September 26, 2021
Americas Tax Policy: This Week in Tax Policy for September 24
This week (September 27-October 1)
Congress: The House and Senate are in session and facing the expiration of government funding on September 30 and the need to address the debt limit, with a likely must-act date in October.
House: In addition to his intention to bring the reconciliation bill to the floor next week, Majority Leader Hoyer said, "On Monday, September 27, pursuant to the Rule passed in August, the House will consider the Infrastructure Investment and Jobs Act. This legislation passed the Senate on a bipartisan basis last month and would create millions of good jobs all across America by investing in critical infrastructure projects."
Senate: There is a procedural vote at 5:30 p.m. Monday on the Motion to Invoke Cloture on the Motion to Proceed to H.R. 5305, the House-passed CR. It is expected to fail due to Republican opposition to the debt limit suspension, following which Democrats could pivot to a version that strikes the debt limit language.
Washington Council EY's new "DC Dynamics" podcast looks at what's coming up in US tax policy, with the past as a guide, and puts current developments in political and policy context.
Last week (September 20-24)
Reconciliation outlook: A budget reconciliation bill of some substantial size could be brought to the House floor as early as next week, as key policy makers have begun negotiating tax issues that differ between House Democrats, Senate Democrats, and the White House. Senate Majority Leader Chuck Schumer (D-NY) September 23 announced an "agreement on a framework that will pay for any final negotiated agreement" on the budget reconciliation bill, reached between himself, House Speaker Nancy Pelosi (D-CA), Treasury Sec. Janet Yellen, Ways & Means Chairman Richard Neal (D-MA), and Finance Chairman Ron Wyden (D-OR). He called the agreement a "menu of options." The Hill newspaper reported, "White House officials and congressional leaders have agreed that Wyden and Neal will use the House Ways and Means Committee's tax proposal combined with a few 'Senate ideas' that were left out of Neal's mark." A topline spending number has not been agreed to, and that will determine how much tax revenue is needed and which options are included in a compromise bill. The spending and tax plans are still under discussion with moderate Democrats, who will greatly influence the package. There is urgency to make progress on the reconciliation bill in an effort to satisfy House progressives, who say they won't support the Senate-passed bipartisan infrastructure bill set for a vote September 27 without action on reconciliation (which some say must include Senate approval of a bill). Moderates like Senator Kyrsten Sinema (D-AZ) have signaled that if the House doesn't approve the bipartisan infrastructure bill around the September 27 target, they won't back a reconciliation bill. The House Budget Committee on Saturday will assemble the $3.5 trillion-plus in recommendations from 13 committees covering a broad swath of issues on health, climate, and caregiving, and education in addition to tax (combined text available below). The step is seen as a formality because the Budget Committee can't make changes to committee recommendations but also a demonstration that progress is being made. House Majority Leader Steny Hoyer (D-MD) said September 24, "The Budget Committee has announced a Markup for the Build Back Better Act for tomorrow and it is my intention to bring it to the Floor next week."
Tax negotiations: The Washington Post reported Chairman Neal as saying Democrats continue to discuss issues like new carbon taxes but have a tentative agreement on IRS financial reporting requirements, in a story noting the chairmen have long taken different approaches to issues. "Wyden, for example, has sought to proffer significant changes to tax laws that govern foreign earnings, newly tax stock buybacks and raise money from wealthy executives and investors that avoid individual tax rates. The items had been left out of the House's early bill, setting the stage for talks between the two committees and Biden administration officials … " the story said. "Exiting those meetings, Neal and Wyden stressed their staffs continue to work toward a final menu of options that will be presented to Democratic lawmakers in the days ahead."
The Wall Street Journal reported that Ways & Means and Finance "are still discussing many other tax options, including the size of an increase in the corporate tax rate" but "were aligned on raising the top income tax rate to 39.6% from 37%, instituting new limits on tax-preferred retirement accounts totaling $10 million or more, and a retroactive cap on deductions for conservation easements, which are charitable donations of land rights." Chairman Wyden is pushing for a "billionaire's income tax" on annual increases in wealth, the report said. That could reflect dissatisfaction by some Democratic senators with the Ways & Means proposal for a 3% surcharge on incomes over $5 million, seen as perhaps not going far enough to tax the very wealthy. "I'm going to push very hard for it. Yeah, I'm chairman of the committee, I'm going to push hard," Wyden said. The report said "the tentative agreement on the IRS provision would require banks to report total annual inflows and outflows from bank accounts with at least $10,000 worth of gross flows. That is a higher threshold than the $600 the Biden administration initially proposed, though still one that would give the IRS two more annual data points on many people who have their paychecks deposited."
POTUS: Asked during a news conference September 24 whether he supports Senator Wyden's proposal on annual taxes on billionaires' unrealized gains, President Biden said, "Yes, I do. I support a lot of these proposals," and also argued for the additional financial account reporting to the IRS. He said for some members seeking to constrain the cost of the bill, their priorities add up "to a number higher than they said they were for, because … we're getting down to the hard spot here. People are having now to go in and look in detail as to what it is, specifically, they're for." The President dismissed concerns about the bill's cost saying, "based on the commitment that I made, it's going to cost nothing because we're going to raise the revenue."
Batchelder confirmed, among others: The Senate September 22 confirmed by a 64-34 vote the nomination of Lily Batchelder to be Assistant Secretary of the Treasury for Tax Policy. As a White House announcement of her nomination in March said, "From 2014 to 2015, she served as Deputy Director of the White House National Economic Council and Deputy Assistant to the President under President Obama. There, she was responsible for tax and budget issues, including tax reform, retirement policy, and low-income benefits. From 2010 to 2014, she served as Majority Chief Tax Counsel for the U.S. Senate Committee on Finance, where she led Chairman Baucus's work on tax issues … "
On the trade side, the Senate confirmed two Deputy USTRs this week: Jayme White to be the Deputy USTR for Europe and the Western Hemisphere and Sarah Bianchi for the Deputy USTR for Asia and Africa. The Senate vote for White, a long-time trade staffer for Chairman Wyden, was 80 to 18 while the Senate vote on Bianchi was 85 to 11. Speaking with respect to Bianchi's nomination on the Senate floor, Chairman Wyden said that her chief responsibility would be "taking on China."
International tax: Ireland wants a proposed 15% global minimum tax rate on corporate profits to be a ceiling, not a floor — and it doesn't want to accept any deal until it's clear what the U.S. Congress will authorize, Irish officials said Monday, Politico reported. "I am very clear that it is not appropriate for Ireland to be in the agreement now. That may continue to be the case," Irish Finance Minister Paschal Donohoe said at a Dublin press conference alongside EU Economy Commissioner Paolo Gentiloni. "But equally we are working very hard to see if an agreement is possible that would allow Ireland to join."
Government funding, debt limit: The House September 21 approved 220-211 a continuing resolution (CR) to extend government funding from September 30 to December 3 and suspend the debt limit until December 16, 2022. The bill isn't expected to pass the Senate, despite including disaster and Afghan resettlement aid, because Republicans won't support the debt limit increase on the grounds that Democrats are largely moving their agenda on a one-party basis under reconciliation. Still, Speaker Pelosi downplayed the threat of a government shutdown. "We'll keep government open. We'll have the votes to do that, and then we'll go to the Senate again. But the full faith and credit is a national debate." Democrats could act on the debt limit under the reconciliation process, as the Speaker alluded to, but it would require reopening the budget resolution and two Senate vote-a-ramas, which some Democrats say could take too long given the must-act date in October. Senate Republican leader Mitch McConnell (R-KY) September 23 disagreed with that assessment and laid out the steps the other party could take in short order. "Senate Democrats know what they need to do. They will need to write a short resolution amending their previous budget resolution with new debt limit instructions. They'll take that to the Budget Committee … " he said. "Then a vote to proceed on the floor, a limited 'vote-a-rama,' and a vote on final passage. And then, once the budget has been amended, House and Senate Democrats would use the same fast-track process on a short and simple bill to actually raise the debt limit. This won't be a multi-week process."
Trade: Taiwan this week formally applied to join the Comprehensive and Progressive Trans-Pacific Partnership, the 11-nation member successor trade bloc to the Trans-Pacific Partnership. Taiwan's application comes one week after China's formal application to join the CPTPP. The U.S. withdrew from the TPP, in part designed to coral China's growing economic clout in the Indo-Pacific, in early 2017. Taiwan's entry into the CPTPP would severely antagonize China and is considered a long shot by some analysts. Were China to be admitted to the CPTPP, on the other hand, Taiwan would almost assuredly fail to be admitted to the trade agreement. China's push to join the CPTPP has renewed calls for the U.S. to reconsider its decision to walk away from the multilateral trade pact.