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Tax Update (September 30)

Sep 30, 2019 | SHARE  

Carbon Tax

On Thursday (Sep. 26) Rep. Brian Fitzpatrick (R-PA) introduced a carbon tax bill that would put a price on carbon and invest the revenue in infrastructure. The legislation is similar to the “MARKET CHOICE Act,” a carbon tax bill authored by former representative Carlos Curbelo of Florida. Fitzpatrick co-sponsored that bill, which would have enforced a carbon tax while repealing federal taxes on diesel, gasoline, and aviation fuels. Fitzpatrick’s bill seeks to spend most of the tax revenue on infrastructure, while using the remainder to support the research and development of carbon capture. The legislation would also restrict the authority of the Environmental Protection Agency (EPA) to regulate greenhouse gases from stationary sources under the Clean Air Act.[1]  “Legislative action taken — or not taken — by this Congress on these issues will be felt for generations. With the American public overwhelmingly seeking fixes to our crumbling roads and bridges while searching for solutions to mitigate the dangerous effects of climate change, our bipartisan bill is a dynamic solution that seeks to tackle both problems. It doesn’t have to be a tough choice,” Fitzpatrick said in a statement. [2] 


Steering Committee Reprieves Brady

House Republicans are considering changing rules regarding term limits for committee chairs. At a Tuesday (Sep. 24) Steering Committee hearing, members opted to make one important change to its term-limits policy, voting to ensure that half-terms do not count towards the cap. The move allows Rep. Kevin Brady (R-TX), who took over the House Ways and Means Committee in November 2015 when Paul Ryan relinquished his chairmanship to become House Speaker, to stay on as the panel’s top Republican until the end of 2022. [3] Republican retirements have increased over the past few months, and President Trump has urged the House GOP to abolish term limits. Some Republicans, such as Minority Leader Kevin McCarthy (R-CA), defended term limits, arguing they bring “fresh blood” to the top ranks of the GOP. 


Opportunity Zone Tract Changes

Investors have been asking state officials to expand areas for opportunity zone tax breaks, and the 2020 Census could give them an opening. The Census Bureau is currently updating census tract boundaries, which could allow state governments to “cover more of their states in opportunity zones.”[4] States have already chosen some 9,000 census tracts to be eligible for the program, in which investors can defer tax payments by funneling money toward struggling areas. Next year’s census will update the borders of some of those tracts — which could give states the opportunity to expand the amount of land eligible for the program. The Treasury Department says such a development would be in the spirit of the program itself, and officials in about 10 states told Bloomberg Tax that they would consider expanding the initiative to new areas brought into the census tracts already chosen.


Biden Considering Wall Street Tax

Presidential candidate and former Vice President Joe Biden is considering a financial transactions tax, a more moderate way to tax Wall Street and “Main Street” than either Sen. Elizabeth Warren’s (D-MA) annual wealth tax or Sen. Bernie Sanders’ (I-VT) aggressive tax-the-rich scheme. Biden’s staff confirmed that the campaign is working on tax proposals but did not disclose any specifics.[5] A financial transactions tax would impact all securities and transactions and would be less far-reaching than the wealth taxes Sanders and Warren have put forward. Biden does have some proposals to tax wealthier Americans and has proposed rolling back half of the corporate tax cut from the Tax Cuts and Jobs Act (TCJA) and eliminating the “stepped-up basis” that allows taxpayers to pass unrealized gains to heirs tax-free when they die.


TIGTA

On Thursday (Sep. 26), Internal Revenue Service (IRS) Inspector General J. Russell George told the House Appropriations that he was open to formally investigating the IRS’ audit rate on the Earned Income Tax Credit. Democrats claim the EITC is excessive, and argue the IRS needs to do a better job going after high income filers, especially non-filers.[6] George said he has not found any demographic bias in the audit rate but has agreed to examine any civil rights violations. [7] 


Extenders/Impeachment Impact

On Wednesday (Sep. 25), Senate Finance Chairman Chuck Grassley (R-IA) said the Democrats’ impeachment move would not impact the push for a tax extenders package, even though the two parties are divided on the issue.[8] Grassley expressed some confidence that Congress could pass a measure restoring the expiring and expired tax provisions, and the Secure Act. The Secure Act is currently languishing in the Senate, where Republicans are holding it up in response to the House’s removal of Section 529 tax benefits for home-schooled children, which is a conservative priority. Meanwhile, Ways and Means Ranking Member Kevin Brady (R-TX) said, “I worry every day that’s wasted on impeachment makes it tougher for us to find some solutions. And tax extenders might be a good example of that.” Brady is neutral at best on extenders and has wanted for years to reform the extender merry-go-round.


Green Energy Tax Package

Democrats are currently looking at a $30 billion Green Energy Tax package. The package would include tax credits for electric vehicles, solar power (for five years), offshore wind, energy storage, and other green energy extenders. Democrats have identified oil and gas to pay for around $10 billion of the credits but it is unclear where the remaining $20 billion will come from. A potential markup could take place in October or November.


References

[1] Siegel, John “Republican Brian Fitzpatrick to introduce carbon tax bill that funds infrastructure” Washington Examiner, 25 Sep 2019 https://www.washingtonexaminer.com/policy/energy/republican-brian-fitzpatrick-to-introduce-carbon-tax-bill-that-funds-infrastructure

[2] Green, Miranda “GOP Congressman introduces bipartisan carbon tax bill” The Hill, 26 Sep 2019 https://thehill.com/policy/energy-environment/463269-gop-congressman-introduces-bi-partisan-carbon-tax-bill

[3] Zanona, Melanie & Bresnahan, John “House GOP weighs easing term limits on committee chairs” Politico, 24 Sep 2019 https://www.politico.com/story/2019/09/24/gop-term-limits-committee-1510493

[4] “2020 Census Could Expand Opportunity Zones Chosen for Tax Breaks” Bloomberg Tax, 23 Sep 2019 https://news.bloombergtax.com/daily-tax-report/2020-census-could-expand-opportunity-zones-chosen-for-tax-breaks 

[5] Becker, Bernie “Tax return confusion” Politico Pro Morning Tax Newsletter, 27 Sep 2019 https://subscriber.politicopro.com/newsletter/2019/09/tax-return-confusion-762432

[6] Becker, Bernie “Tax return confusion” Politico Pro Morning Tax Newsletter, 27 Sep 2019 https://subscriber.politicopro.com/newsletter/2019/09/tax-return-confusion-762432

[7] Lorenzo, Aaron “Watchdog opens to examining IRS audits of EITC recipients” Politico Pro 26 Sep 2019 https://subscriber.politicopro.com/article/2019/09/watchdog-open-to-examining-irs-audits-of-eitc-recipients-3918553

[8]Becker, Bernie “Tax return confusion” Politico Pro Morning Tax Newsletter, 27 Sep 2019 https://subscriber.politicopro.com/newsletter/2019/09/tax-return-confusion-762432

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