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July 13, 2020

What to expect in Washington (July 13)

Regarding the next coronavirus response bill that lawmakers plan to begin negotiating next week, House Speaker Nancy Pelosi (D-CA) said on CNN'S "State of The Union" that a compromise must be reached regarding unemployment insurance, with the $600 add-on expiring July 31, and more direct payments must be provided for people who are "desperately in need." The House-passed HEROES Act would provide $3 trillion in relief, and the Speaker highlighted food assistance and an OSHA standard. Asked about her confidence in a deal she said, "When we first passed our bill, [Republicans] said … we need a pause. Now they know that we don't need a pause. We need to act … Now they're saying a trillion dollars. That's not enough."

A New York Times story on the prominence of health care in the election, including some close Senate races, said Senate Republicans view the next coronavirus bill as an opportunity to counter negative perceptions that may result from continued efforts to dismantle the Affordable Care Act (ACA) by "offering provisions aimed at meeting medical needs stemming from the pandemic," and that leaders see their legislative response to the virus as paramount to voters. "I think the virus spending is more important than the other health care issues," said fourth-ranking Senate Republican Roy Blunt (R-MO).

Politico reported July 13 on efforts to get an acceleration of general business credits in the next package, with one challenge being the $1 trillion cap that Republicans have set for the bill.

An analysis piece in the Sunday Washington Post pondered White House Chief of Staff Mark Meadows taking an increased role in negotiating the next response bill — following which legislative activity may be limited before the election — given concerns from some Republicans that Treasury Secretary Steven Mnuchin gave Democrats too much in previous bills. It said Meadows has a charming personality but doesn't have a deep relationship with the Speaker and "there's apprehension about whether Meadows will revert to his days as a co-founder of the House Freedom Caucus, the conservative faction that torpedoed even small immigration compromises and persuaded Trump to shut down the government in late 2018."


Infrastructure will be a focus this week, as presumptive Democratic presidential nominee Joe Biden said, "I'll be laying out an updated blueprint of how we can build a modern, safe, sustainable infrastructure and the clean energy economy," and President Trump will visit Atlanta Wednesday to tout his transportation agenda and announce a policy change designed to speed infrastructure projects. Biden's previously announced infrastructure plan, from November, was described as being "paid for by making sure the super-wealthy and corporations pay their fair share. Specifically, this investment will be offset by revenue raised through reversing the excesses of the Trump tax cuts for corporations; reducing incentives for tax havens, evasion, and outsourcing; ensuring corporations pay their fair share; closing other loopholes in our tax code that reward wealth, not work; and ending subsidies for fossil fuels."

An editorial in Sunday's Washington Post said Biden's plan announced last week on Made in America/R&D "confirmed that the U.S. political center has shifted away from free trade and toward government-led industrial policy" and that his previously announced proposal to increase the corporate income tax rate to 28% "could shore up the federal tax base." The paper said, "without loopholes it might be possible, for the sake of competitiveness, to set the corporate rate a hair lower, at the world average (adjusted for each country's total output) of 26.5%."

On July 10, the Office of the U.S. Trade Representative announced duties of 25% on French products like make-up, soap and handbags to counter France's Digital Services Tax (DST), with the application suspended for up to 180 days until January 6, 2021. In January, France suspended the collection of estimated payments for DST liability for 2020 until December to provide more time for OECD negotiations to develop a global solution that would avoid unilateral implementation of DSTs, in exchange for the US holding off on $2.4 billion in tariffs on imports including wine, which wasn't targeted in Friday's notice. Politico noted that the announcement, 12 months after the Section 301 investigation on the DST was initiated, is a legal maneuver that preserves the US's ability to impose tariffs if the OECD talks fail.

The global EY Tax COVID-19 Response Tracker has been updated through July 6.


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For additional information concerning this Alert, please contact:
Washington Council Ernst & Young
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   • Kurt Ritterpusch (