Biden’s plans to raise taxes on corporations and the wealthy are losing momentum – Thomas Franck, CNBC. “Nearly six months into President Joe Biden’s administration, Wall Street remains divided over the likelihood, and impact of, one of the Democrat’s key campaign promises: higher taxes. While the president and his Cabinet have made progress in persuading foreign partners to back a global minimum corporate tax rate, the Biden team does not appear any closer to passing the types of sweeping tax reform he promised during his 2020 campaign.”
Among the many components of the Biden tax plan are an increase in the domestic corporate tax rate to 28% from 21% and the top individual income tax rate to 39.6% from 37%. The White House also wants to raise the capital gains tax rate on those making more than $1 million a year from its current 20% to 39.6%.
But with the GOP resolute against tax increases, and with a handful of economists concerned that raising taxes now could risk the economic recovery, some say the outlook for the administration’s tax plans has grown murkier in recent months.
Status Update: Where things stand in Congress for Biden’s Jobs and Families plans – Jay Heflin, Eide Bailly. “With the House and Senate on recess, now is a good time to provide a status update on where things stand for legislation that President Joe Biden wants enacted into law.”
Since Biden released these plans, it seems less likely that they will be enacted into law. However, that could change. There is a saying on Capitol Hill that legislation is assumed to fail – until it passes. This could be true for Biden’s plans, but it is too early to tell... The House and Senate are expected to vote on both bills in the fall.
Democrats wrestle over control of the infrastructure throttle – Burgess Everett and Sarah Ferris, Politico:
July and August will render a decisive verdict on Democrats’ so-called ‘two-track’ strategy of enacting Biden’s jobs and families plans via twin bills, one with GOP support focusing on physical infrastructure and the other on a partisan spending plan centered on fighting climate change, increasing child care and raising taxes on corporations and the wealthy.
Some House moderates are urging party leaders to focus squarely on the bipartisan bill, while many liberals remain skeptical it will happen at all — and Speaker Nancy Pelosi has threatened to sideline it without an accompanying Democratic package. A failed bipartisan result would force Democrats to write one huge spending bill marrying all their priorities.
…
‘If you add the two plans together, it would be the biggest bill in the history of the country,’ said House Budget Chair John Yarmuth (D-Ky.). ‘There's no way it’s going to be easy.’
Schumer warns August recess in danger as infrastructure work piles up – Alexander Bolton, The Hill. “Senate Majority Leader Charles Schumer (D-N.Y.) warned colleagues in a letter Friday to be prepared to work long nights, over the weekends and into the scheduled August recess so that they can finish work on a bipartisan infrastructure bill and a budget resolution.”
‘My intention for this work period is for the Senate to consider both the bipartisan infrastructure legislation and a budget resolution with reconciliation instructions, which is the first step for passing legislation through the reconciliation process,’ Schumer wrote in a ‘Dear Colleague’ letter.
‘Please be advised that time is of the essence and we have a lot of work to do. Senators should be prepared for the possibility of working long nights, weekends, and remaining in Washington into the previously-scheduled August state work period,’ Schumer warned.
Here is the Schumer letter.
I'm a tad confused. How is work piling up on the infrastructure bill when a Senate vote on it is reportedly imminent? Are things in disarray?
Senate eyes taking up bipartisan infrastructure deal as soon as July 19 – Jordain Carney, The Hill. “A bipartisan infrastructure agreement could be brought up on the Senate floor as soon as the week of July 19, a source confirmed to The Hill. The bipartisan group of negotiators is still working to turn their $1.2-trillion, eight-year framework into legislation. But the source said that the Senate ‘could move to’ the bipartisan deal as soon as the week of July 19 ‘as part of the two track strategy to move both the budget resolution and [bipartisan] bill through the Senate in the upcoming work period.’”
They are under a tight deadline. Senate Majority Leader Charles Schumer (D-N.Y.) wants to bring up both the bipartisan agreement, if it sticks together, and a budget resolution that will unlock a separate, Democratic-only, multi-trillion infrastructure bill before the Senate leaves town until September.
Biden Plan’s Higher Taxation of Businesses Would Boost Collections to Highest in 40-Plus Years – Garrett Watson and William McBride, Tax Foundation. “President Biden’s tax proposals released as part of his fiscal year 2022 budget would collect about $2 trillion in new tax revenue from businesses over 10 years. This new revenue would bring income tax collections on businesses as a portion of GDP to its highest level on a sustained basis in over 40 years.”
Conservative groups mount opposition to increase in IRS budget, threatening White House infrastructure plan – Jeff Stein, Tony Romm and Yeganeh Torbati, Washington Post. “Conservative political groups are mobilizing against a key element of a bipartisan infrastructure deal, and their opposition could make it harder for the U.S. government to collect unpaid taxes. Congressional Democrats and Republicans have agreed to increase funding for the Internal Revenue Service so that the agency can bring in more tax revenue, hoping the money can help pay down some of the infrastructure package’s expected price tag. The early contours of the infrastructure blueprint have won the White House’s support, but the IRS provision in particular is drawing opposition from well-funded conservative groups, which are strongly opposed to expanding the reach of a tax-collection agency that they long have alleged is politically motivated.”
Among the conservative groups spearheading the opposition are the Committee to Unleash Prosperity, FreedomWorks, the Conservative Action Project, and the Leadership Institute. They are preparing a letter that warns Republicans should not negotiate with the White House unless they agree to 'no additional funding for the Internal Revenue Service.'
Here is a draft of the letter, as reported by Tax Notes ($).
How Should Congress Fund Investments in The Internal Revenue Service’s Infrastructure? – Janet Holtzblatt, Tax Policy Center. “Congress is moving toward rectifying the decade-long funding crisis at the IRS. The House is on track to adopt President Biden’s proposed $1.6 billion budget increase from the 2021 level (not counting the funds in COVID relief legislation). And the infrastructure framework agreed to by the president and a bipartisan group of senators boosts agency funding and appears to endorse Biden’s goal of making some additional IRS funding mandatory and multi-year, although at lower levels than he proposed.”
Mandatory funding is a smart move, guaranteeing financing for the agency’s own multi-year infrastructure investments. That’s an important commitment for an agency whose favorability ratings appear to drop as audit rates increase, making Congressional consideration of the IRS’s annual appropriations more politically charged when tax enforcement intensifies. Still, there is a risk to the IRS when Congress makes some of the agency’s funding mandatory and some subject to annual appropriations. For example, a future Congress could cut the IRS’s appropriations, forcing it to make up the difference by drawing on the mandatory account.
IRS plans weekend events to help families with Child Tax Credits – Michael Cohn, Accounting Today. “The Internal Revenue Service is planning to host events this weekend in a dozen cities to help people who usually don’t file a tax return register for monthly Advance Child Tax Credit payments. The events will take place July 9 and 10 in Atlanta, New York, Detroit, Houston, Los Angeles, Las Vegas, Miami, Milwaukee, Philadelphia, Phoenix, St. Louis and Washington, D.C./Maryland at the offices of various community groups.”
Locations can be found here.
Nonprofits' tax status reviews sometimes aided by public tip, - Kay Bell, Don’t Mess with Taxes. “Knowing whether a group is a tax-exempt organization is important, not just from Uncle Sam's revenue collection (or not) perspective, but also from a public standpoint. Donors who want to deduct charitable gifts need to know that the group to which they're giving is legit in the Internal Revenue Service's eyes. These public charities are referred to as 501(c)(3) organizations, getting their name from the section of the tax code that created them. However, there are several other tax-exempt classifications under Internal Revenue Code section 501(c). They are granted, for example, to groups that have charitable, educational, religious, or similar purposes.”
Wisconsin Governor Approves Cuts for Middle-Income Taxpayers – Michael Bologna, Bloomberg ($). “Wisconsin Gov. Tony Evers approved more than $2 billion in tax cuts for middle-income taxpayers as part of a Republican-crafted two-year budget bill.”
Evers, a first-term Democrat, on Thursday endorsed most of the 2021-23 biennial budget bill, Wisconsin Act 58, including a provision cutting the third bracket of the individual income tax schedule from the current 6.27% rate to 5.3%. The bracket applies to married filers earning between $31,910 and $351,310 annually and reduces the burden on those taxpayers by $2.37 billion over two years, according to a legislative fiscal analysis.
New Jersey Tamps Down on Worker Misclassification in Signed Laws – Erin Mulvaney, Bloomberg ($). “New Jersey Gov. Phil Murphy (D) signed legislation that aims to strengthen the state’s efforts to address worker misclassification, building on previous efforts that have led to stiff penalties and aggressive audits of ride-hailing giants Uber Technologies Inc. and Lyft, Inc.”
G-20 Finance Ministers Set to Endorse Global Tax Deal in Venice – Alessandro Speciale and Alex Morales, Bloomberg ($). “Group of 20 finance ministers are poised in their communique this week to endorse a global tax overhaul and call for finishing work on the details of the accord by October, according to people familiar with the discussions. Finance ministers and central bankers are meeting Friday and Saturday in Venice, and they’re expected to release a statement at the gathering’s conclusion. While an endorsement of the deal became a fait accompli after all G-20 nations involved signed on to the agreement at the Organization for Economic Cooperation and Development next week, the formal blessing will be a key milestone in the yearslong talks.”
A deal on global tax reform will be finalized ‘very soon,’ German finance minister says – Silvia Amaro, CNBC. “A deal on global tax reform will be finalized ‘very soon,’ German Finance Minister Olaf Scholz told CNBC on Friday, adding he hopes the tax changes could come into force by 2023.”
‘We are now really on the road [to a deal],’ Scholz told CNBC’s Annette Weisbach. ‘We will reach an agreement here at the G-20 when the 20 nations are agreeing on the same idea of having an international global minimum taxation.’
‘This will be a process that will finish very soon,’ he added.
Global Minimum Tax Deal Marked a Win for Yellen. Now She Must Sell It to Congress – Kate Davidson, Wall Street Journal ($). “When the U.S. secured international backing for a global minimum corporate tax last week, it marked an early victory for Treasury Secretary Janet Yellen as the country’s top financial diplomat and paved the way for a key plank of President Biden’s domestic agenda. People involved in the negotiations credit Ms. Yellen with reviving yearslong talks to clamp down on tax avoidance by multinational firms. The breakthrough potentially set the stage for the most sweeping change in international taxationin a century.
She must now navigate more complex negotiations, such as where to set the precise tax rate and how to implement the agreement—discussions set to begin Friday in Venice among finance ministers of the Group of 20 major economies. Ms. Yellen must also sell the plan on Capitol Hill, where support from all Democrats and possibly some Republicans will be necessary to turn the agreement into law in the U.S.
Republicans Warn Global Tax Deal Faces Fight Over Rate, Revenue – Isabel Gottlieb, Bloomberg ($). “Republican leaders warned Thursday that gaining Congressional support for an OECD-brokered global tax deal could be difficult, saying it may harm U.S. firms and give away too much U.S. tax revenue.”
The top Republicans in the House Ways and Means and Senate Finance Committees, Kevin Brady and Mike Crapo, told Treasury Secretary Janet Yellen in a letter Thursday that Congressional support for the plan will “hinge” on protecting U.S. interests. The years-long effort to reach a deal could fall flat without U.S. backing. While the Biden administration helped negotiate the deal, it will be up to federal lawmakers to pass the legislative and treaty changes needed to put the plan into place in the U.S.
Here is the Treasury letter.
The Global Tax Deal Is Bad for the U.S. – Wall Street Journal editorial ($):
Leaders from 130 countries last week agreed to a major overhaul of global tax rules, and we have some advice for Congress: Read the fine print carefully. The deal represents an intersection of Europeans’ longstanding dream to tax American tech companies and the Biden Administration’s attempt to bamboozle lawmakers into passing a competition-killing corporate-tax hike at home.
CFC Rules in Europe – Thomas Locher, Tax Foundation. “Businesses around the world often operate in more than one country, making them subject to multiple tax jurisdictions. To prevent businesses from minimizing their tax liability by taking advantage of cross-country differences, countries have implemented various anti-tax avoidance measures, such as the so-called Controlled Foreign Corporation (CFC) rules.”
Auditor Watchdog Is Overhauled After SEC Report Cites Years of Dysfunction – Jean Eaglesham and Dave Michaels, Wall Street Journal ($). “No bickering in public. No leaks to the press. Above all, be collegial. That was the message the head of the Securities and Exchange Commission gave to the newly named board of an audit-industry watchdog in 2018, according to people familiar with the private meeting. Three years later, the entire board was ousted. Its chairman, who heard the news while attending his daughter’s college graduation, is under SEC investigation, people familiar with the matter said. An official report criticized the board’s feuding members for ‘bad communications and bad chemistry.’"
The Public Company Accounting Oversight Board was already under fire when William Duhnke took the chairman’s job in 2018. The previous board was replaced after a scandal where one of its staff members helped a major auditing firm pass inspection.
The PCAOB, often called the Peekaboo, oversees audits of the financial statements of more than 7,000 companies, valued at a combined $54 trillion, according to the regulator. Created to restore faith in financial markets after the accounting scandals of the early 2000s, the PCAOB has been dogged by criticism that it has been too easy on the auditing profession.
Got Sweet Wheels? Celebrate! Today is National Collector Car Appreciation Day! Today, pay homage to the men and women who toil in restoring automobiles and to those who collect them.
We're Here to Help
