March 8, 2023
What to expect in Washington (March 8)
On March 7, President Biden announced that his upcoming fiscal year 2024 budget proposal includes a plan to extend the solvency of Medicare's Hospital Insurance Trust Fund by at least 25 years and lower health care costs for seniors. According to a White House fact sheet, Biden's budget proposes to prolong the Medicare Trust Fund by increasing the Medicare tax rate on earned and unearned income above $400,000 from 3.8% to 5%; expanding the tax to include business income, as well as income from investments, wages, and self-employment; redirecting Medicare net investment tax revenue to the HI Trust Fund; and expanding Medicare's ability to negotiate drug prices. In addition, the budget will propose a $2 per month cap on Part D cost-sharing for certain generic drugs and eliminating cost sharing for three mental health or other behavioral health visits per year.
President Biden has already outlined a quadrupling of the Inflation Reduction Act (IRA) stock buyback excise tax from 1% to 4% and a previously proposed billionaire's tax to be included in Thursday's Budget release. The New York Times reported this morning, "The president is also expected to continue proposing some tax increases to offset the cost of portions of his agenda that have not yet passed Congress. That agenda includes efforts to expand access to child care and reduce its cost, provide federally guaranteed paid leave for workers, establish universal prekindergarten and enable students to attend community college for free."
Treasury Secretary Janet Yellen will appear for the customary post-Budget hearings at the House Ways and Means Committee on Friday, March 10 and Senate Finance Committee the following Thursday, March 16.
The Senate will hold a procedural vote on the nomination of Daniel Werfel to be IRS Commissioner this morning at 10:45 a.m.
The March 7 Senate Finance Committee hearing on "Tax Policy's Role in Increasing Affordable Housing Supply for Working Families" focused on the need for members to come together to act on bipartisan housing legislation, of which there is a substantial amount. Senate Finance Committee Chair Ron Wyden (D-OR) reintroduced the Decent, Affordable, Safe Housing for All (DASH) Act, which would among other things strengthen the Low-Income Housing Tax Credit (LIHTC) and establish a Renter's Tax Credit and Middle-Income Housing Tax Credit (MIHTC). He recognized Senator Maria Cantwell (D-WA) as a longtime LIHTC advocate and mentioned the bill (S. 657) by Senators Ben Cardin (D-MD) and Todd Young (R-IN) to boost investment in struggling neighborhoods. Ranking Member Mike Crapo (R-ID) mentioned the same bills and said, "Targeted tax policies such as LIHTC are an important part of solving housing affordability and supply issues, but we must also address the drivers that are raising the cost of housing generally."
During the House Ways and Means Committee's second field hearing "on the State of the American Economy: The Heartland" on March 7, Republican members continued to call for additional tax reductions for working-class Americans, including extensions of TCJA provisions for individuals. Witnesses included a founder of a meatpacking company, an owner of a family-owned manufacturing company, a rancher, and a small oil producer. Chairman Jason Smith (R-MO) said ahead of the President's Budget release on Thursday, "Biden's last budget threatened $45 billion in new taxes on American energy producers. It spent $330 billion on policies that discourage work, worsen supply chains, and leave Main Street littered with 'Help Wanted' signs." Rep. Mike Thompson (D-CA) asserted that Republicans should support extension of the expanded Child Tax Credit given the significant tax cut they provided to corporations in the 2017 TCJA. Other Democrats like Rep. Terri Sewell (D-AL) also highlighted the importance of a robust CTC.
Debt limit — Chairman Smith has scheduled a Ways and Means markup for Thursday, March 9 at 10 a.m. of H.R. 187, the "Default Prevention Act," which would guarantee the sovereign debt of the United States Government by authorizing the Treasury Secretary to continue to borrow to pay interest and principal due on the debt, even in the event of an impasse concerning the debt limit.
Global tax — During an OECD panel of The Federal Bar Association 2023 Tax Law Conference, Michael Plowgian, Deputy Assistant Secretary (International Tax Affairs), U.S. Department of the Treasury said, on South Korea, the expectation was the UTPR would come into effect a year after the IIR. The effective date under the Korean legislation caught many people by surprise and it has been raised with them and a conversation about the effective date is at least taking place. Regarding whether GILTI will give a credit for a QDMTT, he said, "We have said this many times, including in preambles to existing FTC regs, we are working on FTC reg guidance about the treatment of Pillar Two taxes, including QDMTTs. And, you know, I can't get out too far ahead of the regulatory project, because there are just a lot of issues to work through. But we agreed to the rule order that QDMTTs come before CFC taxes which come before IIRs. And we expect to reflect that and we do not favor double taxation."