For Puerto Rico, the time to act is now… Or not? Treasury Secretary Jack Lew told Univision that Congress is running out of time to address the island’s debt crisis. Puerto Rico could fail to pay $422 million debt service on May 1 and another $2 billion on July 1. Lew wants Congress to move quickly, but the White House opposes the bill that House Republicans have in the works. House Majority Leader Kevin McCarthy said yesterday that he doesn’t see how Congress can get a bill done by May 1 but thinks it could be wrapped up by July 1. If you need a reminder about how Puerto Rico’s crisis came to be, consider some “suicidal tax incentive declarations.”
In the Senate: A step closer to international tax reform? Senator Chuck Schumer, in yesterdays’ Senate Finance Committee hearing on business tax reform, would like to work with lawmakers this year. “I’m game to do it because I think it’s really important for American competitiveness.” Senate Majority Leader Mitch McConnell still prefers to address corporate tax reform as part of comprehensive tax reform in 2017. Meanwhile, today House Ways & Means Chairman Kevin Brady will discuss the panel’s 2016 tax reform agenda at The Atlantic’s annual summit.
Until then, depreciation reform? Both Republicans and Democrats on the Finance panel seemed interested in Ron Wyden’s plan to simplify cost recovery rules for business investments. Under Wyden’s plan, assets could be bundled into one of six buckets instead of the 100+ different depreciation schedules that exist today. Many Republicans prefer scrapping the system entirely in favor of first year expensing but that would be both expensive and controversial. But contrast, there’s nothing especially earth-shaking about Wyden’s plan, which means it could pass someday.
There’s wanting corporate tax reform, and then there’s paying for it. As TPC’s Eric Toder explained in the Senate Finance Committee hearing yesterday, lawmakers might want to think beyond traditional rate-cutting, base-broadening solutions. He shared several ideas, many of which would shift direct taxation of business profits to shareholders. Toder argues that basing taxes on the location of shareholders (rather than the tax address of multinational firms or the location of their profits) could reduce widespread tax gaming.
In the House: All about ESOPS and S corporations… The House Small Business Committee holds a hearing today on the benefits of S corporations owned by Employee Stock Ownership Plans (ESOPs) Profits from an ESOP’s share of an S Corp are tax free. The hearing will examine how these arrangements work and what they mean for the overall economy.
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