Tax Update (March 1)
H.R. 5837, the Investing in Your Family’s Future Act, introduced by Rep. Ann Wagner (R-MO), would allow for child care payments to be treated as elective deferrals for purposes of employer matching contributions. This legislation has been endorsed by the Bipartisan Policy Center and is co-sponsored by Rep. Hakeem Jefferies (D-NY).
H.R. 5851, the ESOP Fairness Act, introduced by House Ways and Means Committee member Brian Higgins (D-NY), would allow over-the-counter securities to be treated as publicly traded for the purpose of employee stock ownership plan diversification requirements. The proposal has bipartisan support – Rep. Mike Kelly (R-PA) is a co-sponsor – and an identical proposal was introduced in the Senate by Sens. Thom Tillis (R-NC) and Gary Peters (D-MI).
H.R. 5869, the Skill and Knowledge Investments Leverage Leaders’ Untapped Potential Tax Credit Act of 2020 (SKILL UP Act of 2020), introduced by House Ways and Means Committee member Steven Horsford (D-NV) would provide a tax credit for businesses with employees participating in work-based learning programs. The SKILL UP Act would build upon the Work Opportunity Tax Credit (WOTC) program to incentivize on-the-job training.
S. 3315, the Tar Sands Tax Loophole Elimination Act, introduced by Sen. Ed Markey (D-MA) would classify products made from tar sands as crude oil in order to require oil companies who produce or export tar sands oil to pay into the Oil Spill Liability Trust Fund. The classification would subject those companies to the petroleum excise tax. Sen. Markey is joined by Sens. Sheldon Whitehouse (D-RI), Elizabeth Warren (D-MA), Bernie Sanders (I-VT), and Rep. Dan Kildee (D-MI).
Sanders Calls for Tax Hike on Executive Retirement Plans
Following the publication of a Government Accountability Office (GAO) report on Executive Retirement Plans, Sen. Bernie Sanders (I-VT), a frontrunner for the Democratic presidential nomination, is seeking to curb tax benefits of top executives’ plans by requiring earlier taxation of stock options.
Executive retirement plans allow certain highly compensated employees to defer a portion of their compensation and taxes in order to save for retirement. Deferred compensation remains a part of a company’s assets until it is distributed to the employee, at which point it becomes taxable income. The GAO report found that in 2017, around 400 large companies held an estimated $13 billion worth of assets within retirement plans that allowed executives to defer pay and taxes.
Sanders aims to alter this setup by taxing compensation in plans when it vests.
“It is outrageous that the wealthiest corporate executives in America get unlimited, special tax privileges on hundreds of millions of dollars in savings, while ordinary workers can only get tax deferment of up to $19,500 on their 401(k)s,” Mr. Sanders said in a statement.
His proposal would raise approximately $15 billion, a small number when compared to progressive agenda that would dramatically expand the public sector.
The idea is not a new one; it is very similar to a Republican proposal included in early versions of the 2017 Tax Cuts and Jobs Act. Ultimately, the proposal was nixed after companies began complaining that altering executive retirement plans would dramatically change employee compensation packages.
Sanders plan is set to be introduced as legislation, co-sponsored by Sen. Chris Van Hollen (D-MD), on Thursday (Mar. 5). It is unlikely to move in the Republican-controlled Senate.
Anti-tobacco Bill Passes the House
On Friday (Feb. 28), the House approved legislation to ban all tobacco flavors and tax e-cigarettes 213-195. Proponents of the bill have argued that this ban and tax is essential to reducing teen use of vape products. The Joint Committee of Taxation estimates the vaping tax will generate around $5 billion over the next decade.
The vote comes after Democratic leaders, including Speaker Nancy Pelosi (D-CA) and Leader Steny Hoyer (D-MD), stepped in to whip votes after concerns that the bill would target people of color arose. 17 Democratic members voted against the legislation. Majority Whip Jim Clyburn (D-SC), who voiced his concerns that a menthol ban would increase overpolicying in black communities, was notably absent from today’s vote.
Like Clyburn, American Civil Liberties Union (ACLU), opposed the measure for similar concerns on its repercussions in black communities. The mothers of Trayvon Martin and Eric Garner, black men killed by police in 2012 and 2014 respectively, shared fears that banning menthols would increase stop-and-frisk practices.
“We urge you to carefully consider any bill that seeks to ban menthol cigarettes … The majority – 80 percent – of Black smokers prefer menthol cigarettes.” The mothers, Sybrina Fulton and Gwendolyn Carr, said. “When you ban a product sold mostly in Black communities, you must consider the reality of what will happen to that very same over-represented community in the criminal justice system.”
Supporters have refuted this notion, claiming the legislation will punish retailers selling banned products, rather than consumers.
Numerous organizations, including the National Taxpayers Union, Americans for Tax Reform, the Taxpayers Protection Alliance, have spoken against the legislation, citing arguments that the policy will fail to address teen vaping and will create a black market for these products. Additionally, a Tax Foundation study noted that tobacco products are an unstable source of tax revenue.
“Further narrowing the tobacco tax base by banning a portion of tobacco sales altogether could worsen the instability of this revenue source while driving up the costs of administration and law enforcement associated with the ban, especially if the lost revenue is made up by raising the tax rate on the remaining tobacco tax base.”
It is unlikely the legislation will come to a vote in the Senate.
Industry Opposition to Mileage Tax Grows
Trucking groups are opposing a key component of Senate Environment and Public Works Chairman John Barrasso (R-WY) and Senate Finance Committee member John Cornyn’s (R-TX) plan to revamp America’s highways. Barraso and Cornyn are proposing subjecting commercial truckers to a tax on the number of miles they drive in order to pay for their five-year, $237 billion highway bill. The legislation would also index the motor fuels tax and tax electric vehicles.
While supporters of the proposal note that a mileage tax is reasonable due to the increased toll trucks have on roads, Chris Spear, CEO of the American Trucking Association and Sheila Foertsch, Managing Director of the Wyoming Trucking Association, argue that a truck-only mileage tax would cost blue-collar jobs across the country and negatively impact the nation’s supply chain.
“Nobody sees the need for safe and secure roads and bridges more than truckers do, which is why our industry has led the charge for greater federal investment in infrastructure.” Spear and Foertsch wrote in an op ed for the Casper Star Tribune. “ While trucks account for only 4 percent of the vehicles on the road, the industry already pays half of the entire federal Highway Trust Fund user tab.”
Rubin, Richard & Francis, Theo “Bernie Sanders Aims New Tax Hike at Executive Retirement Plans” Wall Street Journal, 27 Feb 2020.
Lorenzo, Aaron “Too cushy a retirement?” Politico Pro, 28 Feb. 2020
 Owermohle, Sarah & Ollstein, Alice Miranda “Broad anti-tobacco bill narrowly passes house” Politico Pro, 28 Feb. 2020
 Campanile, Carl “Menthol cig ban will lead to more stop-and-frisk: Moms of Garner, Martin” New York Post, 16 Oct . 2019
 Boesen, Ulrik “Banning Flavored Tobacco Could have Unintended Consequences” The Tax Foundation, 13 Feb. 2020
 Murphy, Colleen “Hill Tax Briefing: Resistance Builds to Senators’ Mileage Tax” Bloomberg Tax, 26 Feb. 2020
 Spear, Chris & Foertsch, Sheila “Spear, Foertsch: Barrasso tracking tax tax would derail America’s blue-collar boom” Casper Star Tribune, 24 Feb. 2020