13 March 2024 What to expect in Washington (March 13) The March 12 Senate Finance Committee hearing on "Growing U.S. Manufacturing Through the Tax Code" featured a public airing of member views on prospects for the Tax Relief for American Families and Workers Act (H.R. 7024), which combines a Child Tax Credit (CTC) expansion with a return to R&D expensing and the prior calculation for interest deductions, and prevents bonus depreciation from phasing down:
The hearing also included praise from Democrats and witnesses over energy tax credits in the Inflation Reduction Act (IRA), as well as Republicans warning of the consequences if parts of the TCJA are allowed to expire after 2025. In one IRA-focused exchange, Peter Huntsman of the Huntsman Corporation said Treasury could make his company competitive with those in other nations if they included chemicals that they manufacture for EVs in the definition of Buy America and as a domestic component (i.e., if the requirement for the bonus credit went all the way down the supply chain). The company wrote to Treasury on Foreign Entity of Concern criteria, saying shifting the battery supply chain out of a foreign nation requires defining battery components for the FEOC criteria to include all portions of the supply chain. Budget — President Biden's FY2025 Budget proposal released March 11 included previously proposed tax items like quadrupling the stock buyback tax to 4% (from 1%), raising the corporate income tax rate to 28% (from 21%), and a 25% billionaire's tax, plus increasing the corporate alternative minimum tax (CAMT) to 21% (from 15%), ending corporate deductions for all compensation costs of $1 million per employee, longer depreciation of and higher fuel taxes on private jets, and a new tax credit for first-time homebuyers and sellers of starter homes. Much of the Treasury Green Book description was repeated from last year. A WCEY Alert has more details. The President's budget is a traditionally aspirational document and, in this case, lays out expected campaign messages and a roadmap of what a second Biden term could look like on tax if Democrats have control in Congress to make the proposals a reality, with a theme of making corporations and the wealthy pay their "fair share" that they have espoused going back at least 15 years. It was widely noted that many of President Biden's proposals couldn't even be enacted when Democrats controlled both chambers in the previous Congress, as the broader Build Back Better Act was whittled down to the narrower IRA. Of course, the next presidential term, regardless of who is in office, includes the 2025 TCJA tax cliff. Similar to language in the FY2024 Budget, President Biden said he opposes increasing taxes on people earning less than $400,000 and "supports cutting taxes for working people and families with children;" opposes tax cuts for the wealthy, either by extending tax cuts or bringing back deductions and other tax benefits; and supports paying for extending tax cuts "with additional reforms to ensure that wealthy people and big corporations pay their fair share so that the problematic sunsets created by President Trump and congressional Republicans are addressed in a fiscally responsible manner." An editorial in the March 12 Washington Post said "as a reminder of how another four years of Mr. Biden in the White House would be unlike a second term for likely GOP nominee Donald Trump — the document has somewhat more meaning. That is especially true for what might be the first major policy area to feel the impact of the voters' decision in November: taxes. The short version is that Mr. Biden's tax plan would be fairer and more fiscally responsible than Mr. Trump's." The FY2025 Budget again includes proposals intended to strengthen Medicare, as "gaps in the law that allow some pass-through business owners to avoid Medicare taxes would be eliminated and Medicare tax rates would be increased." The proposals would expand the Net Investment Income Tax (NIIT) base to ensure that all pass-through business income of high-income taxpayers is subject to either the NIIT or SECA tax; and increase the additional Medicare tax rate by 1.2 percentage points for taxpayers with more than $400,000 of earnings. When combined with current law, it would bring the marginal Medicare tax rate up to 5% for earnings above the threshold. Combined with increasing the top individual rate to 39.6% and taxing at ordinary rates long-term capital gains and qualified dividends of those with income over $1 million, the proposals increase the top long-term capital gains and qualified dividends rate to 44.6%, Treasury said. "By asking the wealthiest in this country to pay 1.2% more, by closing loopholes for people who have found ways not to pay Medicare taxes, we can save the Medicare program indefinitely," Office of Management and Budget (OMB) Director Shalanda Young told the Senate Budget Committee March 12. A story in the March 12 Wall Street Journal focused on these proposals and positions by President Biden and former President Trump on entitlements, and said, "Tax increases are often seen as nonstarters by Republicans, however, which means the changes are more likely to get discussed on the campaign trail this year than in the halls of Congress. Still, with large parts of the Trump tax cuts expiring after 2025, a broad reworking of the tax code could be on the table next year, giving the next president a lot of input into the shape of any negotiations." The FY2025 Budget, like previous versions during the current Administration, didn't include the 2020 Biden campaign proposal to impose Social Security payroll taxes on incomes greater than $400,000 per year, in addition to imposing the taxes up to the Social Security wage base limit, which for 2024 is $168,600. Congress — The House Republican retreat begins today at the Greenbrier resort in West Virginia, after House votes at 10 a.m., including on the Protecting Americans from Foreign Adversary Controlled Applications Act. The Senate holds votes today on nominations for Haiti ambassador and a US Circuit Court judge. Rep. Ken Buck (R-CO), who previously announced he wouldn't run for re-election, said March 12 he will leave Congress at the end of next week, leaving Republicans with a 218-213 majority and four vacancies, meaning Republicans can lose only two votes and pass any party-line bill. In terms of filling other vacancies:
Health care — On Thursday, March 14 at 10 a.m., the Senate Finance Committee will hold a hearing on "The President's Fiscal Year 2025 Health and Human Services Budget" with HHS Secretary Xavier Becerra.
Document ID: 2024-0587 | |||