May 28, 2021
The Tax News & Views Roundup will not be published on Monday in honor of Memorial Day. The publication will return on Tuesday, June 1.
White House to propose $6 trillion budget plan, as administration seeks to reshape economy, safety net – Jeff Stein, Washington Post. “The budget stacks together the numerous policy initiatives that Biden has already offered in his first four months in office. He has called for a $2.3 trillion infrastructure proposal, a $1.8 trillion education and families plan, and $1.5 trillion in proposed discretionary spending, though some of this money would be spread out over several years.”
Biden has made clear, however, that he wants to negotiate many of these proposals with Republicans, and the figures are likely to fluctuate if talks pick up momentum. But his first formal budget proposal offered Friday locks in his vision of an expanded government, offering more services to a broad segment of Americans, particularly the low-income.
Biden’s Tax Hike Push Will Depend on This ‘Insider’s Insider’ – Christopher Anstey and Laura Davison, Bloomberg ($). “President Joe Biden’s push for the first major federal tax increase since 1993 now rests on the shoulders of Richard Neal. It’s a career moment that comes full circle for Neal, who chairs the House committee responsible for writing the legislation. He joined the key tax-writing body during the battle for that last wave of increases."
Neal says he learned a key lesson during the 1993 effort: Ensure that the tax increase that you vote for actually gets enacted, or you’re left politically all the more vulnerable, with no result to point to. When he and other House Democrats back then voted for an innovative tax on energy, it ended up dying in the Senate. ‘It was this vacuous endeavor,’ Neal, 72, recalled in an interview in his office at the U.S. Capitol this month. ‘We were stuck with a tax-increase vote and no policy achievement.’
The episode serves as background to Neal’s current work figuring out what tax increases he can shepherd through a Democratic caucus that has razor-thin control of the House and Senate. While progressives are determined to boost levies on wealthy Americans and corporations to fund more spending on social programs, moderates, including Senator Joe Manchin of West Virginia, have expressed concerns.
Biden Budget Said to Assume Capital-Gains Tax Rate Increase Started in Late April – Richard Rubin, Wall Street Journal. “President Biden’s expected $6 trillion budget assumes that his proposed capital-gains tax rate increase took effect in late April, meaning that it would already be too late for high-income investors to realize gains at the lower tax rates if Congress agrees, according to two people familiar with the proposal.”
Possible (maybe likely) reaction from Congress: stay out of my lane!
Biden’s Tax On Large Capital Gains At Death Will Catch A Few With Annual Incomes Of Less than $400,000 – Howard Gleckman and Robert McClelland, Tax Policy Center. “President Biden’s campaign promise never to raise taxes on those making $400,000 or less annually will inevitably conflict with his proposal to tax unrealized capital gains at death. We estimate Biden’s new capital gains tax could exempt about 98 percent of decedents who made $400,000 or less, but about 2 percent may face a tax increase. In other words, Biden would come very close to meeting his pledge, but a relative handful of lower-income decedents may pay higher taxes at death. And even that small number may add to the political challenges Biden faces as he tries to convince Congress to pass a tax on capital gains at death.”
Biden’s bid to tax inherited assets could be a documentation nightmare for wealthy heirs – Darla Mercado, CFP. “The wealthy may have a whole other reason to dread President Joe Biden’s proposal to overhaul taxes on inheritances: They may have to dig through decades worth of documents to figure out what they owe Uncle Sam.”
Democrats May Resurrect Tax Breaks TCJA Targeted – Doug Sword, Tax Notes ($). “Top Democratic tax staffers in Congress say some of the expiring business tax preferences that were offsets for the 2017 tax law may be extended to compensate for the higher proposed business tax rates in President Biden’s infrastructure and families proposals. Chief among the candidates could be the scheduled expiration next year of the 100 percent deductibility of research and development expenses. Another candidate could be the phaseout beginning in 2023 of bonus depreciation, which allows companies to immediately deduct 100 percent of a host of expenses.”
Earn less than $75,000? You may pay nothing in federal income taxes for 2021 – Sarah O’Brien, CNBC. “If your income falls below $75,000 for 2021, there’s a chance you’ll end up paying no income taxes on it. On average, taxpayers in that category will have no tax liability after accounting for deductions and credits when they file their 2021 tax returns next spring, according to recent estimates from the nonpartisan Joint Committee on Taxation. Those households also may get money back from the IRS."
Even for taxpayers earning $75,000 to $100,000 in 2021, the average income tax rate paid will be 1.8%.
Senate GOP unveils its $928 billion infrastructure counteroffer to Biden — here’s what’s in it – Jacob Pramuk, CNBC. “Senate Republicans unveiled their $928 billion infrastructure counteroffer to President Joe Biden on Thursday, as the sides see whether they can bridge an ideological gulf to strike a bipartisan deal […] Biden’s latest offer to Republicans came in at $1.7 trillion — $600 billion less than his original plan. He has urged the GOP to put at least $1 trillion into an infrastructure package.”
To reach a deal, the sides would have to resolve not only a gap in the price tag but also differing visions of how to offset the spending. In their counteroffer, Republicans again rejected Biden’s call to raise corporate taxes, contending they could cover infrastructure costs with funds already allocated by Congress or with transportation user fees.
White House reaction to the GOP plan: Tepid, at best.
Statement by Press Secretary Jen Psaki on Senate Republicans’ Infrastructure Proposal – Jen Psaki, the White House:
At first review, we note several constructive additions to the group’s previous proposals, including on roads, bridges and rail. At the same time, we remain concerned that their plan still provides no substantial new funds for critical job-creating needs, such as fixing our veterans’ hospitals, building modern rail systems, repairing our transit systems, removing dangerous lead pipes, and powering America’s leadership in a job-creating clean energy economy, among other things.
Lastly, we are concerned that the proposal on how to pay for the plan remains unclear: we are worried that major cuts in COVID relief funds could imperil pending aid to small businesses, restaurants and rural hospitals using this money to get back on their feet after the crush of the pandemic.
Do Dems go it alone the week of June 7?
Though there are no votes in Congress next week, we will work actively with members of the House and Senate next week, so that there is a clear direction on how to advance much needed jobs legislation when Congress resumes legislative business during the week of June 7.
Biden prepared to extend infrastructure talks – Christopher Cadelago and Laura Barron-Lopez, Politico. “White House officials and other Democrats close to the bipartisan infrastructure talks are willing to let the negotiations stretch past their Memorial Day deadline — but not too far.”
Bipartisan highway bill advances in Senate, offering a path through infrastructure morass – Anthony Adragna, Politico. “A bipartisan proposal to spend hundreds of billions of dollars on highways advanced through a Senate committee Wednesday even as negotiations on a much bigger package continued to struggle — offering a possible off-ramp for Congress to make some progress on infrastructure this year. The bill approved unanimously Wednesday by the Senate Environment and Public Works Committee would allocate $311 billion over five years for roads and highways. Its bipartisan approval stands in contrast to floundering efforts to broker a deal between Senate Republicans and the White House on a multitrillion-dollar package that would fund everything from roads to broadband to blunting climate change.”
Democrats Wary to Roll Back Trump-Era Business Write-Off – Lydia O’Neal and Kaustuv Basu, Bloomberg ($). “Democrats who have spent the past four years railing against the 2017 tax code overhaul appear hesitant to roll back one of that law’s broad business tax breaksThat reluctance is underlined in the White House’s plans to pay for trillions in infrastructure and social spending. President Joe Biden has called for sweeping corporate and individual tax changes, but shied away from touching a temporary write-off of up to 20% for partnerships, LLCs, and other entities taxed only at the individual owner level.
Washington lobbyists say the optics of clawing back a tax break available to small business likely makes this a fight the administration isn’t interested in picking right now. The White House will need to hold together a razor thin Democratic majority in Congress to advance its economic plans and two House Democrats—Reps. Henry Cuellar (Texas) and Josh Gottheimer (N.J.)—have backed legislation to make the tax break under Section 199A permanent.
Trump wanted a quick tax break. His appointees are now stuck with big bills – Brian Faler and Daniel Lippman, Politico. “Many of former President Donald Trump's political appointees got a nasty surprise when they left the government: A big tax bill. They've been ordered to immediately repay months of payroll taxes that had been deferred under a bid by Trump to boost the economy ahead of last year’s elections — levies he had assured them would later be forgiven.”
It’s a little-noticed addendum to Trump’s much-criticized plan last summer to prime the economy.
In August, he issued an executive order allowing employers to put off paying their workers’ share of the 12.4 percent Social Security tax for the rest of the year. The idea was to boost consumer spending by putting more money in the pockets of millions.
But the initiative was widely rejected by private sector employers, in part because they feared workers would be unprepared to pay the money back.
It was mandatory, though, for federal employees making less than $4,000 per biweekly paycheck, and the government began implementing it in September.
OECD's Gurria sees deal on global tech tax in June or July – Reuters staff, Reuters. “OECD chief Angel Gurria said on Thursday he expects all the necessary elements for a global accord on taxing tech giants to be ready by June or July thanks to a sharp shift in the U.S. stance on the initiative. ‘The issue was a little bit tied up, mainly because of the American position,’ he told a virtual news conference, adding that administration of President Joe Biden had made a ‘180 degree turn’ from that of his predecessor.”
JPMorgan’s Dimon, Citigroup’s Fraser doubt Joe Biden’s minimum global corporate tax rate plan would work – Thomas Franck, CNBC. “JPMorgan Chase CEO Jamie Dimon and Citigroup chief Jane Fraser on Thursday expressed concerns over President Joe Biden’s effort to hike the amount of taxes businesses pay on foreign profits and a concurrent goal to set a global minimum corporate tax rate. Testifying before the House Financial Services Committee, Dimon argued that a plan to raise the U.S. tax rate on foreign profits to 21% could, over time, push firms to move business overseas. Dimon thinks that shift could accelerate if allies renege on their promises to impose a similar global minimum tax rate.
‘America would be the only country, I think, in the world that would have what we call a global tax rate,’ he said, referring to the proposed 21% rate on U.S. companies’ foreign income.
Tax Relief for Families in Europe – Elke Asen, Tax Foundation. “Most countries provide tax relief to families with children—typically through targeted tax breaks that lower income taxes. While all European OECD countries provide tax relief for families, its extent varies substantially across countries.”
Court OKs $79M Tax Break Because of Israeli Marriage – Aysha Bagchi, Bloomberg ($). “A deceased man’s estate was entitled to claim tens of millions of dollars in tax breaks because New York courts would honor his religious divorce and subsequent Israeli marriage, the U.S. Tax Court ruled. The Thursday ruling rejected the IRS’s argument that the estate of Semone Grossman wasn’t allowed to claim an estate tax marital deduction after the bulk of the estate—about $79 million—was left to Ziona Grossman, who married Semone Grossman in Israel in 1987. The IRS argued that Semone Grossman’s religious divorce from his first wife was invalid under New York law.”
Individual Sentenced for Bribery of an IRS Revenue Agent – Treasury Inspector General for Tax Administration. “On March 4, 2021, in the Northern District of Georgia, Dauda Saibu was sentenced for bribery of an Internal Revenue Service (IRS) revenue agent. On February 28, 2020, Saibu was charged and subsequently waived prosecution by indictment. According to the court documents, on October 11, 2019, Saibu met with a revenue agent to discuss his 2014 tax return. At the end of that meeting, Saibu attempted to give the revenue agent a cash bribe. The revenue agent properly reported the bribe offer and agreed to work with Federal law enforcement authorities.”
Alabama Governor Signs Law Amending Provisions Governing Tax Collectors – Blomberg ($). “The Alabama Governor May 26 signed a law amending provisions related to tax collectors, for property tax purposes. The law includes measures: 1) defining ‘tax collecting official’ as the elected or appointed official charged with collecting ad valorem taxes and other prescribed fees on real and personal property within the county; 2) specifying that the deputies appointed by tax collecting officials are responsible for any errors, and the bond for deputies be at least 50 percent of the official’s bond; 3) requiring that the demand that tax collecting officials make on delinquent taxpayers be by first class mail, and that the demand be $5 per property; 4) allowing the official to accept one or more partial payments of any amount per tax account for payment of taxes or assessments on tangible personal property; and 5) setting commission rates for the officials. The law takes effect Oct. 1.”
Memorial Day is near! Today is not just National Beef Burger Day it is also National Hamburger Day! Celebrating these two merriments simultaneously is easy: Eat a double cheeseburger! It is also National Cooler Day! Giddy Up!
This is a roundup of tax news and opinion. Any opinions expressed or implied are those of the author and not necessarily those of Eide Bailly. Opinions found in linked items are those of the authors of the linked item, not of your bloggers or of Eide Bailly. “$” means link may be behind a paywall. Items here do not constitute tax advice.