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Ways & Means Democrats release their tax plan. The 645-page committee draft includes scores of tax breaks, including extending most of this year’s expansions of refundable tax credits through 2025 while making refundability of the Child Tax Credit permanent and extending or increasing a long list of alternative energy tax breaks. Separately, Chair Richard Neal is set to release several tax hike proposals, including a top corporate rate of 26.5 percent, a 16.5 percent minimum tax on foreign corporate income, and a 3 percentage point surtax on individual income above $5 million. The committee will resume work on the bill on Tuesday.
But it may not be the last word. Democrats still must agree on final top line spending and revenue goals. Sen. Joe Manchin and other moderates say they won’t support the $3.5 trillion target passed by the Senate. Sen. Bernie Sanders and other liberals say they won’t accept a lower number. Whatever the Ways & Means Committee agrees to could well be revised later by the House leadership.
Democrats may have a new revenue goal. Instead of fully paying for all the spending in the reconciliation bill, some Democratic leaders now suggest their goal is to pay for all but $1.5 trillion of it. Why $1.5 trillion? Because that’s how much the Republican’s 2017 Tax Cuts and Jobs Act added to the deficit.
Wyden continues to release his tax plans. The Senate Finance Committee chair, who has been slowly dripping out his own tax ideas, released two more on Friday. He’d impose a 2 percent tax on stock buybacks by public companies and he’d tighten tax rules for partnerships.
Don’t make December plans. The House Democratic leadership says it is aiming to pass a continuing resolution later this month that would run to December 10—a hint that the budget bill won’t be passed at least until then. Of course, the CR always can be extended.
Time’s ticking on the debt ceiling. Treasury Secretary Janet Yellen told congressional leaders last week the “most likely outcome” is that the nation hits its debt ceiling in October. She said failure to raise the limit could damage consumer confidence, increase borrowing costs, and perhaps hurt the US credit rating. Republican leaders say they will not support any increase.
Treasury: Top 1 percent of earners avoid $163 billion in taxes every year. The Treasury Department estimates that the Biden Administration’s proposals to close the gap between what taxpayers owe each year and what they pay could raise $700 billion over ten years. Those proposals include funding for increased IRS audits and enforcement.
Child poverty could fall to below 10 percent in most states if the expanded Child Tax Credit (CTC) is extended. TPC’s Elaine Maag explains a new Urban Institute study that shows that in a typical year, the expanded CTC that Congress approved this year would reduce child poverty by more than 40 percent–from 14.2 percent to 8.4 percent. Child poverty would be reduced by 50 percent or more in 11 states. To learn more about the future of the CTC, tune into an online panel discussion featuring Elaine, Stanford University Law School’s Jacob Goldin, and Center for Taxpayer Rights’ Nina Olson.
Full refundability is a key element of the CTC expansion. Elaine also looks at the importance of full refundability to very low income families. A TPC analysis finds that if Congress extends both the increased credit amount and full refundability, low-income households would get about $3,000 more on average in 2022 than under the pre-2021 law. But if Congress continues only the higher credit without full refundability, those households would get only about $100 more on average.
Was the Senate debate over cryptocurrency tax reporting just theater? TPC’s Howard Gleckman thinks so. It turns out that Treasury likely already has authority to require crypto brokers to report capital gains. So why did the Senate bother with a bill? Probably so it could take credit for the $28 billion in new revenue that the Joint Committee on Taxation scored. But the JCT score came before the bill’s sponsors insisted it was more modest than the legislative language said.
In the United Kingdom: Parliament backs Prime Minister Johnson’s proposed tax increases. Under Johnson’s proposal, the payroll tax rate and the tax on shareholder dividends would climb by 1.25 percentage points. The change would raise $17 billion a year to support Britain’s social care system.
For the latest tax news, subscribe to the Tax Policy Center’s Daily Deduction. Sign up here to have it delivered to your inbox weekdays at 8:00 am (Mondays only when Congress is in recess). We welcome tips on new research or other news. Email Renu Zaretsky at [email protected].