Schumer says Senate will 'immediately' consider budget after infrastructure bill – Rebecca Shabad, NBC News. “Senate Majority Leader Chuck Schumer told Senate Democrats on Monday that once the chamber passes the bipartisan infrastructure package this week, they will ‘immediately move’ to pass a budget resolution that will allow their party to craft a $3.5 trillion social safety net bill.”
Democrats are using the budget reconciliation process to pass the measure with a simple majority vote in the Senate, circumventing the filibuster. The budget resolution that Schumer, D-N.Y., plans to bring to the floor will provide reconciliation instructions to a group of committees that will each be responsible for writing parts of the bill.
When the Senate moves to the budget proposal, it will move to a resolution that lays the groundwork for legislation that increases taxes. The budget will not include tax increases. It will provide guidance to the committees that have the power to increase taxes.
For example, the budget states that the tax-writing Senate Finance Committee must “reduce the deficit by not less than $1,000,000,000 for the period of fiscal years 2022 through 2031.”
It provides the same guidance to the tax-writing House Ways and Means Committee. These tax-writing committees will create the specific tax provisions that will increase taxes. These details may not be known until the fall.
Senate Democrats Outline $3.5 Trillion Antipoverty, Climate Plan – Andrew Duehren and Kate Davidson, Wall Street Journal. “Senate Democrats released an outline of the $3.5 trillion antipoverty and climate plan on Monday, further detailing their ambitions for a major overhaul of the nation’s education and healthcare systems that they hope to advance alongside a bipartisan infrastructure bill. The antipoverty plan is set to offer universal prekindergarten, two free years of community college, and expanded Medicare to cover hearing, dental and vision care, among other provisions."
To cover the cost, Democrats are seeking to raise taxes on corporations and high-income households... Savings generated by lowering drug prices is one of several tools Democrats hope to use to cover the cost of the legislation. Another is enhancing tax enforcement efforts at the Internal Revenue Service, a topic of contention in the bipartisan infrastructure talks that Democrats will now pursue along party lines.
The Biden administration has proposed raising the corporate tax rate to 28% from 21%, raising the top capital-gains rate, and adjusting how assets are taxed at death to raise more revenue. Tightening the net on U.S. companies’ foreign earnings and charging importing fees based on carbon emissions are among the measures Democrats are eyeing...
Deciding on the specifics of the tax increases—as well as the duration and design of the spending proposals—will be one of several major choices Democrats will still need to make in the coming weeks as they craft the bill.
Democrats Release Budget Enabling Biden’s $3.5 Trillion Plan - Steven Dennis and Laura Davison, Bloomberg ($):
The Democratic plan gives the Senate Finance Committee wide latitude to draft policies that would increase taxes on corporations and those making more than $400,000 a year, and instructs lawmakers to provide tax cuts for those making less. In addition the resolution asks the committee to find additional revenue to pay for the $3.5 trillion in spending from health care savings and a new fee on carbon polluters.
Opening Salvos From Dems, GOP on $3.5 Trillion Budget Bill – Doug Sword, Tax Notes ($). “Senate Democrats compared their $3.5 trillion budget proposal to the New Deal while Republicans vowed retaliation by refusing to vote to increase the debt limit before it is reached this fall.”
An outline of the budget resolution, which was released August 9, says that in addition to new tax revenues, the cost will be offset by healthcare savings and long-term economic growth. Democrats say they could find 'hundreds of billions' in savings by using Medicare’s negotiating power to lower prescription drug prices. Although Democrats have complained about Republicans’ past reliance on dynamic scoring — in which economic impacts from new spending or tax cuts are counted as offsets, it appears counting economic gains will be a major pay-for in the budget bill.
Change to Crypto Provision in Infrastructure Bill Blocked – Laura Davison and MacKenzie Hawkins, Bloomberg ($). “A change to cryptocurrency reporting rules in the infrastructure bill was blocked in the Senate Monday, leaving language for broad oversight of virtual currencies still in the legislation that’s set to pass the Senate. The amendment was designed to address concerns from the cryptocurrency industry that the original bill would require entities, like miners and software developers, to report tax data to the Internal Revenue Service that they didn’t have access to. The change was proposed after days of negotiations between three Republicans -- Pat Toomey, Cynthia Lummis and Rob Portman -- and two Democrats, Mark Warner and Kyrsten Sinema.”
The amendment’s failure represents a blow to the crypto industry, which had pushed hard in recent weeks for more narrowly targeted oversight. Portman has said there are other ways to clarify the bill’s language, including Senate floor speeches to show the lawmakers’ intent and additional guidance from the Treasury Department. Lummis said Congress will have to revisit the issue.
Dems Pivot To Reconciliation Bill To Fund IRS Enforcement – Alan Ota, Law360 ($). “Congressional Democrats will look to a filibuster-proof reconciliation bill as a way to salvage a stalled plan to provide the IRS with $40 billion in enforcement funding over 10 years and expand information reporting mandates.”
Several senior Democrats said party leaders would use the fiscal 2022 reconciliation billoutlined Monday to move a proposal to provide the Internal Revenue Service with an average of $4 billion annuallyin mandatory fundingover 10 yearsto finance parts of President Joe Biden's recovery plan. The funding would represent a 34% increase over the fiscal 2021 funding level for the agency provided in the Consolidated Appropriations Act.
Warren Proposes Widening Biden’s Net Over Big Tax-Avoiding Firms – Colin Wilhelm, Bloomberg ($). “Senators Elizabeth Warren and Angus King introduced legislation that would capture taxes from more than 1,000 big U.S. companies that report high profits but may have little taxable income, ensnaring a much larger group than President Joe Biden has proposed though at a lower rate.”
Warren, a Massachusetts Democrat, along with King, a Maine independent who caucuses with Democrats, proposed a 7% tax on book profits for corporations with earnings of $100 million or more. The pair hopes to include the new tax in a multitrillion-dollar reconciliation package including much of Biden’s economic agenda, that Democrats hope to advance later this year.
Tax Break on Union Dues Added to Senate Democrats’ Budget Plan – Ben Penn, Andrew Kreighbaum and Ian Kullgren, Bloomberg ($). “Senate Democrats are forging ahead with budgetary plans to create tax incentives for union membership and penalties for employers that violate workers’ union rights, according to three sources involved in the process. Senate Majority Leader Chuck Schumer (D-N.Y.) unveiled instructions Monday that a $3.5 trillion budgetary package is intended to fund ]pro-worker incentives’ and ‘labor enforcement and penalties,’ without divulging other details or providing specific text.”
‘Mr. SALT’ and N.J. Ally Fight Ocasio-Cortez to Revive Tax Break – Laura Davison, Bloomberg ($). “A major push by a group of U.S. lawmakers to secure an expansion of the federal deduction for state and local taxes -- which on Monday won inclusion in a critical budget plan -- owes much to a pair of onetime roommates in the nation’s capital. One, Tom Suozzi, has the nickname ‘Mr. SALT,] and the other, Josh Gottheimer, is co-chief of a sometime influential bipartisan House group known as the Problem Solvers.”
The duo sees the legislative vehicle for the bulk of President Joe Biden’s longer-term economic proposals -- a $3.5 trillion bill made up mostly of social spending measures, funded in part by tax hikes -- as a crucial opportunity to win SALT relief.
SALT Fight Looms Within Bigger Budget Resolution Battle – Doug Sword, Tax Notes ($). “Senate Democrats will consider in their $3.5 trillion reconciliation bill at least a partial rollback of the $10,000 state and local tax deduction cap that was imposed by the Tax Cuts and Jobs Act.”
Every time Democrats have tried to roll back the cap, Republicans have pointed to a Joint Committee on Taxation estimate that most of the benefits from repealing the cap would flow to households with more than $1 million a year in adjusted gross income.
Surge of SALT Workarounds Could Pose Complications for Passthroughs – Paul Jones, Tax Notes ($). “One of the more notable state tax policy trends during the 2021 legislative session has been the adoption of passthrough workarounds to the federal cap on the state and local tax deduction.”
More than 11 states have enacted those workarounds this year, joining the seven that adopted workarounds in the last three years. Other states are considering them as well. The basic design of those workarounds involves creating an elective entity-level tax on passthroughs and providing an offsetting individual income tax credit for passthrough owners. In effect, the passthrough entity (PTE) pays the state income tax for the owners and claims a full federal deduction for the state tax. Since the SALT cap only applies to individual taxpayers and not to the entity, the workaround allows owners to receive the benefit of an uncapped federal deduction for the state tax paid on their passthrough income.
NY Group Appeals Property Tax System To State High Court – James Nani, Law360 ($). “A property tax coalition asked Monday forNew York's highest court to consider its challenge accusing New York City and the state's property tax system of unconstitutionally favoring wealthy white residents after its appeal was tossed last year. Tax Equity Now New York, or TENNY, asked the state Appellate Division, First Department to allow it to take its challenge to New York City's property tax system to the Court of Appeals, which is New York's highest court.”
SC Fed. Court Told County's Road Repair Fee Is Illegal Tax – James Nani, Law360 ($). “A South Carolina county and its lawmakers were hit Monday with a proposed federal class action alleging the county's annual $50 road repair levy on vehicle owners is unconstitutional and violates a state Supreme Court ruling issued in June.”
Horry County residents Robert LaMaire and Crystal Goings told the U.S. District Court in South Carolina that the county and its council are violating their due process rights by charging the road maintenance fees. The two residents and the proposed class are seeking an injunction preventing further road fee charges, a refund of the charges collected by the county 'in all fiscal years,' interest and an award of costs, expenses and attorney fees, the complaint said.
Ariz. Income Tax Bypass Illegally Overrides Voters, Court Told – Daniel Tay, Law360 ($). “An Arizona law creating a new tax structure for small businesses illegally interferes with a voter-approved measure imposing a high-earner income tax surcharge by allowing filers to avoid the levy, the measure's supporters told a state court. The law at issue, S.B. 1783, which creates an alternative tax structure for ‘Arizona small business taxable income,’ allows filers to avoid the income tax surcharge imposed by Proposition 208 in violation of the state's Voter Protection Act, Invest in Arizona told the court in a complaint filed Thursday.”
Dead Americans Get Millions in Checks as Feud Over Data Drags On – Courtney Rozen, Bloomberg ($). “Long before the Treasury Department sent $1.4 billion in stimulus checks to dead people last year, the U.S. government struggled to keep track of the deceased."
Dead farmers received about $22 million in crop subsidies over five years. The Federal Emergency Management Agency sent Hurricane Sandy disaster benefits to 45 people who died before the agency received their assistance applications. The Agriculture Department incorrectly paid $35 million in rural housing rental assistance because it didn’t know whether tenants passed away.
The Global Minimum Tax and Sensible Tax Policy: Choose One – Daniel Bunn, National Review. “If a recent statement by more than 100 countries agreeing on a framework for a global minimum tax is any guide, tax competition is going to be severely curtailed. But opting for cartel over competition is not the only objection to what is being proposed. Sensible tax policy may be another casualty of this deal.”
Int’l agreements spur move to global minimum tax – Roger Russell, Accounting Today. “What began as an awareness of the changing landscape in tax brought about by large companies earning significant revenue in places where they had no physical presence — and therefore no tax responsibility — is heading for a resolution on the international stage. After years of discussions, position papers, proposals, negotiations, and re-proposals, both the G7 and G20 met in June 2021 and gave approval to the OECD’s proposals as outlined in its Pillars 1 and 2.”
‘Years ago, the OECD recognized that there were issues related to digitalization of the global economy,’ said Laurie Dicker, transfer pricing technical tax leader at Top Eight Firm BDO USA. ‘It was based on the fact that the global tax system is built on the premise of countries having taxing rights where companies have physical presence, and as the economy digitalizes there is the notion that companies are now earning income in places where they do not necessarily have a traditional taxing presence. For example, an entity that sells a digital service, whether entertainment or educational or anything else you can access digitally. Someone can buy that in a country in which they don’t have physical presence. The servers can be anywhere, so the companies generate income from someone buying the service but the county does not get taxing rights. That’s the backdrop.’
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