Kevin McCarthy secures Speakership after historic floor battle – Emily Brooks, The Hill:
Kevin McCarthy (R-Calif.) became the 55th Speaker of the House in the midnight hour on Saturday, ending a historic four-day, 15-ballot stalemate caused by a group of 20 hard-line conservative members — and fulfilling the California Republican’s longtime goal.
The final vote, on the 15th ballot, was 216 for McCarthy, 212 for House Minority Leader Hakeem Jeffries (D-N.Y.) and six present votes. With the present votes, he needed 215 votes to win.
Next steps: House members (or members-elect) will return to the chamber's floor at 5pm today and continue getting things in order, like voting on a Rules Package that will guide how bills come to the floor, selecting chairs for committees and selecting lawmakers for those committees. The tax-writing House Ways and Means Committee will be one of the panels that will have new members.
About that Rules Package:
House postpones vote on rules package until Monday after McCarthy elected speaker – Virginia Aabram, Washington Examiner:
Newly elected Speaker McCarthy made major concessions on the rules to the conservative wing of his party in a hard-fought bid to win the gavel. They include Freedom Caucus priorities such as lowering the number of members needed to bring a no-confidence vote against the speaker and an end to proxy voting.
The demands have led at least one centrist Republican to decide against supporting the rules package, including Rep. Tony Gonzalez (R-TX).
The Rules legislative text is here. A Section-by-Section summary is here. Both links are provided by Punchbowl News ($).
Tax folks might find this interesting (from the summary):
Increased Threshold for Tax Rate Increases. Subsection (b) restores a requirement for a three-fifths supermajority vote on tax rate increases.
This only pertains to tax "rate" increases. It appears that non-rate increases, like shrinking tax breaks, still require a majority for passage. As do tax cuts. Given that the House majority is Republican, it is hard to see any sort of tax increase pass the chamber no matter what the threshold is for passage.
There is also this (emphasis added):
Subsection (e)(1)(D) allows the chair of the Committee on the Budget (or the Majority Leader or his designee, should the chair not yet be elected) to adjust an estimate under clause 4 of rule XXIX to exempt the budgetary effects of measures to protect taxpayers with taxable incomes below $400,000 from an increase in audits above the most recent tax year from the Internal Revenue Service.
There has been a debate on this issue. The IRS is not to increase audit rates on this income group, but compared to what? Audit rates from decades past? Audit rates from the past decade? This clause attempts to spell out what the audit rate will be.
It is not clear if the Rules Package will pass the House. Democrats are highly unlikely to support it and some Republicans have already come out against it.
Now the real challenge begins - Jake Sherman and John Bresnahan, Punchbowl News ($):
As of now, only two Republicans have publicly signaled they may vote against the rules package: Reps. Tony Gonzales (Texas) and Nancy Mace(S.C.).
Among their complaints is that McCarthy gave up too much to conservatives to get the speakership. Moderates feel like they need to stand up to GOP leadership’s catering to conservatives now or else they’ll get steamrolled for the next two years.
If three more Republicans oppose the plan, it will not pass the chamber (assuming all lawmakers vote).
There is also this:
The House will also vote today on a bill by Rep. Adrian Smith (R-Neb.) to rescind $80 billion in IRS funding approved as part of the Inflation Reduction Act. House Republicans vowed to make this – the Family and Small Business Taxpayer Protection Act – the first measure they take up if they won the majority.
It is highly unlikely that the Senate will pass this bill, which means it will not become law.
New Retirement Law Paves Way for Insurers to Tap Your 401(k) - Austin Ramsey, Bloomberg ($):
Retirement plans featuring in-plan annuity investments stand to gain traction in the wake of a new landmark spending law, connecting workplace savers with lifetime income options and drawing closer ties with insurance providers that regulators have previously kept at bay.
SECURE 2.0 (Pub.L. 117-328), which President Joe Biden signed into law Dec. 29 as part of an end-of-year government spending package, streamlines the process for investing in insurance contracts that hedge against outliving retirement savings and nixes burdensome minimum distribution requirements for late-career annuity purchases.
The Internal Revenue Service recently completed the final corrections of tax year 2020 accounts for taxpayers who overpaid their taxes on unemployment compensation they received in 2020.
Further down the article:
The IRS corrected approximately 14 million returns. This resulted in nearly 12 million refunds totaling $14.8 billion, with an average refund of $1,232.
The Year Ahead in State And Local Tax Issues – Donna Borak, Michael Bologna and Perry Cooper, Bloomberg ($):
States will be facing a number of potential fiscal and legal challenges in 2023—among them heightened economic risks, continuing sales tax inconsistencies, and battles about income taxes tied to remote work.
The pressures could propel states to think creatively about capturing new funding streams while also trying to tackle social and economic equity issues and helping struggling families.
New Year Ushers in Tax Code Changes in 38 States – Michael Bologna, Bloomberg ($). “The new year brought tax code changes in 38 states, including some significant rate cuts for taxpayers in Arizona, Idaho, Indiana, Iowa, Kentucky, Mississippi, Missouri, Nebraska, New Hampshire, New York, and North Carolina. In Massachusetts a new millionaire’s tax goes into effect. Meanwhile, Maryland and Missouri are eyeing new revenue from taxes on recreational cannabis.”
Minnesota governor still wants tax rebates from huge surplus – The Associated Press:
Minnesota Gov. Tim Walz said Friday that his budget proposal will include tax rebates from the state’s enormous $17.6 billion budget surplus but conceded that the payments will be smaller than he once hoped.
The governor acknowledged that his proposal — which started out last year as $1,000 for individual filers and $2,000 for joint filers — has found only 'lukewarm support' among his fellow Democrats so far. But he wouldn’t specify new figures ahead of his budget announcement set for Jan. 24.
Newsom at Inauguration Touts California ‘Freedom’ Over DC Chaos - Karen Breslau, Bloomberg ($):
Several years of abundance also gave Newsom the luxury of one-time expenses, such as mailing $9.5 billion in direct cash payments to about 17 million Californians, and new or expanded grants and tax credits for businesses recovering from the pandemic.
The article reports that these types of payments are unlikely to occur this year.
Budget Surplus in West Virginia Prompts Governor to Promote Tax Breaks – Kris Maher, Wall Street Journal ($). “Pointing to a record budget surplus, West Virginia Gov. Jim Justice said he plans to announce a major tax cut next week, joining a number of governors from both parties entering the New Year with state surpluses and big plans for tax cuts or new spending.”
Unpacking The Interim Guidance On New Stock Buyback Tax – Xenia Garofalo, Karl Zeswitz and Kyle Colonna, Law360 Tax Authority ($):
The Treasury and the IRS issued the interim guidance to provide clarity as to the calculation of the buyback tax and its application to a stock repurchase by a covered corporation — defined in the notice as 'any domestic corporation the stock of which is traded on an established securities market' — prior to the issuance of the forthcoming proposed regulations.
From the “How to Start a Fiscal Crisis” file:
House Republicans Turn Focus to Spending, China After Dramatic Speaker Vote – Nick Timiraos, Wall Street Journal ($).
Certain lawmakers want to balance the federal budget, which hasn’t been done a long time. One way to accomplish this feat would to be stop issuing debt. If Congress can’t borrow more money, it must live within its means, i.e., the revenue it takes in from, say, income taxes. So not raising the debt ceiling forces Congress to only spend what it takes in, which is what some lawmakers seek to accomplish, according to the article:
Mr. McCarthy on Friday made concessions to win over some GOP votes that included commitments to tie spending cuts to a debt-ceiling increase...
Sounds like a simple plan. Stop issuing new debt and live within one's means.
But there is interest on the debt that the federal government pays, and interest rates are rising. There could also be unplanned expenses that the Federal government must cover (hurricane relief or responding to a terrorist attack, to name two).
If the debt ceiling is not raised there is a distinct possibility that the federal government could default on its debt, which would cause interest rates to rise even further on many things – like on credit card debt, mortgages, and car loans.
Under such a scenario, Congress would have to make some tough decisions. One of them would be how to bring in more revenue to cover rising debt costs so the federal government does not continue to default on its debt. Tax increases would definitely be a part of that decision-making process.
(Also, the argument that the debt ceiling is not about current spending is kinda true. Current spending adds to the deficit that eventually becomes debt. So, yes, current spending does not add to the debt. It creates the deficit that eventually is added to debt. However, if current spending does not create a deficit, then there is no debt increase.)
Diggin’ It! It’s International Choreographers Day! Few know this, but I have wicked dance moves that would have wowed Bob Fosse. However, I chose another path that made all the difference. (Full disclosure, my brother is a retired dancer who toured with Broadway shows. His moves are better than mine.)
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