February 17, 2023 What to expect in Washington (February 17) The Congressional Budget Office (CBO) said February 15 that extraordinary measures Treasury is using to keep the nation's bills paid since the debt limit was reached on January 19 could last until September or be exhausted as soon as July, depending on the timing and amount of revenue collections and outlays, especially the amount of income tax receipts in April. A separate CBO report on the Budget and Economic Outlook said: "The deficits in CBO's current projections are significantly larger than those in the agency's previous baseline projections for 2022 to 2032, which were published in May 2022. The budget shortfall for 2023 is now projected to be $426 billion more — and the cumulative deficit for the 2023–2032 period, $3.1 trillion more — than CBO projected last May. The increases stem from new legislation, changes to the agency's economic forecast, and other changes." The report said of legislative changes that increased projected deficits by $1.5 trillion, "nearly all the legislative changes were to outlays. Those changes included significant increases in outlays for mandatory veterans' benefits and increases in outlays for discretionary defense programs." The Inflation Reduction Act "increased outlays in 2023 by $25 billion and reduced outlays for the 2023–2032 period by $8 billion," CBO said. The decrease in projected outlays from Medicare prescription drug negotiation was offset by other spending in the bill. (Potential new revenue from increased IRS enforcement couldn't be counted by CBO.) IRS Commissioner — A February 15 Finance Committee hearing on the nomination of Daniel Werfel to be IRS commissioner focused on Republican demands that the Administration consult with Congress over how to spend the IRA's $80 billion IRS funding boost, amid long-running insinuations that it will lead to increased audits of average Americans. Democrats countered that depriving the IRS of the new funding — which House Republicans voted to repeal in the first bill they passed this Congress — would allow the wealthy to cheat on their taxes. Werfel previously served as Acting Commissioner in 2013. Some Republicans have voiced support for the nomination — Sens. Tillis (R-NC) and Young (R-IN) — and he is expected to be confirmed. Tax — A February 16 Washington Post opinion column said, "Here's a dirty little secret about those expensive, unpopular Trump tax cuts: We're probably stuck with them for good, because neither party seems to have the political courage to let them lapse. Not the Republicans who supposedly care about fiscal responsibility, and not the Democrats who are on record as hating them." The column noted introduction of a bill to extend the expiring TCJA provisions by House Ways and Means Committee Vice Chairman Vern Buchanan (R-FL) and others (H.R. 976); estimates that extending the "individual tax cuts in full would add around $3 trillion to federal deficits over a decade;" and President "Biden might have already boxed himself into keeping most of them in place" through his pledge to not increase taxes on those earning less than $400,000 annually. The debt limit and expiration of government funding are the deadlines facing Congress that get the most attention. However, a February 16 Bloomberg Daily Tax Report story on the farm bill deadline that also falls on September 30 said members are making a case for including tax items that could be viewed as thematically consistent (in the same way that members tried, unsuccessfully, to have the IRC Section 174 R&D amortization fix attached to the CHIPS bill last year). "Lawmakers have floated measures like reviving full bonus depreciation, which allowed farmers — and companies — to immediately expense capital expenditures, or a research and development tax deduction that expired last year, as possible inclusions in the package the agriculture committees will write this year … " the report said. "Though a tax component in the farm bill is unlikely, conversations around the legislation could generate momentum for tax policies that provide certain incentives or breaks for farmers, ranchers, and businesses." Rep. Ron Estes (R-KS), a Ways and Means member, said talks around farm bill policy could help move related legislation forward. Trade — The Senate Finance Committee's February 16 hearing, "Ending Trade that Cheats American Workers by Modernizing Trade Laws and Enforcement, Fighting Forced Labor, Eliminating Counterfeits, and Leveling the Playing Field," focused on how US manufacturers can/should keep parts that are manufactured under forced labor out of their supply chains, the benefits of the de minimis rule for duty- and tax-free importation of certain goods, and various ideas for customs modernization. Leaders from both sides suggested the issue needs some updating. Chairman Ron Wyden (D-OR) said that since the 2016 Trade Facilitation and Trade Enforcement Act (TFTEA), the last package of trade enforcement tools, Customs and Border Protection has faced additional challenges related to COVID-19, fentanyl, counterfeit goods, and IP theft. Ranking Member Mike Crapo (R-ID) said with the last comprehensive update to customs laws 30 years ago, "A smart reform, now, will not only allow us to seize new opportunities, but also to confront the rise of opportunists … The drafters of the last modernization could not possibly foresee the technological tools available to us today." Health — On February 16, the Senate Health, Education, Labor Pensions (HELP) Committee held its first hearing of the year entitled, "Examining Health Care Workforce Shortages: Where Do We Go from Here?" During the hearing, committee members heard testimony from a panel of health care providers who offered solutions to the nation's current and future shortage of health care workers. Many of the proposals discussed focused on addressing underserved and rural areas, such as through loan repayment programs for providers who work in rural areas, and ways to fill workforce gaps. Bills of interest -
A news release on the introduced windfall profits tax legislation said, "large oil companies will owe a per-barrel quarterly tax equal to 50 percent of the difference between the current price of a barrel of oil and the pre-pandemic average price per barrel between 2015 and 2019." Today, February 17 (12 p.m.) is the EY Webcast, "Tax in a time of transition: legislative, economic, regulatory and IRS developments." On February 22 (12 p.m.) there is an EY Webcast on policy, compliance, tax and federal funding reporting updates for entities operating within the US health sector. The House and Senate are out of session next week for the President's Day recess. What to Expect in Washington won't be published while Congress is away. ———————————————
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