17 June 2024 What to expect in Washington (June 17) The House is out this week, but the Senate is in (the opposite is true next week). The Senate will convene at 3 p.m. today (Monday, June 17), with a vote at 5:30 p.m. related to a judicial nomination. Finance Committee Democrats are set to hold a private meeting on Thursday, June 20, to discuss their approach to tax issues ahead of the 2025 cliff, according to press reports. There is one tax-writing committee hearing, on Tuesday, June 18, at the Senate Finance Committee, "Work and Social Security Disability Benefits: Addressing Challenges and Creating Opportunities." Prior to breaking for the recess, on Friday morning the House approved the National Defense Authorization Act (NDAA, H.R. 8070) on a 217-199 vote after including social policy provisions that, as Politico said, "turned a widely bipartisan bill into a measure supported almost entirely by Republicans" in "a gamble for [Speaker] Johnson, who could have pushed to pass a more bipartisan version with the help of Democrats, but instead catered to a sliver of his right flank." Last year's House NDAA similarly included conservative policy riders that were dropped in a compromise reached with the Democratic-controlled Senate in December 2023. Punchbowl reported: "The NDAA is typically pretty bipartisan. But Republicans loaded this thing up with tons of policy riders to appease the right — no surprise there with a two-seat majority." The same dynamic is true for appropriations bills, with spending cuts and conservative policy provisions reflected in the House-passed Military Construction, Veterans Affairs, and Related Agencies Appropriations Act and other spending bills teed up by the Appropriations Committee, including those on Homeland Security, State and Foreign Operations, Financial Services and General Government, Agriculture, Defense, and Legislative Branch. Those bills will have to be reconciled with bills to come out of the Democratic-controlled Senate. The Senate appropriations process isn't expected to get underway until after the July 4th recess. There is a September 30 government funding deadline, though that could be patched with a continuing resolution (CR) until after the elections. Tax — A CNN debate is scheduled for June 27 between President Biden and former President Trump, whose meetings with House and Senate Republicans and the Business Roundtable (BRT) last week increased speculation about what could be in store in a possible second term. Trump told the BRT group of CEOs June 13 that he wants to further reduce the 21% corporate tax rate by one percentage point to an even 20%, and reportedly discussed potential plans for tariffs and exempting tip income from tax in Washington last week. (Separately, Punchbowl News reported last night, "The Business Roundtable is planning executive fly-ins in the months ahead for company leaders to work Washington ahead of the 2025 tax debate.") While there were some new details, Trump's tax plans are still, as the Wall Street Journal said, "light on specifics" via "an improvisational economic-policy process that is light on fact sheets and white papers." The report said after imposing tariffs during his first term, "Trump has talked throughout this campaign about a 10% across-the-board tariff on imported goods" and, on Thursday, "went further, floating to House Republicans the idea of replacing the entire income tax system with tariffs … that would reverse more than 100 years of progressive taxation and is virtually assured to raise consumer prices." On ABC's This Week June 16, Treasury Secretary Janet Yellen was asked about the tariff proposal, and said, "It would require tariffs well over 100% … The impact would be to make life unaffordable for working-class Americans … and would harm American businesses." On the same program, Senator Tim Scott (R-SC), who has been mentioned as a possible VP pick, demurred about the tariff issue, saying he wasn't in the House meeting where it was discussed. He focused instead on former President Trump's proposal to exempt tip income from tax, saying, "what we talked about during the meeting with President Trump is the importance of focusing on the actual working class. Exempting tips is a great idea, followed by more tax cuts that actually generates more revenue to the Treasury and more money in the pockets of the average family." The differences between Democrats and Republicans on tax policy, ahead of the pivotal end-of-2025 tax cliff of TCJA individual and other expirations, are already pronounced, even ahead of any presidential candidate debates. There are also differences among Republicans. House members are more inclined to recognize the need for revenue offsets, while Senators maintain that pro-growth tax provisions need not be paid for. The House is out this week, making it unlikely there will be reported developments for Ways & Means tax teams. Committee Republicans have sought public input generally, and some of the teams have sought, or are planning to, seek more specific comments. Even with the Senate in session, it isn't clear there will be any news on the Senate Finance Committee working groups, which have been discussed in the press but not formally announced. Ranking Member Mike Crapo (R-ID) has said members "aren't there yet to answer those kinds of questions" about tax plans for 2025, especially with who will control the White House, Senate, and House after the 2024 elections unknown. On the revenue offset issue, and particularly an increase in the 21% corporate rate that some Republicans are said to back, some members including Senator Crapo are trying to mute talk of a corporate tax increase with a case about the incidence of the tax. "Corporate taxes are paid by workers, by retirees and by consumers, so it has a huge impact on everybody in the United States," he has said. Another Wall Street Journal story this morning, "Corporate Tax Rate Spurs Political Fight with More Than $1 Trillion at Stake," said, "The corporate tax is one of the few ways the U.S. can, indirectly, tax foreign investors in U.S. securities and nonprofits with large tax-free endowments. But the shareholder base also includes pension funds, 401(k) accounts and some middle-income households. Biden and Democrats play down effects on those groups. They also don't count corporate tax increases as violating the president's pledge to protect households making under $400,000 from tax hikes." The story noted that Republicans have touted the success of the corporate rate reduction and international tax changes as successful, including in staving off inversions. Ways & Means Ranking Member Richard Neal (D-MA) was cited as still supporting the 26.5% rate proposed in the 2021 Build Back Better Act that his side of the Committee, then in control, produced before it was whittled down to the much-narrower Inflation Reduction Act. Global tax - The OECD this morning released:
A communique at the close of the G7 meeting June 14 said, "We also remain committed to strengthening the rules-based multilateral trading system and to implementing a more stable and fairer international tax system fit for the 21st century." Today and tomorrow (June 17-18), AEI is hosting an event, "Complexities, Discontinuities, and Unintended Consequences of US International Tax Rules: Options for Change," to discuss a series of papers considering options for reforming US international tax rules.
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