And now, to the Senate, really. This morning, the House plans to pass a scaled-down version of President Biden’s Build Back Better social spending, climate, and tax bill. The measure would extend the expanded Child Tax Credit for a year, raise the cap on the state and local tax (SALT) deduction, create a new minimum tax on corporate book income, and impose a surtax on households with incomes of $10 million or more. The vote comes after the Congressional Budget Office reported it would add about $160 billion to the deficit over 10 years, including the bill’s many phase-ins and phase-outs.
And about the IRS funding. In the least surprising and most telegraphed estimate of the year, CBO concluded that raising IRS funding by $80 billion would generate a net revenue increase of about $127 billion over 10 years. The Biden Administration had been lobbying for a score that showed a net increase in revenues of $400 billion.
Shaking out SALT cap alternatives. TPC’s Len Burman and Howard Gleckman lay out the numbers. TPC analyzed an $80,000 cap on state and local tax deductions and an alternative that would eliminate the cap entirely for those making $400,000 or less. The result: Repealing the deduction limit for all but very high-income households would be less regressive than raising the cap to $80,000. Either would be less regressive than repealing the cap entirely. But all three would overwhelmingly benefit high-income tax filers and none would do much to help middle income households.
Comparing the corporate book minimum tax to a rate hike. TPC’s Thornton Matheson and Thomas Brosy analyzed the relative effects of the House’s proposed 15 book tax and a corporate tax rate increase. They concluded that the rate hike generally would be more efficient and more progressive. However, the effects would depend on how capital intensive a business is and whether new capital is financed with debt or equity.
Another debt limit forecast. The Bipartisan Policy Center predicts the Treasury will run out of borrowing authority between mid-December and mid-February. But the group warns Congress would be taking a “high-stakes gamble” if it does not address the issue by the end of December. Treasury Secretary Janet Yellen recently forecast “x day” will occur around December 15.
A new Fed chair by Thanksgiving. The White House says President Biden will announce his choice to chair the Federal Reserve Board within a week. Current Chair Jay Powell remains on the short list but progressives are pushing others including current governor Lael Brainard. Biden also has several Fed governor slots to fill.
A US electric vehicle tax incentive isn’t attractive to Canada and Mexico. Leaders in Canada and Mexico say President Biden’s proposed electric vehicle tax credits that subsidize “buy American” are protectionist and may violate international trade agreements. Biden would offer car buyers up to $12,500 in incentives for EVs made in the US, including a $4,500 credit for union-made cars and trucks. Biden met with Canadian Prime Minister Justin Trudeau and Mexican President Andres Manuel Lopez Obrador yesterday to discuss a range of trade issues.
IRS Criminal Investigation division releases annual report. Enforcement actions have focused on tax and COVID-related fraud, money laundering, and cybercrimes. The IRS-Criminal Investigation (IRS-CI) Fiscal Year 2021 Annual Report says the agency initiated more than 2,500 criminal investigations, identified $10 billion in tax fraud and financial crimes, and got a nearly 90 percent conviction rate.
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