Gaps, Surpluses, And A Retreat

McConnell: No to $4 trillion but maybe yes to $600 billion. Senate Minority Leader Mitch McConnell told reporters that “no” Senate Republican will support the “$4.1 trillion grab bag which has infrastructure in it but a whole lot of other stuff.” He also said the GOP would oppose President Biden’s efforts to roll back some of the corporate tax cuts in the Tax Cuts and Jobs Act. Negotiations continue between a small group of GOP senators who back a $568 billion package and Biden, whose infrastructure bill would actually cost closer to $2.2 trillion. 

How Would Biden’s increased funding for IRS enforcement work? TPC’s Janet Holtzblatt reviews the president’s ideas for added funding and describes the consequences. Her key takeaway: A 4:1 return on the new spending is reasonable, but only once the agency can use the money to fully beef up its enforcement capacity, which could take several years. 

Biden’s proposed bank disclosure rules would help close the tax gap, but need improvement. TPC’s Steve Rosenthal argues that Biden’s proposal to require financial institutions to report account information is both more expansive and less revealing than current  income reporting requirements for wages and investments. It requires too many reports while revealing too little useful information. Steve says the plan would be improved by including bank reporting elements of a recent, more targeted proposal by former IRS Commissioner Charles Rossotti.

Biden proposes a higher tax on real estate transactions, to the dismay of some investors.  CNBC reports on the provision of the American Families Plan that would impose higher taxes on “1031” real estate transactions exceeding $500,00. Currently, investors can defer taxes on real estate profits by rolling them into their next property. A National Association of Realtors’ 2020 survey shows that 84 percent of 1031 exchanges were by sole proprietorships or S corporations.

In Maine, a $462 million surplus gives state lawmakers room to spend or cut taxes. Maine’s Revenue Forecasting Committee upgraded its fiscal picture last week. State revenues have returned to pre-pandemic levels and surpassed recent estimates. Total revenues for 2021 were revised upward from $3.69 billion to $4.15 billion, or 4.6 percent. Forecaster project revenues will  increase in each of the next four  fiscal years.

Following protests, Colombia’s President Ivan Duque backs down from tax increases. Duque had previously insisted that tax hikes were a necessary response to the pandemic-driven economic crisis. He  would have lowered the threshold at which salaries are taxed to monthly income of $656 or more. Tens of thousands of Colombians took to the streets in union-organized protests. Duque said upon withdrawing his tax bill: “It is a moment for the protection of the most vulnerable, an invitation to build and not to hate and destroy.”

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