Tax News Update    Email this document    Print this document  

June 24, 2024

What to expect in Washington (June 24)

The Senate is now out until July 8. The House is in this week before a recess the week of Independence Day. On Tuesday, the House will hold suspension calendar votes on Foreign Affairs Committee bills before turning to the Department of Homeland Security, State and Foreign Operations, and Department of Defense appropriations bills as a government funding deadline looms September 30. The State and Foreign Ops bill proposes terminating US participation in the Organization for Economic Cooperation and Development (OECD). The Republican-authored appropriations bills include spending cuts and policy riders that make them likely to be opposed by House Democrats and set up a clash with the Democratic-controlled Senate.

The House Ways & Means Committee has scheduled a hearing on "Strengthening Child Welfare and Protecting America's Children" for Wednesday, June 26 at 10 a.m.; and a Health Subcommittee hearing on "Improving Value-Based Care for Patients and Providers" for June 26 at 3 p.m.

Tax — Republicans and Democrats have been squaring off for some time about the tax policy decisions that confront them when TCJA individual and pass-through provisions expire at the end of 2025. Democrats made their positions clearer last week as Senator Elizabeth Warren (D-MA) called for tax increases beyond just letting TCJA provisions expire for those with income over $400,000, to "raise taxes on giant corporations and billionaires," and to let the TCJA provisions expire if those demands can't be met. Senate Finance Chairman Ron Wyden (D-OR), a wealth tax supporter, said he was struck by his members' commitment to raising taxes on the wealthiest Americans and companies. Higher Congressional Budget Office (CBO) deficit forecasts last week upped incriminations over what, and who, is to blame.

Ahead of the debate, the candidates' claims regarding tax policy are being more heavily scrutinized. A June 23 New York Times story on "Fact-Checking Biden's and Trump's Claims About the Economy" took on President Biden's recent claim that former President Trump "provided a $2 trillion tax cut for the super wealthy, which has done nothing but increase the debt and very little impact on ordinary people and their ability to, you know, function and grow." The story said: "High-income earners did far better under the tax cut, though, with the top 1 percent receiving nearly 17 percent of the total benefit with an average tax cut of $30,000. Several analyses of the 2017 law from nonpartisan, left-leaning and conservative think tanks showed that it led to a modest near-term increase in gross domestic product, though the economists have disagreed on the long-term effects. One recent study also found that the 2017 law bolstered investment and workers' pay modestly, though other studies have found little to no effect on workers' pay."

A story in the Saturday Washington Post, "Democrats' plan to tax the rich and corporations begins to take shape" said, "In the House, some top lawmakers are reevaluating past tax-and-spending bills that prioritized broad short-term investments that have since expired, demanding instead that Democrats focus on bringing in more revenue from major corporations and the rich that can permanently fund a limited number of high-impact social programs."

"If something's important, let's make sure we're making it a priority and doing it for a longer term. And if it's not a priority, maybe we don't need to do it anymore," said Rep. Suzan DelBene (D-WA), chair of the Democratic Congressional Campaign Committee. Majority Leader Steve Scalise (R-LA) cited the Republican argument against tax increases based on the incidence of tax, saying, "Look at what his energy policies have done. The people hit the hardest are low-income families paying higher gas prices, paying more at the grocery store and more for their household electricity bills all because of bad Biden policies."

The Post story said, "Democrats are split on what to do with the revenue their proposed tax increases would generate. Previous Biden-era investments covered a broad swath of programs, from child care to internet access and housing support. Many of those programs have since expired, and with divided control of Congress, they have little chance of being reinstated. Biden's budget, a largely symbolic reelection blueprint, called for new federal spending to lower consumer costs for health care, child care and housing."

A June 23 WSJ story, "Democrats' Billionaire Taxes Still Have a (Slight) Chance," described the aftermath of the Moore v. United States decision, in which the Supreme Court June 20 held 7-2 that the TCJA mandatory repatriation tax does not exceed Congress's constitutional authority, in a case that could have had ramifications for a wealth tax and the tax code overall. The story said, "Democrats, focused on wealth inequality and hungry for new revenue sources, are eager to push the boundaries of the income tax to force billionaires to pay taxes on appreciating stock values — even if they never sell those assets." It further said, "Biden, when he rails against billionaires' low tax rates, uses an income definition that includes unrealized gains — not the one in the current tax system. He would impose an annual 25% minimum tax on that broader tax base for the top 0.01% of households. Wyden would apply income taxes to unrealized gains of even fewer taxpayers."

The story said a limited idea that could be cast as an anti-abuse provision would end the "Buy Borrow Die" tax strategy targeted by Chairman Wyden, by which business owners are able to borrow against the business' growing and untaxed value to fund personal purchases, then, by virtue of stepped-up basis, pass assets to their children often entirely tax-free.

The annual OECD USCIB Tax Conference is being held in Washington this week, with a focus on OECD tax policy developments and business interaction.

* * * * * * * * * *
Contact Information

For additional information concerning this Alert, please contact:

Washington Council Ernst & Young