,’ Sanders, a Vermont independent who caucuses with Democrats, said in a statement. ‘I will not support more tax breaks for billionaires.’
Representative Pramila Jayapal of Washington, chair of the Congressional Progressive Caucus, said other members of the group also are ‘not happy’ with the SALT proposal.
Sanders Open to SALT Compromise With Income Cap Around $400k – Susanne Barton and Steven Dennis, Bloomberg ($). “Senator Bernie Sanders says he is open to a possible SALT compromise that would entail lifting the cap for people with incomes under about $400,000 a year.”
When $200K is taxed like $10 million: Latest tax plan targets less affluent with trusts – Lynnley Browning, Accounting Today. “Democrats have pivoted to the wallets of the working wealthy in their hunt for cash to fund a winnowing social spending agenda. Their latest proposals could lead to higher taxes on working professionals and business owners who earn good money but aren’t crazy-rich — a stark contrast to their earlier focus on billionaires.”
After scrapping efforts aimed at the very richest Americans, lawmakers last week proposed new surcharges that would affect certain trusts and estates with annual income as little as over $200,000. While millionaires to the richest billionaires would also pay the new surcharges, their taxes would kick in at far greater thresholds while they’re alive.
‘The people who are going to get hurt are not the really wealthy people doing sophisticated planning but the ordinary taxpayer,’ including ‘mass affluent’ individuals worth between $100,000 and $1 million and the would-be rich with small businesses, farms and properties, said Martin Shenkman, an estate planning lawyer based in Fort Lee, New Jersey.
What Is Biden’s Minimum Book Income Tax on Corporations? – Thomas Brosy, Tax Policy Center:
What did the President propose?
His plan, which was introduced as legislation by House Democratic leaders, would impose a 15 percent alternative minimum tax on the adjusted financial statement income (“book income”) of large corporations. As a result, some large corporations would pay an amount by which their minimum tax exceeded their regular tax for the year. The minimum tax would allow a credit for a share of taxes paid in other countries.
Which firms would pay the new tax?
Corporations with a 3-year average adjusted book income above $1 billion will be subject to the minimum tax. In 2019, about 455 US corporations reported net income before taxes above $1 billion. However, many of these firms would not be subject to minimum tax because they pay more in regular income taxes.
Infrastructure bill could upset debt limit timeline – Sylvan Lane, The Hill. “The passage of President Biden’s sweeping economic plan could shorten the time frame in which Congress must act to avert a debt default even as Democrats remain divided over how to raise the borrowing limit.”
The U.S. last week exhausted the $480 billion in new debt authorized by a bipartisan deal last month and may need to raise or suspend the ceiling shortly after December begins. The Treasury Department has already begun taking “extraordinary measures” to avert a default, but Treasury Secretary Janet Yellen warned it may not be able to do so beyond Dec. 3.
While budget experts say the Treasury Department should be able to keep the U.S. solvent beyond that date, a provision of the bipartisan infrastructure deal could accelerate that countdown.
The $1.1 trillion measure would transfer $118 billion from the Treasury’s General Fund to the Highway Trust Fund. It’s unclear when Treasury would have to make that transfer, but doing so before a debt ceiling increase would deplete cash that could be used to avert a default.
Localities Urge Congress to Exclude Munis From Corporate AMT – Joe Mysak, Bloomberg ($). “Twenty-nine groups representing municipal bond issuers sent a letter to Congress Monday night urging them to exclude tax-exempt bond interest from the proposed 15% Corporate Alternative Minimum Tax and to restore municipal bond provisions that were dropped from the latest version of the Build Back Better Act."
The groups, including the Government Finance Officers Association, the National Association of State Treasurers and the National League of Cities, said they were ‘alarmed’ by the Corporate AMT, which would impose a 15% minimum tax on the tax-exempt bond interest earned by investors who hold about one-quarter of outstanding tax-exempt municipal bonds.
‘Ultimately, this tax will not be borne by corporations, but by our communities, in the form of higher interest demanded by bondholders,’ the letter said. ‘Our organizations are currently analyzing the effect of this provision, but we know that the Congressional Research Service estimates that subjecting private activity bonds to the individual AMT has raised the interest cost of those bonds by 50 basis points.’
States Face Hurdles In Diluting Federal Tax Preemption – Paul Williams, Law360 ($). “States are beginning to challenge federal preemption of their taxing authority after a 2018 Supreme Court ruling striking down a sports gambling ban, but they may face an uphill climb in invalidating core checks on the taxation of interstate commerce.”
Texas and Maryland are arguing in court that the federal Internet Tax Freedom Act, or ITFA, which bans state taxation on internet access and discriminatory taxes on electronic commerce, is an improper preemption statute under the U.S. Supreme Court's Murphy v. NCAA ruling. Texas is making its claim as an alternative argument in a sales tax dispute with Apple, and Maryland has raised the argument in defense of its digital advertising tax in state and federal courts.
Virginia Task Force Objects to Corporate Income Tax Overhaul – Michael Bologna, Bloomberg ($). “A task force advising the Virginia legislature is warning against shifting the state’s corporate income tax filing protocols to reflect transactions between a company’s related units.”
The Work Group to Assess the Feasibility of Transitioning to Unitary Combined Reporting discouraged any major changes in Virginia’s current corporate tax filing protocols. In a final report dated Monday, the work group said combined reporting would lead to more complexity for taxpayers and the Virginia Department of Taxation, and ‘potential damage to Virginia’s business climate.’
Illinois October State Revenues Rise 10% on Income, Sales Taxes - Shruti Date Singh, Bloomberg ($). “Illinois state revenue in October rose 9.7% to $3.1 billion with gains largely from sales and corporate income tax revenue, according to a monthly report from the Commission on Government Forecasting and Accountability.”
Colorado Rejects Property Tax Cuts for Apartments, Hotels – Michael Bologna, Bloomberg ($). “Colorado voters rejected a ballot initiative that would have cut property tax assessment rates for multifamily housing units and lodging facilities, and require the state to reimburse local governments for homestead exemptions.”
Voters on Tuesday rejected Proposition 120, by a margin of about 57% to 43%, according to unofficial results. The proposal would have modified the tax code to permanently reduce property tax assessment rates for two classes of properties. The citizen-driven initiative called to cut assessment rates for apartments, but not condominiums, from 7.15% to 6.5%. Assessment rates for hotels, motels, and bed and breakfasts would have been trimmed from 29% to 26.4%.
Washington State Voters Want to Repeal Capital Gains Excise Tax – Laura Mahoney, Bloomberg ($). “Washington state voters overwhelmingly voted to disapprove of an excise tax on capital gains that takes effect in 2022.”
Voters responded to a nonbinding, advisory question on the Nov. 2 statewide ballot with 63% in favor of repealing the tax and 37% in favor of maintaining it, the state elections office reported late Tuesday. Under a 2007 state law, voters must be asked whether they want to repeal or maintain tax increases enacted by the Legislature. Lawmakers aren’t required to act based on the result of the vote, however.
5 things to watch with global tax deal – Brian Faler, Politico ($). “G-20 leaders just blessed a historic agreement that would transform the international tax system. Their plan to create a new 15 percent global corporate minimum tax, and give countries new authority to dun big multinationals, is designed to simultaneously crack down on tax-dodging companies and squash fights over who gets their tax dollars. That’s hardly the end of the story though. There are still plenty of open questions about how this agreement is going to work, and potential landmines that could upend the plan.”
THE RECONCILIATION ANGLE: The U.S. needs to get its tax code in line with the accord, and Democrats aim to use reconciliation to do that. Remember, the agreement is only in principle — it doesn’t have any legal force. Each country must now pass separate legislation to make the minimum tax a reality…
WHAT ABOUT THOSE DIGITAL SERVICES TAXES?...
MANY LOSERS ARE STILL TBD:…
ENTREATIES FOR A TREATY: Another question is whether whatever the negotiators decide in terms of divvying up taxing authority will require changes in U.S. treaties.
OECD Chief Sees Tax Deal As Inspiration For Climate Solution – Todd Buell, Law360 ($). “Organization for Economic Cooperation and Development Secretary-General Mathias Cormann said the world should take inspiration from the successful multilateral talks led by his group for a global tax deal as countries aim to tackle climate change.”
In remarks shared with reporters Monday, Cormann said the tax deal formally backed over the weekend by leaders of the Group of 20 of developed and developing economies was a significant victory for multilateralism, 'which we should all seek to replicate in responding to another key global challenge — climate change.'
The deal signed off on by G-20 leaders would see the reallocation of some taxing rights as well as a global minimum tax of 15%. The principles had been agreed to last month by 136 out of 140 jurisdictions taking part in negotiations, which had taken a number of years.
It’s National Sandwich Day! And the options are numerous: PB&J, BLT, Ham&Cheese, Dagwood, the Monte Cristo and Sloppy Joe. Get your hands on one!
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