As lawmakers partake in their second week of Spring break, the focus in D.C. turns to what will occur next week (hint: tax bill happening).
What Went Down:
- Tax legislation is expected to be introduced next week but keep expectations low for it becoming law.
- IRS Commissioner Daniel Werfel will testify before the Senate Finance Committee next week.
Let’s Get To It:
Tax Bill Approaching:
Lawmakers are expected to be introduce legislation that would transform the Section 163(j) interest deduction back into its former self (from EBIT to EBITDA).
Don’t get excited.
Bill introductions happen nearly every day (remember the recently introduced R&D expensing bill that has yet to go anywhere?).
Congress began its new session in January. Since then, nearly 2,600 bills have been introduced in the House and over 1,000 bills have been introduced in the Senate.
Few will become law.
The truth is, Congress is not really focused on tax issues right now. Its plate is full with debt ceiling debates and whether to fund the federal government. Pet projects are also drawing focus, like:
- Barring certain people from playing certain sports.
- Barring certain people from law enforcement jobs.
- Overriding vetoes on legislation spurned by President Biden.
- Confirming as many people as possible to as many positions as possible.
There is also ‘anti-business sentiment’ among lawmakers – in both parties. We’re hearing that if the tax-writing House Ways and Means Committee pursues taxes it will be to benefit individuals and not big corporations.
This message comes from the horse’s mouth: House Ways and Means Chairman Jason Smith (R-Mo.).
‘Our priorities have changed — our priorities are small business, working-class Americans and farmers over big corporations,’ he said in an interview.
‘These huge companies that get big tax advantages and have very good trade policies that have allowed them to invest billions in China and overlook Americans while they reap all these tax benefits — that’s something we’re going to be looking into.’
Working-class Americans and farmers operate pass-thru businesses. It is highly likely that business tax increases hurt their pocketbook as much as individual tax increases would.
The notion that business tax increases could actually hurt people was recently explained to a tax staffer on the House Ways and Means Committee. After hearing it, the staffer said that the committee might hold a hearing on business tax increases that negatively impact individuals. This hearing will likely focus on small business owners. However, the committee has not announced when it will occur.
Legislative Outlook: At this point, it seems more likely than not that legislation modifying business tax provisions will not pass Congress this year. But things could change (and usually do on Capitol Hill).
Werfel’s Big Moment:
The new IRS Commissioner will likely have a lot of big moments when testifying before Congress.
Commissioner Werfel will present himself before the Senate Finance Committee on April 19th – a day after the tax season ends.
The focus of the hearing will be on whether the IRS made strides this tax season to correct the mistakes it made during last year’s tax season.
Expect to hear groans from the Republican side of the dais, and potentially applauds from the Democratic side.
Legislative Outlook: There will likely be calls to repeal the $80 billion IRS funding plan, but it will not become law. Democrats control the Senate and the White House and will not support such legislation.
Pardon if this recap missed a monumental moment, but we can recap it next time!