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Tax Update (August 5)

Aug 5, 2019 | SHARE  


On July 25, the House passed the Bipartisan Budget Act favorably by a vote of 284-149. After passing the Senate by a vote of 67-28 on Thursday (Aug 1), the two-year $2.7 trillion budget deal was signed by President Trump this morning (Aug 2). Congress will have to work quickly to develop a spending package before appropriations for federal agencies run out to avoid a government shutdown on September 30 when the fiscal year ends. House and Senate leadership staff are expected to craft a deal over the August recess to move various funding bills during the last week of September. According to a senior Senate Finance staffer, an omnibus or continuing resolution (CR) is the most likely vehicle for tax extenders. If an omnibus spending bus materializes, it is expected that the House and Senate tax writers would start putting together a tax title that includes extenders, energy tax credits, and, potentially, retirement savings changes. To date, no negotiations have begun. However, given the short time frame between August recess and Rosh Hashana/Yom Kippur, it is likely that both chambers will pass a short-term CR.This would give negotiators more time to conference a spending deal and work out a tax extenders package. Either way, the tax title is likely to look more like the PATH Act than a traditional extenders deal. 


Senate Environment and Public Works Chairman John Barrasso (R-WY) said talks with Senate Finance Chairman Chuck Grassley (R-IA) did not include discussion on a possible gas tax hike to pay for the $287 billion surface transportation bill. Grassely told reporters that increasing the gas tax is probably off the table.  “All I’ve consented to is we’re going to talk about it after September, we’re going to start the conversation with McConnell because if I’m going to exert a lot of both political capital as well as a lot of work to finance this, I want to make sure that we get it up on the floor,” Grassely said.[1] Majority Leader Mitch McConnell (R-KY) has a history of opposing legislation that includes tax increases. Surprisingly, President Trump privately backed a 25-cent increase in the gas tax last year, but has never endorsed the idea publicly.

Energy Credits

The House Ways and Means Committee could hold a markup in on energy tax incentives in September. The package could potentially feature revamping the tax credit for electric vehicles (EVs), according to Rep. Dan Kildee (D-MI). The legislation, H.R. 2256, would increase the number of EVs a car-maker can sell before a tax credit for buyers is ended. Additionally, buyers of hydrogen fuel cell vehicles would get another 10 years to claim a credit for purchases of new qualified fuel cell motor vehicles. The green energy tax package could also include a measure to continue the current levels of renewable energy tax credits instead of phasing them out as scheduled, including the business energy investment tax credit and a residential energy tax credit. Ways and Means Subcommittee Chairman on Select Revenue Measures Rep. Mike Thompson (D-CA) sponsors H.R. 3961,which would extend both of those credits for five years. This would impact a broad range of industries, including microturbines, geothermal heat pump technologies, solar, and fuel cells. Thompson acknowledged there are numerous tax measures being looked at in September, but hopes the bills could be part of a September markup. Ways and Means Chairman Richard Neal (D-MA) told Kildee in June that he wanted to “chart a path forward and produce legislation that will continue to grow our clean energy economy and get more electric vehicles on the road.”[2] 

Capital Gains

Twenty-one Senate Republicans urged Treasury Secretary Steve Mnuchin to use executive authority to index capital gains to inflation in a letter sent Monday (July 29). The group, which accounts for roughly 40% of the conference, noted that such a move would “remove the unfair inflation tax on savings and investment” and be a “positive, pro-growth change.” Ted Cruz (R-TX) and other Republican senators want the change to be made without involving Congress. Many of the Trump administration’s top economic advisors support the notion, including Larry Kudlow, who has championed it for years. Secretary Mnuchin is hesitant to make the change, and said “right now there’s no commitment to getting it done or not getting it done.”[3] Sherrod Brown (D-OH) and a dozen Democratic senators asked Secretary Mnuchin to abandon the idea earlier this month.


[1] Joselow, Maxine. “Grassley says gas tax hike ‘off the table’” E&E Daily. 1 Aug 2019.

[2] Lorenzo, Aaron & Becker, Bernie. “House tax writers eye green energy tax incentives” Politico Pro. 20 Jul 2019.

[3] Davidson, Laura. “Cruz pushes Mnuchin for quick action on capital gains tax break .” Bloomberg. 29 Jul 2019.


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