Bipartisan Senate Group Seals $1.2 Trillion Infrastructure Deal – Erik Wasson, Bloomberg ($). “A bipartisan group of 10 senators has agreed to pitch a $1.2 trillion eight-year infrastructure spending package to President Joe Biden, according to people familiar with the deliberations. The proposal, backed by Republicans including Mitt Romney and Democrats including Joe Manchin."
The proposal is limited to core physical infrastructure and omits the social programs such as elderly care Biden included in his ‘American Jobs Plan,’ the people said. They also said there are no tax increases included, although Romney earlier said the group was discussing indexing the gasoline tax to a measure of inflation -- something he doesn’t count as a tax hike.
…
Dick Durbin, the No. 2 Senate Democrat, said Thursday he’s in favor of indexing the gas tax. And Tester said, ‘I’ll take a look at it.’ White House officials met on Thursday with Democratic senators working on a bipartisan agreement. ‘Some questions still need to be addressed, particularly around details of both policy and pay-fors,’ White House spokesman Andrew Bates said.
On a scale of 1 to 10, the excitement level for this "deal" should be a two. An agreement by ten Senators that does not yet have the approval of congressional leaders, or the party caucuses, or the White House has a long way to go.
Punchbowl News ($) reports how the proposal would be paid for:
- Repurposing unused spending from past COVID relief bills
- Creating an infrastructure bank where states could get loans for infrastructure projects
- Bonds
- Indexing the gas tax
A detailed breakdown for how much revenue each provision would raise is not publicly available. What is in the public domain is President Joe Biden’s opposition to increasing the gas tax because it would hit taxpayers earning less than $400,000, and repurposing COVID relief funds because the pot is too small.
Meanwhile, a bipartisan deal seems to going the way of the dodo, according to House Ways and Means Chairman Richard Neal (D-Mass.), as reported by Bloomberg ($).
"Democrats Only: House Ways and Means Committee Chairman Richard Neal (D-Mass.) said yesterday that he’d prefer not to use reconciliation to advance a comprehensive infrastructure package, but that ‘the door seems to be closing’ on the possibility of a bipartisan agreement that could move through a more normal legislative process. ‘There’s going to have to be some revenue increases,’ Neal told the 2021 Spring New Markets Tax Credit Virtual Conference hosted by accounting and consulting firm Novogradac. ‘Eventually you’re going to have to vote for revenue if you want the project,’ Neal recalled telling advocates for a New York City-area infrastructure build."
Pay-as-You-Go Surprise: GOP Backs Road Fees While Democrats Balk – Keith Laing, Bloomberg ($). “The debate over how to pay for the nation’s roads, bridges and transit systems is leading some normally anti-tax Republicans to embrace higher levies on motorists -- even a new one based on miles driven instead of fuel purchased. But some Democrats who have supported the idea of charging a mileage fee are now opposed. They see infrastructure as an economic stimulus measure and want it paid for by corporate taxes. That change of positions has Washington observers scratching their heads.”
Treasury Official Doubles Down on Limited Capital Gains Reform – Jonathan Curry, Tax Notes ($). “Progressives holding out hope that President Biden will pivot to a more comprehensive approach to taxing the unrealized capital gains of the wealthy should temper their expectations. The most obvious alternatives to what Biden has proposed, like an annual mark-to-market tax regime, ‘aren’t quite ready for prime time,’ Kimberly Clausing, Treasury deputy assistant secretary for tax analysis, said June 10 during a public interview with Howard Gleckman of the Urban-Brookings Tax Policy Center."
Democrat Seeks to Wedge Child Welfare Into Infrastructure Bill – Andrew Kreighbaum, Bloomberg ($). “A top Senate Democrat wants to include money for health care, child care, and nutrition as part of President Joe Biden’s signature infrastructure legislation, setting the stage for a battle with Republicans who say such a measure should focus on roads, bridges, and other needs.”
Sen. Bob Casey, chair of the Health, Education, Labor, and Pensions Subcommittee on Children and Families, could introduce legislation for a package of proposals as soon as next week. The framework will also address child abuse and wealth inequality.
Casey report can be found here.
Treasury Official Won’t Rule Out Curb On Pass-Through Deduction – Michael Rapoport, Bloomberg ($). “The Biden administration might still take action to curb a tax break for pass-through business owners, a Treasury official said Thursday. Kimberly Clausing, deputy assistant Treasury secretary for tax analysis, said she 'wouldn’t read much into the absence' of any action by the administration thus far on the Section 199A 20% deduction for pass-through businesses.”
Billionaire Tax Leak Referred to FBI as Probe Grows, IRS Says – Laura Davison, Bloomberg ($). “The disclosure of the personal income and tax data of some of the wealthiest Americans has been referred to additional federal investigators to probe the leak of confidential information, an Internal Revenue Service official said.”
Treasury says tax gap to balloon to $7 trillion over next decade, calls for beefed-up IRS – Thomas Franck, CNBC. “The Treasury Department estimates that the difference between how much Americans owe in taxes and how much they actually pay will balloon to $7 trillion over the next decade. In prepared remarks, Deputy Assistant Secretary Mark Mazur told Congress on Thursday that the so-called tax gap will only worsen over the next several years without more funding from lawmakers.”
Lawmakers debate the merits of increased IRS funding to improve compliance and up revenue – Jay Heflin, Eide Bailly. “Lawmakers in a joint congressional hearing on Thursday took opposing positions when debating President Joe Biden’s budget proposal to shrink the Tax Gap, which is the difference between taxes that are owed and the amount that is collected.”
‘Over the coming decade, the gross Tax Gap is projected to total approximately $7 trillion, roughly 15.2% of all owed taxes,’ said [Mark Mazur, Treasury’s Acting Assistant Secretary of Tax Policy.]
[IRS Deputy Commissioner] O’Donnell contended that regulating paid tax preparers would help shrink the Tax Gap.
‘Returns that are prepared by a paid preparer are more likely to have errors than individuals who prepare their own,’ O’Donnell said. ‘Anything we can do to improve our ability to ensure that paid preparers have the confidence and the capacity to prepare an accurate return and avoid further interaction with the Internal Revenue Service is a major step forward.’
Distrust of IRS drives GOP critique of Biden tax enforcement plan – Lindsey McPherson, Roll Call. “House Ways and Means Republicans at a joint subcommittee hearing Thursday said they couldn't support removing a big chunk of the IRS budget from the annual appropriations process in part because of the leak of a massive trove of personal tax return information earlier this week.”
IRS Makes Few Tweaks in Final Disaster Tax Relief Rules – Sam McQuillan, Bloomberg ($). “Final IRS rules putting in place a congressional mandate for natural disaster tax relief largely mirror the agency’s previously proposed version. The rules (T.D. 9950; RIN: 1545-BP98) move back deadlines for individuals living in, injured or killed in a federally declared disaster area, as well as for businesses and relief workers operating within the area. The regulations also clarify the definition of ‘federally declared disaster.’”
The final rules largely adopt a previously proposed version (REG-115057-20) that the agency released in January. Both versions preserve the IRS’s discretion to determine which declared disasters qualify for relief and for certain tax deadline postponements.
Non-tax filer families will soon be able to sign up for the enhanced monthly child tax credit – Carmen Reincke, CNBC. “There’s good news for families that don’t traditionally file taxes but have children who are eligible for the new, enhanced child tax credit. They will soon be able to send their information directly to the IRS without filing a tax return, ensuring that they receive the monthly payments, which are slated to begin July 15. The IRS will launch two portals, expected in June, for families to input more updated information concerning the enhanced child tax credit, the House Ways and Means Committee said in a Thursday statement. The committee also released an information sheet on the new enhanced credit.”
The Ways and Means press release can be found here.
In other Treasury/IRS related news, the Senate Finance Committee on Thursday approved the nomination of several Treasury Department nominees including Lily Batchelder as assistant secretary for tax policy, Nellie Liang as domestic finance undersecretary, Ben Harris as assistant secretary for economic policy, and Jonathan Davidson as assistant secretary for legislative affairs. All were approved by bipartisan votes and their nominations no head to the Senate floor for a vote on confirmation.
Citing Thomas Jefferson, Michigan panel weighs ban on city income tax for non-residents – Beth LeBlanc and Craig Mauger, The Detroit News. “A Michigan House committee debated Wednesday a ban on city income taxes imposed on individuals who work but don't live in the city, legislation that would shrink the revenues of 24 municipalities, including Detroit. For about 30 minutes, the House Tax Policy Committee discussed — but didn't vote on — the bill sponsored by Rep. Pamela Hornberger, R-Chesterfield Township. Chairman Matt Hall, R-Marshall, described the meeting as the start of a conversation, spurred in part by the growing use of remote workers during the COVID-19 pandemic.”
‘Digital Nomads’ Set for Income Tax Break Under Louisiana Bill – Jennifer Kay, Bloomberg ($). “Up to 500 ‘digital nomads’ moving to Louisiana next year while working for out-of-state companies would receive an individual income tax break under a bill heading to the governor’s desk. The bill (S.B. 31) caps the number of participants in the program, which would end after Dec. 31, 2025. The Senate on Thursday voted unanimously to concur on changes to the bill that were approved in the House on a 72-28 vote.”
NC Senate OKs massive tax cut package – Laura Leslie, WRAL.com. “State senators on Wednesday approved a measure to cut personal and corporate income taxes and other business taxes by more than $2 billion over the next two years. Eight Democrats joined Republicans in the 36-14 vote.”
‘We have consistently collected more revenue from taxpayers than we need to operate a sound state government,’ said bill sponsor Sen. Paul Newton, R-Cabarrus. ‘This bill recognizes that and will allow taxpayers to keep more of their hard-earned money while keeping North Carolina on solid financial ground.’
FACT SHEET: President Biden and G7 Leaders to Announce Steps to Forge a More Fair and Inclusive Global Economy – The White House. “Today, President Biden will meet with G7 leaders to discuss ways to forge a more fair, sustainable, and inclusive global economy that meets the unique challenges of our time. President Biden and G7 partners are committed to a global recovery that benefits the middle class and working families at home and around the world.”
Developing Countries Seek More Benefit From Global Tax Deal – Isabel Gottlieb and Hamza Ali, Bloomberg ($). “As years-long negotiations on how to tax tech giants like Facebook and Amazon head toward a deal this summer, developing countries still have a list of key issues they want addressed. Those countries want to avoid dispute resolution procedures with multinational companies and wealthier countries they say threaten their sovereignty, and hope to eke a little more revenue out of the deal.”
Former OECD Deputy General Calls G-7 Tax Deal ‘Half-Baked’ – Yuko Takeo and Emi Urabe, Bloomberg ($). “Historic. Groundbreaking. Those are some of the words that have been used to describe the compromise struck last week by the Group of Seven to try to make multinational corporations pay their fair share of taxes.”
‘Murky’ and ‘half-baked’ are two other ways to characterize it, according to Rintaro Tamaki, a former deputy secretary general at the Organization for Economic Cooperation and Development who oversaw tax policy for six years.
Europe’s Carbon Border Tax Plan Looms Over Global Trade – Matthew Dalton. Wall Street Journal ($). “Europe is preparing legislation that would jolt the rules of international trade by taxing imported goods based on the greenhouse gases emitted to make them, a plan that has sent shudders through the world’s supply chains and unsettled big trading partners such as the U.S., Russia and China. The European Union plan, due to be announced next month, is generating debate ahead of a summit of the leaders of the Group of Seven rich countries in southwestern England starting Friday, where the international response to climate change is set to be a central topic.”
Treasury, IRS Delay Reporting Provision of BEAT Rules to 2023 – Michael Rapoport and Isabel Gottlieb, Bloomberg ($). “Companies will have until 2023 to prepare for disclosing some information under a regulation under U.S. anti-profit-shifting rules, Treasury and the IRS said Thursday. The extension (Notice 2021-36) delays until Jan. 1, 2023, a reporting provision that was set to take effect beginning this week, as part of a 2019 regulation relating to the base erosion anti-abuse tax, or BEAT.”
Hold the Phone! It’s National German Chocolate Cake Day! For me, it’s PTO day! (cough, cough) I’ll be at the deli, er, doc, seeking help.