Tax News & Views the Biden Walk Back Roundup

June 28, 2021

Biden Walks Back Threat on Bipartisan Infrastructure Deal – Ken Thomas and Andrew Duehren, Wall Street Journal. “President Biden walked back comments tying the fate of a roughly $1 trillion bipartisan infrastructure agreement to a separate, Democratic effort to pass a broad antipoverty plan, recommitting to the bipartisan deal after Republicans threatened to withdraw their support. Mr. Biden said Saturday that his earlier comments ‘created the impression that I was issuing a veto threat’ on his proposal, ‘which was certainly not my intent.’”

‘The bottom line is this: I gave my word to support the Infrastructure Plan, and that’s what I intend to do. I intend to pursue the passage of that plan, which Democrats and Republicans agreed to on Thursday, with vigor,’ he said in a statement. Mr. Biden will travel to Wisconsin on Tuesday to discuss the merits of the agreement, according to a White House official. The statement marked a reversal by the president in a bid to preserve bipartisanship support of the infrastructure deal that his comments had cast into doubt.

Here is the meat of Biden's statement on this issue: 

I have been clear from the start that it was my hope that the infrastructure plan could be one that Democrats and Republicans would work on together, while I would seek to pass my Families Plan and other provisions through the process known as reconciliation. There has been no doubt or ambiguity about my intention to proceed this way.

At a press conference after announcing the bipartisan agreement, I indicated that I would refuse to sign the infrastructure bill if it was sent to me without my Families Plan and other priorities, including clean energy. That statement understandably upset some Republicans, who do not see the two plans as linked; they are hoping to defeat my Families Plan—and do not want their support for the infrastructure plan to be seen as aiding passage of the Families Plan. My comments also created the impression that I was issuing a veto threat on the very plan I had just agreed to, which was certainly not my intent.

So to be clear: our bipartisan agreement does not preclude Republicans from attempting to defeat my Families Plan; likewise, they should have no objections to my devoted efforts to pass that Families Plan and other proposals in tandem.

GOP Senators Say Biden’s Infrastructure Deal Back on Track – Laura Davison and Yueqi Yang, Bloomberg ($). “Three Republican senators said President Joe Biden’s assurance that he isn’t linking a bipartisan $579 billion infrastructure plan to a larger tax and spending bill will allow negotiations to move ahead. Rob Portman, a lead infrastructure negotiator for Republicans, said he ‘was very glad to see the president clarify’ remarks he made Friday, which Republicans took as a threat to veto the infrastructure bill by connecting it with the bigger legislation that the GOP opposes.”

‘It was a surprise, to say the least, that those two got linked,’ the Ohio Republican said on ABC’s ‘This Week’ on Sunday. ‘And I’m glad they’ve now been de-linked and it’s very clear that we can go forward with a bipartisan bill that’s broadly popular, not just among members of Congress, but the American people.’

So three Senate Republicans essentially forgave President Biden. It will take at least ten Senate Republicans to pass the bill and it is not clear if seven other Senate Republicans feel the same way. 

White House: 'Absurd' for GOP to take issue with dual-track infrastructure approach – Alex Gangitano, The Hill. “The White House is pushing back on complaints from Republicans over Democrats' plans to simultaneously pursue a bipartisan infrastructure package and one that can pass via reconciliation without GOP support.”

‘I think the American people are quite focused on how we’re getting work done on their behalf, less focused on the mechanics of the process. Now it is up to Republicans … to decide if they are going to vote against a historic investment in infrastructure that’s going to rebuild roads and railways and bridges in their communities, simply because they don’t like the mechanics of the process,’ press secretary Jen Psaki told reporters on Friday.

‘That’s a pretty absurd argument for them to make. Good luck on the political front on that argument,’ she added. 

McCarthy pans deal: Biden gave GOP 'whiplash' – Scott Wong, The Hill. “House Minority Leader Kevin McCarthy (R-Calif.) on Friday poured cold water on a $579 billion bipartisan infrastructure deal struck by the White House and senators of both parties a day earlier, predicting it would not pass Congress after President Biden linked it to a separate multitrillion-dollar reconciliation package.” 

‘I think my members need a chiropractor ‘cause they got whiplash after watching the president yesterday say there was a deal and say there was no deal, say: ‘You can have a deal on the trillion dollars on infrastructure, but you’ve got to vote for $5 trillion at the same time too, and you’ve got to raise taxes on everybody, and you’ve got to have a Green New Deal,’’ McCarthy told reporters at his weekly news conference. ‘I don't think that's going to work. I don't think that's going to pass. I think they killed any opportunity. I think it was disingenuous in every shape and form.’

Other news related to the bipartisan infrastructure deal:

Superfund Tax Revival Renewing ‘Polluter Pays’ Debate – Genevieve Douglas and Kellie Lunney, Bloomberg ($). “One of the bipartisan infrastructure deal’s pay-fors is reviving longstanding questions over who should pay to clean up some of the nation’s most contaminated land. The White House released a framework on Thursday for its $579 billion bipartisan infrastructure deal. Included within the pay-fors of that plan is a line item to ‘reinstate Superfund fees for chemicals,’ a potential restoration of excise taxes that expired in the mid-nineties.”

Lawmakers in favor of bringing back the ‘polluters pay’ tax model, including Rep. Earl Blumenauer (D-Ore.), applauded the provision. But industry representatives said that with few details to go on, questions remain on whether the revenue scheme should apply more broadly so that companies aren’t financially responsible for sites that they otherwise wouldn’t be liable for under the Superfund law.

Democrats Focus on Turning Tax Talk Into Action – Richard Rubin and Andrew Duehren, Wall Street Journal. “Narrow margins, shifting politics shape party’s choices as it considers raising taxes on corporations and on those with high incomes… Democrats raised taxes each of the last two times they controlled the government—in 1993 and 2010—after bruising political battles that drew objections from moderates inside the party. Now, some Democrats are convinced that tax politics have changed and public concern about inequality and corporate tax avoidance make the issue less toxic. The goal: approach 1990s levels of taxes, as a share of the economy, without reversing middle-class tax cuts enacted since then or raising taxes directly on households making under $400,000.”

‘There’s been a dramatic shift in the last decade,’ said Sen. Ron Wyden (D., Ore.), chairman of the Senate Finance Committee. ‘It used to be: ‘Democrats, oh my goodness’…never bring up the word taxes. Now the American people are supportive of our basic theory that everybody ought to pay their fair share.’

Mr. Neal, [the House Ways and Means Chairman], has been more cautious, not rejecting the administration’s tax-increase plan without explicitly embracing it either. ‘One of the things I have done with the committee members, I’ve encouraged them not to take, again, absolutist positions and not to volunteer revenue, until we see what the final architecture looks like,’ he said. ‘Then we’re going to have to measure the appetite of those who want these initiatives as to what they’re willing to vote for.’

Bipartisan infrastructure deal could make it harder for tax cheats to elude IRS – Yeganeh Torbati, Washington Post. “The bipartisan deal on new infrastructure spending that President Biden reached this week with a group of moderate Democrats and Republicans in the Senate represents a significant achievement for the White House, and not only for the roughly $1 trillion it would direct to public works projects if passed into law.”

The deal would also secure a boost in the budget of the Internal Revenue Service after a decade of cuts, which independent experts say is critical to ensuring businesses and the wealthiest Americans pay what they owe in taxes. As agreed, the deal would provide $40 billion in new funding for the IRS, which has seen its budget shrink by one-fifth between 2010 and 2018.

IRS Adds Thousands of Auditors as Senate Eyes Enforcement Boost – Genevieve Douglas and Laura Davison, Bloomberg ($). “The Internal Revenue Service is hiring thousands of new auditors as it gears up for a potentially massive tax-enforcement push if Congress is able to pass an infrastructure plan that includes $40 billion to expand audits on the wealthy. The IRS small business and criminal investigations divisions are adding thousands of new tax enforcement employees as the agency seeks to rebuild the roughly 17,000 audit staff lost in the past decade, officials said Friday.”

Just to be clear, there are two bills that are potentially at play:

1. A $1 trillion infrastructure bill that needs Republican support to pass Congress.

2. A $6 trillion reconciliation bill that is expected to include $2.4 trillion in tax increases and pass Congress with only Democratic support.

However, support is unclear by Sen. Joe Manchin (D-Va.) for the $6 trillion bill that increases taxes as he thinks the entire bill should be paid for. So, maybe the price tag could be reduced?

'This Week' Transcript 6-27-21: Sen. Joe Manchin, ABC News:

I’m willing to meet everybody halfway. If Republicans don’t want to make adjustments to a tax code which I think is weighted and unfair, then I’m willing to go reconciliation. That’s how you’re able to do it.

But if they think in reconciliation I’m going to throw caution to the wind and go to $5 trillion or $6 trillion when we can only afford $1 trillion or $1.5 trillion or maybe $2 trillion and what we can pay for, then I can’t be there. 

Meanwhile, Sen. Bernie Sanders (I-Vt.), a chief architect of the $6 trillion reconciliation bill, said he would not support the bipartisan infrastructure bill if the $6 trillion reconciliation bill does not pass.

Bernie Sanders to Biden and Manchin: 'No reconciliation bill, no deal' – Dominick Mastrangelo, The Hill. “Sen. Bernie Sanders (I-Vt.) is warning President Biden and Sen. Joe Manchin (D-W.Va.) that he will not support a bipartisan infrastructure bill that does not include a provision for reconciliation.

‘Let me be clear: There will not be a bipartisan infrastructure deal without a reconciliation bill that substantially improves the lives of working families and combats the existential threat of climate change,’ Sanders said in a tweet on Sunday afternoon. ‘No reconciliation bill, no deal. We need transformative change NOW.’

It is important to note that if one Senate Democrat votes against the $6 trillion reconciliation bill, it will not pass Congress because no Republican Senators are expected to support it. If one Senate Democrat votes against the $1 trillion infrastructure bill it could still pass Congress if enough Senate Republicans support it (some Senate Republicans are expected to support the infrastructure deal). Also, no legislation has been written for either the bipartisan infrastructure bill or the reconciliation bill, so there is a long way to go before votes are cast.   


Top Senate Democrat Pushing Forward With Capital Gains Overhaul – Colin Wilhelm, Bloomberg ($). “The chairman of the Senate Finance Committee plans to push ahead with his own plan to alter the way the U.S. taxes unrealized gains on everything from stocks and bonds to real estate and art.”

In the coming weeks, Sen. Ron Wyden (D-Ore.) will introduce legislation to tax capital assets for wealthier households annually, like income, regardless of whether those assets have been sold or not, his office told Bloomberg Tax. The plan will be redrafted from a proposal Wyden released in 2019 to align with the Biden administration’s proposals to raise the top capital gains rate and tax unrealized assets at death.


Lawmakers Eye Tax Credit in Bipartisan Affordable Housing Bill – MacKenzie Hawkins, Bloomberg ($). “A bipartisan group of lawmakers is proposing to boost U.S. affordable housing by 2 million units over the next decade by expanding a key tax credit as part of President Joe Biden’s agenda on jobs and the economy. The Affordable Housing Improvement Act of 2021, spearheaded by Representatives Suzan DelBene and Jackie Walorski, would permanently increase tax-credit allocations to states, allow states to fund more projects by easing bond-funding requirements and expand subsidies for underserved communities.”


Keeping the Monthly Child Tax Credit Coming, Limiting Risk of Overpayments – Elaine Maag, Tax Policy Center. “The advance payment is exactly what it sounds like—an advance of the CTC that you normally receive when you file your income tax return. The catch is that the IRS typically does not know your income or family status until you file that year’s return during the following year.”

So, to pay the credit in advance, the IRS uses information based on a prior-year tax return: for this year’s advance payment, either the calendar year 2020 tax return or, if that’s not filed yet, the 2019 tax return. Or, if your income is very low and you don’t have to file a tax return, you can use a new portal on the IRS website to enter the information necessary to qualify for and calculate the advance credit. But here’s the risk. If the taxpayer’s income increases in 2021, the taxpayer may be entitled to a smaller CTC—and may have to pay some of or all the advance back.


Trade-offs of Expanding Individual Tax Credits While Repealing SALT Deduction – Garrett Watson, Tax Foundation. “A key theme of our Options for Reforming America’s Tax Code 2.0 is that tax policy is a matter of trade-offs. For example, expanding the generosity of tax credits for lower-income individuals can help make the tax code more progressive, but it also reduces federal revenue. Pairing a credit expansion with a tax offset may sustain federal revenue but can also hamper economic growth."

Take, for example, the option to restructure the Child Tax Credit (CTC) and the Earned Income Tax Credit (EITC) based on a bill introduced by Sen. Mitt Romney (R-UT) this year. The option would provide an expanded child benefit of $4,200 per child under 6 and $3,000 per child for those ages 6 to 17. It would eliminate the Child Tax Credit’s minimum income requirements and phase out for taxpayers earning more than $200,000 (filing single) or $400,000 (married filing jointly). The Earned Income Tax Credit would also be restructured to provide a maximum credit of $1,000 per adult and an extra $1,000 for households with dependents. In all, it would reduce federal revenue by about $1.4 trillion over 10 years.

One way to offset that cost would be to eliminate the state and local tax (SALT) deduction, which is capped at $10,000 through 2025 and tends to benefit higher-earning households. Repealing the deduction entirely would raise about $1.5 trillion over 10 years—enough to finance the cost of the credit expansion option in the long run, and, on a conventional basis, result in a net revenue gain in the long run.

State Pass-Through Entity Taxes Let Some Residents Avoid the SALT Cap at No Cost to The States – Kim Reuben, 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.”


Oregon lawmakers quietly gave businesses a tax break worth hundreds of millions – Hillary Borrud, The Oregonian. “Oregon lawmakers appear to be just hours away from finishing a legislative session noteworthy in large part for the staggering amounts of money they approved for affordable and shelter housing, wildfire response and rebuilding, mental health and addictions treatment and infrastructure projects. Vulnerable Oregonians and well-worn public facilities aren’t the only winners this session, though. Businesses of all sizes and from all sectors, regardless of their profitability during the pandemic, stand to benefit from a new state tax break that could collectively save them $450 million to $600 million and trim the state’s revenue by a similar amount, according to a state estimate.”

The tax cut is available to businesses and self-employed individuals who received forgivable loans through the Paycheck Protection Program, a $780 billion federal effort to help businesses keep employees on the payroll amid pandemic uncertainty. Not only are the taxpayer-funded payouts tax-free under federal law, but Congress in December passed a provision to allow businesses to deduct their spending of the taxpayer money against taxes they might owe on profits.

Unpaid Taxes Not Barred by Statute of Limitations: Ohio Court – Sam McQuillan, Bloomberg ($). “An Ohio man must pay over $3,800 in outstanding municipal taxes plus penalties and interest to a Cleveland suburb, an appellate court ruled Thursday. Michael Davie argued the city of Shaker Heights hadn’t exhausted its administrative resources and that a three-year statute of limitations disallowed the city’s lawsuit demanding taxes. Davie had appealed a lower court’s decision to grant summary judgment to the city after previously filing for his own summary judgment.”

Texas Court Must Consider Company’s Inability to Pay Taxes – Donna Borak, Bloomberg ($). “A Texas appeals court reversed a trial court’s dismissal of Manana Entertainment Inc.’s challenge to the state comptroller over failure to prepay taxes in connection with the company’s operation of a sexually oriented business. The Court of Appeals of Texas, Third District, said in an opinion Thursday that the lower court incorrectly dismissed Manana’s suit over lack of jurisdiction, citing a recent precedent by the Texas Supreme Court.”

Tennessee, Kentucky Argue Offset Provision Is Unconstitutional – Lauren Loricchio, Tax Notes ($). “The attorneys general of Tennessee and Kentucky argue in a motion for summary judgment that a provision of the American Rescue Plan Act forbidding states from using federal funds provided by the act to offset reductions in states' net tax revenue is unconstitutional and that Treasury should not be able to enforce it.”

The motion, filed June 23 in the U.S. District Court for the Eastern District of Kentucky by Kentucky Attorney General Daniel Cameron (R) and Tennessee Attorney General Herbert Slatery III (R), claims that the provision violates the limits on Congress’s power to spend under Article I and the Constitution’s prohibition against commandeering.

Nebraska Court Dismisses TCJA Suit on Procedural Grounds – Amy Hamilton, Tax Notes ($). “A Nebraska court has dismissed on procedural grounds a case involving the revenue department's disallowance of any state deduction for IRC section 965 deemed repatriation.”


Biden’s Global Tax Competition – Benjamin Willis, Tax Notes ($). “Portraying the United States as a country in desperate need of low corporate tax rates to compete with other market jurisdictions is disingenuous. It contradicts the numerous qualities that drive corporations to target U.S. consumers. While some market countries are indeed at a competitive disadvantage, the United States is extremely well positioned to impose tax rates commensurate with the immense value that participation in its economy brings to corporations. Looking to low-tax jurisdictions to establish U.S. tax rates demonstrates a weak understanding of the United States and its place among the world’s market jurisdictions. The United States is by no means at the economic mercy of the tax havens that attract paper transactions for nominal fees through low corporate tax rates.”


It’s National Paul Bunyan Day! For those who haven’t heard of him, he is a giant lumberjack who teamed up with Babe the Blue Ox (also a giant) in several tales told to children. The tale I remember is when Babe the Blue Ox was slogging through mud and created several lakes with her massive hooves.

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