WELL, THAT TOOK SOME DOING: As you might have heard by now, the House finally passed the bipartisan infrastructure framework late on Friday.
The big question now: How much leverage have progressives given up, after working so hard for so long to keep the Senate-passed infrastructure deal linked to passage of the larger, Democrats- only social spending package?
Both the House and the Senate are taking a break this week. But for now at least, Democrats are saying the right things. “We are going to get a very strong version of this bill through the House, through the Senate, to the president’s desk and into law,” Ron Klain, the White House chief of staff, said on NBC’s “Meet the Press."
Easy for him to say, of course. But Rep. Josh Gottheimer (D-N.J.), one of the centrists who had been seeking a full CBO score on the Democrats’ safety net and climate package before voting on it, sounded like he thought it would all get done soon enough, too.
Gottheimer said on CNN’s “State of the Union” that he fully expected CBO’s analyses to confirm that the social spending package is fully paid for, as the Biden administration’s figures maintain.
“We expect it all to match up with what was presented, and we will move forward,” Gottheimer said — though he has his own specific reasons for wanting the larger measure passed. (More on that later.)
IN FACT: MORE ON ALL OF THIS IN A BIT, but first welcome to the “we all need a moment to recover from infrastructure week(s)” edition of Weekly Tax.
Yeah, we know a lot of you were watching “Succession” last night: Today marks 49 years since a little something called Home Box Office (HBO) first went on to the airwaves. (Among the first offerings: A Paul Newman movie.)
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THE TIME WILL COME: The question of when, how and/or if the House will pass the social spending framework will be front-and-center until at least next week.
But for tax lobbyists, the focus has long since shifted over to the Senate.
That’s because most people assume the Senate will have the final word on the policy particulars of the big tax-and-spending package. (In fact, House Democrats largely have admitted that just pushing the process over to the Senate is a big reason they’re trying to pass something.)
And to be clear, there’s a fair amount that the business community would like to see changed.
For pass-through businesses, both the proposed surtax on the rich — which hits certain companies at a far lower income threshold — and extending Obamacare’s net investment income tax are top of the list.
Corporations have their own concerns, including softening proposed changes to the international systems (or at least delaying some further), at least paring back a planned corporate minimum tax and targeting a potential new limit on the deduction for interest on business debt.
Now, it’s possible that lobbyists might increase their efforts In the House, because they keep delaying consideration there.
But it’s not hard to see the appeal of focusing on the Senate —given that most everyone expects that chamber to make changes and Democrats have zero margin for error there. (Not to mention: At least a couple centrists have proven plenty willing to throw their weight around on this process.)
BACK TO THE SALT MINES: And now, back to Gottheimer’s main motivation in getting the larger Democratic package across the finish line — the chance to offer relief to the $10,000 cap on state and local tax deductions that Republicans enacted with their 2017 tax law.
Gottheimer noted in his CNN appearance that median property taxes are around $15,000 a year in the key county in his congressional district, and maintained that his efforts to lift the cap are meant to help the decidedly middle-class — ”a law enforcement officer and a teacher” making a combined $200,000 a year.
“For working class and hardworking families, middle-class families in my district, this will equal a tax cut for them, because their taxes went up,” he added.
Worth noting: The current House proposal would lift the SALT cap to $80,000 for nine years, before snapping back to $10,000.
Obviously, a cap that high would almost certainly be more than enough for a family paying $15,000 in property taxes, and would give the vast majority of its benefits to those at the top end of the income ladder. (Check out this from the Committee for a Responsible Federal Budget about House Democrats’ previous SALT relief proposal, which raised the cap to $72,500.)
In fact, some Democrats who are pushing to raise the SALT limits have been pretty open about the fact that they’re at least as concerned about the very rich heading out to low-tax states — and undercutting the tax base in their high-cost areas — as offering relief to the middle-class, which helps explain the push for the much higher cap.
Final point: Gottheimer’s congressional district is among the richest in the nation, but it’s a good bet that a good chunk of his constituents got a tax cut from the Tax Cuts and Jobs Act. The Urban-Brookings Tax Policy found back in 2018, for instance, that at least three out of five taxpayers in each state got tax relief through TCJA, and only about one in 20 nationwide got a tax hike.
THE ELON MUSK ANGLE: If nothing else, progressives believe that the Tesla founder Elon Musk’s Twitter poll over the weekend helps their cause. Musk asked if he should sell a tenth of his company stock, because of all that’s being” made lately of unrealized gains being a means of tax avoidance.”
Senate Finance Chair Ron Wyden (D-Ore.) responded that Musk’s poll simply illustrated why his proposed yearly tax on the unrealized gains of the super wealthy, which JCT recently said could raise well over a half-trillion dollars over a decade, was necessary. Meanwhile, Americans for Tax Fairness stressed that “billionaires shouldn’t only have to pay taxes when they volunteer to do so.”
Musk’s response to Wyden can’t be printed in a family tax newsletter. But it turns out that Musk might have had to sell some stock anyway, even if the Twitter voters hadn’t recommended that he do so.
Around the World
MAYBE NOT A GREAT IDEA: Ghana, the biggest producer of gold in Africa, is having second thoughts about a tax that could be increasing smuggling, Bloomberg reports. Gold production fell 14 percent in Ghana last year, in part because of the pandemic. But the government also put into place a 3 percent tax on gold exports from smaller producers in 2020. Those smaller outfits are expected to produce even less this year, and Finance Minister Ken Ofori-Atta said the government is examining whether to keep the tax on the books. The government introduced the tax to generate more revenue out of gold. But the head of Precious Minerals Marketing Co., a state-owned marketer, says that “there has been a drastic decline” in gold exports ever since, and that there is evidence that gold is leaving the country illegally.
Around the Nation
ITCHING TO USE THAT SURPLUS: A key state lawmaker in Indiana is floating both property and sales tax cuts, The Associated Press reports. Like some other states, Indiana saw a big increase in state tax collections recently — 14 percent during the most recent budget year. Tim Brown, the chair of the state House Ways and Means Committee, said that he was interested in broadening the state’s sales tax base to potentially cover services, while also cutting the rate from 7 percent. Brown is also thinking about whether the state should exempt more businesses from having to pay a property tax on equipment.
Quick Links
WaPo: “Biden’s minimum tax proposal could hit these ultra-profitable corporations.”
Bloomberg: “Crypto Traders Have Short Window to Avoid House Tax Plan.”
NPR: “Trump left a $7 million mess after delaying census workers' payroll taxes.”
ABC News: “Gladys Knight's son gets prison over restaurant taxes.”
Did You Know?
HBO cost $6 a month when it debuted in 1972.
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