June 15, 2022
What to expect in Washington (June 15)
Democrats in Washington are not only up against the challenge of defending their economic proposals as inflation-fighting, including those discussed by Senator Joe Manchin (D-WV) and Senate Majority Leader Chuck Schumer (D-NY) for a reconciliation package, but are now competing with inflation proposals by Republicans eyeing a potential takeover of one or both chambers of Congress after the midterm elections.
Four Senate Finance Committee Republicans — former Chairman Chuck Grassley (R-IA) and Senators James Lankford (R-OK), John Barrasso (R-WY), and Steve Daines (R-MT) — June 14 proposed increasing the married filing jointly income threshold for the ACA-enacted Net Investment Income Tax (NIIT) from $250,000 to $400,000 and other investment tax changes like expanding the zero percent tax bracket for long-term capital gains and qualified dividends. The Middle-class Savings and Investment Act, which would also expand the Saver's Credit for retirement, would be financed by extending the $10,000 State and local tax deduction cap.
House Ways & Means Committee Republicans have advocated repurposing unspent COVID relief funds, making TCJA provisions permanent, negotiating better trade agreements along the lines of the USMCA, and increasing American energy production.
The Wall Street Journal: "The policies offer a preview of the fall midterm election campaign, where inflation is likely to be one of the core issues on voters' minds as Republicans try to regain control of the House and Senate. But in the closely divided Congress, it is difficult to design politically viable legislative proposals that remove money from the economy or significantly reduce costs for businesses and households."
There has been reporting that the White House is caught between members who want to go after oil companies on gas prices and those who advise that it is a bad idea. Reports on June 14 said Senate Finance Committee Chairman Ron Wyden (D-OR) plans a proposal for a 21% additional tax on the excess profits of oil and gas companies with more than $1 billion in annual revenue. The 21% tax would be in addition to any regular income tax due and profits over 10% of current year expenses would be considered excessive, Reuters reported.
Meanwhile, "President Biden's economic team has discussed the gas tax holiday recently and is expected to meet later this week for further talks," The Hill newspaper reported.
And President Biden June 14 continued to highlight the reduction in the Federal budget deficit and struck a more defiant tone in response to Republican charges that spending, particularly the American Rescue Plan Act, contributed to inflation. "I don't want to hear any more of these lies about reckless spending. We're changing people's lives … [T]his year, we're delivering the biggest drop in the deficit in the history of the United States of America," the President said at an AFL-CIO convention. "Look, the point is this: Under my plan for the economy, we've made extraordinary progress. And we put America in a position to tackle the worldwide problem that's worse everywhere but here: inflation."
Global tax — The UK Financial Secretary to the Treasury issued a letter June 14 confirming that the UK will implement Pillar 2 legislation that will apply to accounting periods beginning on or after December 31, 2023. This delay in the effective date (previously April 2023) comes after hearing concerns from the business community.
The next European Union Economic and Financial Affairs Council (ECOFIN) meeting is on Friday, June 17, and there are hopes that Poland will abandon its opposition to the Pillar 2 minimum tax directive. Tax Notes reported Pascal Saint-Amans, Director of the OECD Centre for Tax Policy and Administration, as saying he is confident the EU will reach a deal at the meeting. "If there is a deal on Friday, then it's likely that the U.S. would move, whether immediately or a bit later, which requires Congress to move," Saint-Amans explained, according to the report. "Why is it so important to have a first mover, and why is it so important for the U.S. administration to have Europe move? Because if somebody just grabs the tax — your tax — well, you will not let it go. You will act yourself."
Competitiveness — Punchbowl reported that Chairman Wyden, Senate Banking Committee Chairman Sherrod Brown (D-OH), and Senator Mark Warner (D-VA) "met with Ways and Means Committee Chair Richie Neal (D-Mass.) in his office off the House floor to discuss USICA conference negotiations" June 14. This is the same group that met to discuss trade issues under the measure on May 18, and it is one of the more recent signs of activity for the conference, which Bloomberg reported could be hampered by Republicans reluctant to give Democrats a win before the midterm elections and wary of "soft on China" perceptions.
Today (3 p.m.), the Senate Finance Subcommittee on International Trade, Customs, and Global Competitiveness holds a hearing, "Supply Chain Resiliency: Alleviating Backlogs and Strengthening Long-Term Security."
Retirement - The Senate Health, Education, Labor, and Pensions (HELP) Committee approved by voice vote June 14 the RISE & SHINE Act (S. 4353), intended to be incorporated into 'SECURE 2.0' retirement legislation. The bill would allow employers to offer emergency savings accounts, improve communications to retirement plan participants and transparency around lump-sum buyout offers, and require plans to automatically re-enroll employees who decline to participate in the employer provided plan every three years. The bill also addresses topics covered in the House-passed retirement bill, including 403(b) multiple employer plans and increased access to plans for part-time workers. An amendment directing the DOL to study the impact of inflation on retirement savings was agreed to by voice vote. The House passed its 'SECURE 2.0' bill on March 29. The Senate Finance Committee may mark up its portion next week.
Elections — House Ways and Means Committee member Rep. Tom Rice (R-SC), one of 10 House Republicans to vote to impeach President Trump, lost his primary race June 15. Adam Laxalt won the Nevada GOP Senate primary and will face Senate Finance Committee member Catherine Cortez Masto (D-NV), "one of the most endangered Democrats in an evenly divided Senate," the AP said.
Friday, June 17 (12 p.m.) is the EY Webcast, "Tax in the time of COVID-19: Update on legislative, economic, regulatory and IRS developments." Register.