Tax News & Views Dems go all-in Roundup

June 25, 2021

Biden, Senators Agree to Roughly $1 Trillion Infrastructure Plan – Andrew Duehren, Kristina Peterson and Sabrina Siddiqui, Wall Street Journal ($).  “President Biden and a group of centrist senators agreed to a roughly $1 trillion infrastructure plan Thursday, securing a long-sought bipartisan deal that lawmakers and the White House will now attempt to shepherd through Congress alongside a broader package sought by Democrats. Mr. Biden and Democratic leaders said that advancing the deal on transportation, water and broadband infrastructure will hinge on the passage of more elements of Mr. Biden’s $4 trillion economic agenda. The two-step process sets up weeks of delicate negotiations between Republicans and Democrats and among Democratic factions.”

Income tax increases absent from bipartisan infrastructure plan backed by President Biden – Jay Heflin, Eide Bailly. “President Joe Biden on Thursday threw his support behind a $1.2 trillion infrastructure plan that does not increase personal or corporate income taxes and was recently endorsed by a bipartisan group of Senators.”

The framework’s cost is expected to be fully paid for without income tax increases, and, according to the White House, will instead be offset by the following:

  • Reduce the IRS tax gap
  • Unemployment insurance program integrity
  • Redirect unused unemployment insurance relief funds
  • Repurpose unused relief funds from 2020 emergency relief legislation
  • State and local investment in broadband infrastructure
  • Allow states to sell or purchase unused toll credits for infrastructure
  • Extend expiring customs user fees
  • Reinstate Superfund fees for chemicals
  • 5G spectrum auction proceeds
  • Extend mandatory sequester
  • Strategic petroleum reserve sale
  • Public private partnerships, private activity bonds, direct pay bonds and asset recycling for infrastructure investment
  • Macroeconomic impact of infrastructure investment

Progressives Aim to Hold Biden, Pelosi to Promise on Bigger Bill – Jarrell Dillard, Bloomberg ($). “Progressive Democrats threatened to withhold support for a bipartisan infrastructure bill to hold President Joe Biden and party leaders to their promise to move a more expansive spending bill through Congress at the same time.”

‘None of this matters unless we get the 50 votes we need for our reconciliation bill,’ Representative Pramila Jayapal, the leader of the Congressional Progressive Caucus, said Thursday after Biden announced his support for a $579 billion plan for infrastructure spending drafted by a bipartisan group of 10 Senators.

The infrastructure package needs Republican support to get through the Senate, but Senate Majority Leader Chuck Schumer and House Speaker Nancy Pelosi are maneuvering to get the rest of Biden’s $4 trillion agenda -- and progressive priorities -- through Congress on a fast-track process known as reconciliation. That can clear the Senate with only the votes of the 50 senators who caucus with Democrats.

Explainer: Democrats seek to enact two bills (an infrastructure and another bill addressing other issues). Progressive Democrats are not happy that the infrastructure bill is going first and they don't trust that the second will be passed and enacted into law. To keep Progressive Democrats onboard with moving two bills, Democratic leaders – including President Joe Biden – have vowed to move them simultaneously. This means that if only one of the bills pass Congress (which is a definite possibility) it will not be signed into law until the other bill is passed. This vow may not take into account that Republicans are needed to pass the infrastructure bill. In other words, if Republicans oppose the infrastructure bill, they will block both bills from being enacted into law.

Here is what Biden said, according to the White House transcript:

Q    Mr. President, you said you want both of these measures to come to you 'in tandem.'  Did you receive any assurances that that would happen?  And how do you anticipate — what will you do if —

THE PRESIDENT:  I control that.

Q    — they don’t get to you in time?

THE PRESIDENT:  If they don’t come, I’m not signing.  Real simple. 

So, but I expect — I expect that in the — the coming months this summer, before the count — the fiscal year is over, that we will have voted on this bill, as well — the infrastructure bill — as well as voted on the budget record [sic] — resolution. 

And that’s when they’ll — but if only one comes to me, I’m not — and if this is the only thing that comes to me, I’m not signing it.  It’s in tandem. 

Infrastructure Deal Faces Tax Hike Questions From Both Sides – Doug Sword and Jad Chamseddine, Tax Notes ($). “The White House has announced a deal on a $1.1 trillion bipartisan infrastructure compromise but placed it on the same legislative track as a partisan reconciliation package that could grow to $6 trillion, creating doubters along the way. Recognizing the difficulties in keeping together what President Biden admitted is a divided Democratic Party, the president, House Speaker Nancy Pelosi, D-Calif., and Senate Majority Leader Charles E. Schumer, D-N.Y., committed June 24 to moving the two mammoth pieces of legislation in tandem.”

‘We will not take up a bill in the House until the Senate passes the bipartisan bill and a reconciliation bill,’ Pelosi told reporters. Schumer said the bills ‘are tied together.’  Biden went a step further, saying he will sign the bills into law only if they come to him at the same time. ‘If they don’t come, I’m not signing; real simple,’ Biden said. ‘If only one comes to me . . . I’m not signing. It’s in tandem.’ 

Meanwhile, centrist Democrats do not support the larger bill.

Some moderate Democrats oppose Biden spending package, as progressives feared – Lindsey McPherson, Roll Call. “Progressive Democrats’ concerns that their more centrist colleagues won’t support President Joe Biden’s larger spending and tax agenda are starting to bear out.”

Oregon Rep. Kurt Schrader, a member of the fiscally conscious Blue Dog Coalition, said in an interview that he’s planning to vote against a budget resolution that would include reconciliation instructions for trillions of dollars in additional spending. Another moderate House Democrat, who requested anonymity to speak freely about a position that would upset party leaders, said the same. 

With those two expected ‘no’ votes, Speaker Nancy Pelosi doesn’t have much more room to maneuver on that first step toward passing a big spending bill, let alone the reconciliation legislation itself that would contain all the details. She can only lose two more Democratic votes and still adopt the budget resolution in her narrowly divided 220-211 chamber, since no Republicans are likely to vote for it, as budget resolutions are designed to be partisan wish lists. 

Things are about to get really interesting on Capitol Hill.


House Democrats propose increasing IRS budget for fiscal 2022 – Naomi Jagoda, The Hill. “House Appropriations Committee Democrats on Wednesday released a draft government funding bill for fiscal 2022 that would increase the IRS's budget. The financial services and general government appropriations bill would provide the IRS with about $13.2 billion in base funding for the agency, plus an additional $417 million focused on reducing the "tax gap" between the amount of taxes paid and the amount owed. The total funding for the IRS in the bill is $1.7 billion higher than the enacted level for this year.”

Congress must fix clean energy tax credits to advance low-carbon future - Dan Lashof, The Hill opinion. “President Joe Biden has raised the bar for climate action in the United States by setting a 50 to 52 percent emissions-reduction target by 2030 and a goal of reaching net-zero emissions by 2050."

To meet these ambitious goals, the United States must accelerate the deployment of low-carbon technologies. Tax credits can be an important policy lever to help expand the production of zero-carbon electricity, electrify the transportation, building and industrial sectors, improve energy efficiency, as well as build critical infrastructure including high-voltage transmission and electric vehicle charging networks.

Lawmakers Mount Another Effort to Stop Green Tax Break Abuse – Kaustuv Basu, Bloomberg ($). “A bipartisan group of lawmakers reintroduced a bill to crack down on controversial tax-advantaged land deals, a rare revenue-raising proposal that could garner support from both parties. Legislation reintroduced Thursday in the Senate and the House would limit a deduction under tax code Section 170(h) in an effort to curb syndicated conservation easements, deals in which promoters solicit multiple partners to buy interest in a property, then donate the development rights to generate a tax deduction. The IRS alleges the transactions are often used as tax shelters, relying on inflated appraisals to generate deductions larger than the amount investors paid for their share of the land.”


SALT Cap Opponents Pull In Union Support to Promote Repeal – Laura Davison and MacKenzie Hawkins, Bloomberg ($). “House Democrats agitating to lift the cap on state and local income tax deduction are enlisting teachers, firefighters and other union members to demonstrate the impact on workers in high-tax, heavily unionized states like New York and New Jersey."

'The bottom line is the SALT cap is anti-union. The states that are most affected by the SALT cap are states that have the highest levels of union membership in our country,' Representative Tom Suozzi, a New York Democrat, said at a news conference Wednesday. 'Other states that are not affected by it are often anti-union.' Curbing the state and local tax, or SALT, deduction has 'chilled the investment' in education, health care and public sanitation, said Randi Weingarten, president of the American Federation of Teachers. 'We need to recreate the incentive to have the state and localities provide these services.'

State Pass-Through Entity Taxes Let Some Residents Avoid the SALT Cap at No Cost to The States – Kim Rueben, Tax Policy Center. “This week, Colorado became the 14th state to either require or allow some pass-through businesses such as partnerships to pay state income taxes at the entity level rather than on their personal income tax returns. Why does this matter? It’s an increasingly popular way for states to give some residents relief from the 2017 Tax Cuts and Jobs Act’s (TCJA)$10,000 cap on the state and local tax (SALT) deduction without lowering state tax revenue by a dime.”

Lawmakers Call for Prompt SALT Deduction Cap Repeal – Tax Notes ($). “The cap on the state and local tax deduction should be fully repealed to provide tax relief for union workers and reduce incentives for high-income taxpayers to leave states with a high cost of living, nine Democratic lawmakers said in a June 24 release.”


Lord of the Roths: How Tech Mogul Peter Thiel Turned a Retirement Account for the Middle Class Into a $5 Billion Tax-Free Piggy Bank – Justin Elliott, Patricia Callahan and James Bandler, ProPublica. “Billionaire Peter Thiel, a founder of PayPal… has quietly turned his Roth IRA — a humdrum retirement vehicle intended to spur Americans to save for their golden years — into a gargantuan tax-exempt piggy bank, confidential Internal Revenue Service data shows. Using stock deals unavailable to most people, Thiel has taken a retirement account worth less than $2,000 in 1999 and spun it into a $5 billion windfall.”

About a decade after the creation of the Roth, Congress made it even easier to turn the accounts into mammoth tax shelters. It allowed everyone — including the very richest Americans — to take money they’d stowed in less favorable traditional retirement accounts and, after paying a one-time tax, shift them to a Roth where their money could grow unchecked by Uncle Sam — a Bermuda-style tax haven right here in the U.S… And thanks to the Roth, Thiel’s fortune is far more vast than even experts in tallying the wealth of the rich believed. In 2019, Forbes put Thiel’s total net worth at just $2.3 billion. That was less than half of what his Roth alone was worth.

Top Senate Democrat Eyes Roth IRA Tax Ploy After Thiel Report – Laura Davison, Bloomberg ($). “Senate Finance Committee Chairman Ron Wyden is considering reviving a proposal that would limit how much wealthy individuals can shield retirement savings from taxes, after a ProPublica report that Peter Thiel had amassed $5 billion in a tax-free account. Wyden, the Democrat who controls the Senate’s tax agenda, said he would revisit his 2016 proposal that would prevent people from contributing to Roth individual retirement accounts once they’ve reached $5 million in value.”


New Hampshire Lawmakers Agree on Ending Individual Income Tax – Michael Bologna, Bloomberg ($). “New Hampshire is on track to become the nation’s ninth no-income-tax state under a two-year budget bill approved by state lawmakers Thursday. Both chambers of the state Legislature approved H.B. 1, enacting the 2022-2023 biennial budget, and a conference committee report under H.B. 2, enacting the tax provisions. H.B. 2 phases out the individual income tax, reduces the Meals and Rooms Tax from 9% to 8.5%, and slashes taxes paid by businesses. House Majority Leader Jason Osborne (R) said the measure cuts taxes by $170 million over two years.”

Oregon Bill Targets Lower Income Tax Rates to Small Businesses – Laura Mahoney, Bloomberg ($). “Oregon lawmakers approved legislation Thursday that would adjust a tax break for partnerships so it benefits small businesses that hire more workers or reinvest profits. The bill (S.B. 139), which passed with an Assembly vote of 31-26, now heads to Democratic Gov. Kate Brown’s desk. She has 30 days to sign or veto the bill.”

Arizona Lawmakers Approve ‘Unprecedented’ Flat Income Tax Plan – Brenna Goth, Bloomberg ($). “Sweeping tax cuts approved by Arizona lawmakers Thursday would transition the state to a flat income tax and insulate high earners from a voter-approved tax increase—a controversial move that leaders are touting as the biggest tax cut in state history.”

Arizona would join states such as Colorado and Kentucky with flat income taxes under the suite of budget bills (S.B. 1828 and S.B. 1827) supported by Gov. Doug Ducey (R). The party-line passage by both chambers of the state Legislature follows weeks of controversy over a tax cut estimated at $1.9 billion when fully implemented and its impact on local governments.

Oregon Governor Signs Law Extending Time for Return Filing, Payment of Estate Tax – Bloomberg ($). “The Oregon Governor June 23 signed an estate tax law extending the time for filing returns and paying the tax. The law includes a measure requiring estate tax returns be filed and the tax be paid to the Department of Revenue no later than 12 months following the date of the decedent’s death. The law generally takes effect 91 days after adjournment of the legislative session and applies to estates of decedents dying on or after Jan. 1, 2022. [H.B. 3138, enacted 06/23/21]”

Shrinking personal property tax could disappear for good – Erik Gunn, Wisconsin Examiner. “Wisconsin is moving closer to eliminating a business tax that has become increasingly quirky and disliked in the last few decades. The Legislature’s budget committee endorsed legislation repealing the state’s personal property tax Wednesday. On Tuesday, the Senate Economic and Workforce Development Committee similarly backed the bill.”


Happy National Leon Day! What??? Today marks the halfway point on the calendar to Christmas Day. Leon is Noel spelled backwards, and many Christmas enthusiasts begin their decoration planning on this day.

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