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July 22, 2020

What to expect in Washington (July 22)

Treasury Secretary Steven Mnuchin and White House Chief of Staff Mark Meadows said yesterday (July 21) that their goal is to get a $1 trillion coronavirus relief package through Congress by the end of next week (July 31), though Senate Majority Leader Mitch McConnell (R-KY), who is planning to release a proposal later this week, expressed doubt that it could come together that quickly. There are still disputes among Republicans on issues like the payroll tax cut advocated by the President and unemployment benefits. "We have a lot of work to do to get something passed by the end of next week," Secretary Mnuchin said.

House Speaker Nancy Pelosi (D-CA) and Senate Democratic leader Chuck Schumer (D-NY) said after meeting with Mnuchin and Meadows that real talks can't begin until the Republican proposal is produced. "We can't negotiate on a vague concept. We need a specific bill," Senator Schumer said after commenting that Meadows provided only a general outline of a GOP proposal. Speaker Pelosi later said on CNN, "We have a great piece of legislation. They seem to be in disarray."

The New York Times reported that outstanding issues among Republicans also include "how much money to devote to testing and the federal health agencies on the front lines of the virus response," and that Senate Finance Committee Chairman Chuck Grassley (R-IA) yesterday pushed back against the payroll tax cut idea and instead advocated more direct payments.

An NBC News article focused on some Republicans not wanting to spend more, citing Senators Ted Cruz (R-TX) and Rand Paul (R-KY) as among those raising objections. Senator Bill Cassidy (R-LA) said of discussions among Republicans Tuesday, "It was all very 60,000-foot." The article said, "Senate Republicans have roundly rejected the [House] bill but are struggling to unite around an alternative that would satisfy competing priorities within their party. 'We haven't reached a conclusion on anything,' said Sen. John Kennedy, R-La."

A Politico story said one major obstacle in the talks is the Republican intention to tie school funding to physically reopening, which Senator Patty Murray (D-WA) said "is a non-starter for Democrats." The emerging GOP plan is said to offer $70 billion for K-12, $30 billion for higher education, and $5 billion for states to use at their discretion.

President Trump resumed coronavirus briefings yesterday and said, "It will probably unfortunately get worse before it gets better." He encouraged mask-wearing and said negotiators were working on extending the unemployment benefits add-on at an amount lower than $600, which in the CARES Act "gave people a lifeline."

Rep. David Schweikert (R-AZ) has introduced legislation to reduce the current 7.5% income threshold for the medical expense deduction to 5% for years 2020–2021 and make the 7.5% income threshold permanent for all other years. The TCJA temporarily lowered the deduction to 7.5%, and it was subsequently extended through 2020. The prospect of the threshold increasing is unacceptable, Schweikert said, "especially during a global pandemic."


Presumptive Democratic presidential nominee Joe Biden yesterday outlined a plan for childcare, preschool, and care for older Americans and those with disabilities, to be paid for by rolling back tax benefits for real estate investors (with incomes over $400,000) such as like-kind exchanges and using real estate losses to lower income taxes. The Wall Street Journal observed that "Mr. Biden also would roughly double the top capital-gains rate. Combined with limits on like-kind exchanges, that policy means commercial real-estate transactions that today yield no income taxes could instead be taxed immediately at a 39.6% rate." The Trump campaign criticized the plan for raising taxes.

The global EY Tax COVID-19 Response Tracker has been updated through July 9.

On Friday, July 24, from 12:00-1:00 p.m. EDT is the next webcast in the EY series discussing Tax in the time of COVID-19. This week's panelists will provide updates on: (i) The US legislative and economic landscape; (ii) Global tax policy developments; (iii) Treasury and IRS regulatory projects; and (iv) any IRS and breaking developments. Click here to register.


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