20 October 2024 This Week in Tax Policy for October 21 Congress: The House and Senate are out of session until after the November 5 elections, scheduled to return on November 12. 2024 elections: The presidential race is a dead heat with mere weeks to go before Election Day. Swing-state polls are consistently showing thin margins between Democratic candidate Vice President Kamala Harris and Republican candidate Former President Donald Trump, and multiple national likely-voter polls have shown them essentially tied. Regarding congressional elections, recent news stories have discussed the prospect of the Senate flipping to Republican control. The Senate map leans in favor of Republicans, who are defending 11 seats compared to Democrats and independents defending 23 seats. The current ratio is 51-49 and Republicans are highly favored to win in West Virginia with the retirement of Sen. Joe Manchin (D-WV). If Republicans hold their seats, any additional Republican pickup of a currently Democratic seat or a Trump presidency would deliver Senate control to the GOP. CNN Inside Politics October 13 included discussion of the fact that, while Republicans are favored to take the Senate in November, the House is a different story, because with so few battleground districts, it could go either way. Additionally, a CNN data reporter said, "We're probably not going to know who won the House for days, if not weeks, on end because the ballots are counted so slowly out in California. Of course, there's so many key districts there, key battleground districts." With all 435 House seats on the ballot, it's not unusual for a handful of races to remain unresolved for an extended period of time for a variety of reasons, simply as a statistical matter. But with a historically narrow four-seat Republican majority, these unresolved races could determine control of the House in the next Congress. "Congress may be headed for an Election Day double flip. With less than four weeks to go, Republicans appear poised to win the Senate, which is currently controlled by the Democrats. The Democrats, meanwhile, seem to have a slight edge in the race for the Republican-controlled House," the Washington Post reported. "If the polls and predictions prove right — and that is still a big if — it would be the first such flip, a historic and fitting outcome for a political era marked by slim margins and deep division." 2025 tax cliff: A story in the October 14 Wall Street Journal (WSJ) gaming out tax policy scenarios for a Democratic or Republican sweep or split control of Washington said, in a GOP trifecta, Senate Finance Ranking Member Mike Crapo's (R-ID) view that extending TCJA provisions expiring at the end of 2025 shouldn't be offset because they would simply continue current policy "isn't universal, and some Republicans might be concerned enough about adding $4 trillion or more to budget deficits to resist that position." Senator Thom Tillis (R-NC) said any "non-pro-growth" policies should be paid for, quipping, "We're going to have to do car washes, bake sales, find the parts of the American Rescue Plan and the Inflation Reduction Act that are sources for pay-fors." In a Democratic-controlled Washington, "Even with narrow majorities, Democrats could likely agree on some tax increases, because they would no longer be blocked by exiting Sens. Kyrsten Sinema and Joe Manchin, who limited the party's revenue-raising policies in 2021 and 2022 … Democrats would work down the list of what is most politically feasible, probably starting with a higher corporate tax rate and tax increases on U.S. companies' foreign profits." The story suggested the temporary extension of the Bush tax cuts after 2010 and permanency of the provisions (except for high incomes) in early 2013 as precedent but noted the 2025 tax cliff "extensions aren't just tax cuts. Moving pieces such as the $10,000 cap and international tax law create a much more complex negotiation." A previously circulated WCEY Alert on taxes in the three election scenarios is available here. An October 15 Roll Call story said the "growing possibility of divided government in Washington next year has some predicting the tax fight could stretch into 2026 and beyond," citing deep ideological differences that complicate a long-term tax deal to address TCJA provisions expiring at the end of 2025, raising the odds of a short-term extension. The story cited WCEY's Ray Beeman as saying even though 2026 taxes aren't filed until 2027, increased withholding would ensure individual taxpayers feel the effect of going over the cliff much sooner, possibly as early as their first paycheck in the new year, making it more challenging to pass individual tax breaks retroactively than it is for businesses. "Everybody's going to feel that pretty immediately, at an individual level, and then at a macroeconomic level. Taking $4 trillion out of the economy could be problematic," he said. That's a major reason Beeman said he puts the chances of going over the cliff as fairly low. "I'm not saying there's no chance they'll go over the cliff, but I think if push comes to shove … that they take some sort of interim action," he said. "There will be a lot of pushback on them if they actually don't do something." Tariffs: There is a continued focus on tariffs that Former President Trump continues to say will feature prominently in his administration if he wins the election, and that he and his delegates say could be used to coax some manufacturers back to the US. He has called for tariffs of 10%-20% or more on imported products, 60% on products from certain foreign adversaries, and 100%-200% on some foreign automobiles. "To me, the most beautiful word in the dictionary is tariff, and it's my favorite word," the former president said at the Economic Club of Chicago October 15. "We're going to lower taxes still further for companies that are going to make their product in the USA. We're going to protect those companies with strong tariffs, because I'm a believer in tariffs." He argued, "The higher the tariff, the more likely it is that the company will come into the United States and build a factory in the United States, so it doesn't have to pay the tariff." An article in the October 18 WSJ said tariffs could be tapped to pay for part of the $4 trillion cost of extending TCJA provisions expiring at the end of 2025. House Ways & Means Committee Chairman Jason Smith (R-MO) said on CNBC September 30, 2024, in the context of paying for TCJA extensions: "I also believe if you codify various aspects of the 301 tariffs that can raise a lot of money in the hundreds of billions of dollars." A story in the October 17 Washington Post said: "While some business leaders and congressional Republicans remain optimistic that the former president is engaged in election-year posturing, Trump has repeatedly insisted that tariffs represent an unmitigated positive for the U.S. economy … Tariffs have been a constant bedrock of his economic agenda since he first ran in 2016, along with lower taxes, increased energy production and deregulation." SAF credit: The Treasury Department and IRS October 18 issued Notice 2024-74 for the Sustainable Aviation Fuel (SAF) credit created by the Inflation Reduction Act. Notice 2024-74 provides that a taxpayer who uses a 40BSAF-GREET 2024 safe harbor in Notice 2024-37 to calculate its emissions reduction percentage with respect to claims that relate to the sale or use of a SAF qualified mixture after the effective date, must use the October 2024 version of the 40BSAF-GREET 2024 model. IRA guidance tracker: This list describes select IRS guidance related to the Inflation Reduction Act (IRA).
Document ID: 2024-1925 | |||
