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June 7, 2024

What to expect in Washington (June 7)

There were some developments this week related to the House Ways & Means Committee tax teams announced in April and Senate Finance Committee tax working groups assembled in May, both of which are comprised entirely of Republicans. Ways & Means Republicans launched a comment portal for the tax teams on May 21. Now Rep. Carol Miller (R-WV), Chair of the Supply Chains Tax Team, is separately asking for input on energy credits and incentives, with an expected focus on which credits are being effectively utilized and where reforms are needed.

Full Committee Chairman Jason Smith (R-MO) has said some Republicans are interested in a corporate tax rate increase (though he is not advocating for that). On June 5, the Bloomberg Daily Tax Report (DTR) cited Senate Finance Committee Ranking Member Mike Crapo (R-ID) as saying of 2025, "everything is in play in the sense that we are looking at everything," but "pro-growth tax policy does not need to be offset." His working groups are "operational," while "declining to give specifics on what topics they'll cover," the report said. The Finance effort had a less public rollout than Ways & Means but press reports have said the groups will split among individual taxes, business measures, international tax, retirement, community development, and energy.

Democrats would be expected to back 2025 TCJA extensions only for household incomes below $400,000 and have a whole host of proposed revenue offsets from President Biden's budget proposals and bills in Congress, including an increase in the corporate tax rate and other tax increases on corporations and high-income individuals. Invoking the 2011 Obama-era Buffett Rule, President Biden tweeted June 5, "No billionaire should be paying a lower federal tax rate than a teacher, a nurse, or a sanitation worker."

Along the same lines, the Senate Budget Committee has scheduled a hearing for Wednesday, June 12 (10 a.m.) on, "Making Wall Street Pay Its Fair Share: Raising Revenue, Strengthening Our Economy." Witnesses include Joseph Stiglitz, a former CEA Chair under President Clinton who supports proposals to tax high incomes, including a wealth tax.

Energy tax — Treasury and IRS today issued Notice 2024-48 that publishes information taxpayers may use to determine whether they meet certain requirements under the Statistical Area Category or the Coal Closure Category in Notice 2023-29 for purposes of qualifying for the Energy Community Bonus Credit.

Treasury Secretary Janet Yellen took some heat over tax credit implementation from fellow Democrats during a June 4 Senate Appropriations Financial Services and General Government Subcommittee hearing. Senator Chris Coons (D-DE) expressed concern about Treasury's implementation of tax credits and "making sure that they reach upstream players in the semiconductor industry," asking when to expect final rules that would make credits available to manufacturing facilities producing semiconductor component parts. Secretary Yellen said Treasury asked for comment on the depth of the supply chain and "we're trying to get the final rules out as quickly as possible."

Senator Coons and Appropriations full Committee Chair Patty Murray (D-WA) also expressed concerns about the IRC Section 45V hydrogen credit rules.

In comments that generated the most press attention, Senator Joe Manchin (I-WV) told the Secretary, "I totally disagree with what you are doing implementing the EV credits," which were written so that we would "bring manufacturing back to America." He suggested Congress wanted the credit to apply solely to manufacturing in America and with Free Trade Agreement countries, rather than allowing other countries "in the market and staying in the market for the entire extent of the IRA."

Trade — During the June 5 Senate Finance hearing on "Revitalizing and Renewing GSP, AGOA and Other Trade Preference Programs," there was bipartisan support for a bill that addresses the Generalized System of Preferences (GSP), which provides duty-free tariff treatment to products imported to the US from developing countries. Democratic members including Elizabeth Warren (D-MA) and Sherrod Brown (D-OH) pushed for inclusion of Trade Adjustment Assistance (TAA) in conjunction with the GSP bill. House Ways & Means Committee Democratic members similarly opposed a GSP bill (H.R. 7967), approved 25-17 with only Republican votes April 17, over the omission of TAA. TAA provides federal assistance to workers who have lost their jobs due to foreign competition, and the more robust version of the program expired June 30, 2021.

Chairman Ron Wyden (D-OR) noted that the Senate passed a bipartisan bill with Ranking Member Crapo to renew and improve GSP on a 91-4 vote in 2021, but it stalled in the House. Then, the Senate legislation that was a precursor to the 2022 CHIPS and Science Act included GSP and other trade provisions that were not included in the final bill. Wyden said in an opening statement, "Since GSP lapsed, companies are either paying more in tariffs and investing less into their own businesses, or they're making the tough choice to shift supply chains back into" other nations. "I'll continue working with Ranking Member Crapo to get it across the finish line as soon as possible," he said. Senator Ben Cardin (D-MD) said the GSP lapse means companies are taking production to source-material countries, and it "makes little sense" that Congress has not reauthorized the GSP program.

Senator Crapo turned attention to bigger-picture trade issues, namely the Administration's relatively passive approach and the absence of new free trade agreements (FTAs). "Although I support programs like the [GSP] program and AGOA, we need to resume negotiating real, comprehensive trade deals before it is too late," he said. "In the interim though, while the Biden Administration takes no steps toward meaningful trade agreements, Congress can at least prevent us from falling back by getting preference programs back on track. Congress can renew GSP — now … "

Witness Allison Gill, legal director at Global Labor Justice, called for a GSP update "fit for purpose for the increasingly globalized economy," including stronger labor rights provisions, and said it should be accompanied by TAA renewal.

The House Ways & Means Trade Subcommittee has scheduled a hearing on "Looking Beyond 2025 for Trade with Sub-Saharan Africa, Haiti, and Others" for June 12 (1:15 p.m.).

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Washington Council Ernst & Young