Tax Update (August 31)
On Monday (Aug. 24), the Council of Economic Advisors (CEA) released a report that found investors had put about $75 billion into Opportunity Zones (OZ). The report said around 70 percent of that money would not have been invested without the OZ program.
“The CEA projects that the capital already raised by Qualified Opportunity Funds could lift 1 million people out of poverty and into self-sufficiency, decreasing poverty in OZs by 11 percent,” the report said.
Senator Tim Scott (R-SC) highlighted the success of the OZ program at the Republican National Convention (RNC). Some Democrats have criticized the program and said it only benefits wealthy investors.
To view the report, click here.
Payroll Tax Deferral
On Friday (Aug. 28), the Treasury Department announced its first piece of guidance on President Trump’s plan to defer payroll taxes. The guidance states that the deferred payroll taxes will be due between Jan. 1 and Apr. 30, 2021.
To view the announcement, click here.
Trump Campaign Priorities
On Sunday (Aug. 23), the Trump campaign released a “set of core priorities” for a second term. The campaign said Trump will share additional details of these plans through policy focused speeches in the next several weeks.
Tax priorities include:
- Cut Taxes to Boost Take-Home Pay and Keep Jobs in America
- “Made in America” Tax Credits
- Expand Opportunity Zones
- Tax Credits for Companies that Bring Back Jobs from China
- Allow 100% Expensing Deductions for Essential Industries like Pharmaceuticals and Robotics who Bring Back their Manufacturing to the United States
To view the full list of priorities, click here.
Biden Retirement Savings
Traditional 401(k) style plans could see a “drastic” change under Democratic presidential nominee Joe Biden’s retirement proposal. The plan would aim to “equalize” the incentive system by offering flat tax credits. However, the campaign has not said what percentage the credit would be. Currently, the tax break related to retirement savings has a greater impact for higher income earners.
Tax Policy Center Codirector Bill Gale thinks wealthy individuals will save the same amount for retirement regardless of tax incentives. He noted there will most likely be opposition from the industry.
“The retirement industry in my view has been a significant obstacle to useful reform,” Gale said.
“There’s a variety of proposals that they don’t like because they don’t want to have small accounts … but at the same time they don’t want anyone else to have those small accounts because they can grow into large accounts,” he added.
Biden Capital Gains
Biden has also proposed raising capital gains rates to the highest amount in decades. Biden plans to tax capital gains as ordinary income and raise the top rate to 39.6 percent. Those earning over one million annually would face a combined tax rate of 43.4 percent.
Budget analysts believe that this plan would raise little revenue or cost the government money because they believe if the capital gains rate is too high, people will hold onto their assets. The Joint Committee on Taxation believes capital gains taxes bring in the most revenue when the rate is in the high twenties.
Additionally, Biden has proposed a tax on individuals unrealized capital gains when they die. This plan could prevent investors from sitting on their assets.
The Internal Revenue Service (IRS) will now allow taxpayers to digitally sign multiple forms through the end of the year. This change will allow both taxpayers and tax preparers to work together remotely. The IRS may be open to permanently allowing digital signatures for certain documents.
“We understand the importance of digital signatures to the tax community, and we will continue to review our processes to determine where long-term actions can help reduce burden for the tax community, while appropriately balancing that with critical security and protection against identity theft and fraud,” IRS Commissioner Chuck Rettig said in a statement.
On Tuesday (Aug. 25), the Senate Finance Committee released a bipartisan investigative report on syndicated conservation-easement transactions.
“The transactions discussed in this report involve land valuations that appear so inflated above their original purchase prices that they cannot reasonably be characterized as anything other than abusive tax shelters,” the report said.
The inquiry was commissioned in March 2019 by Senate Finance Chairman Chuck Grassley (R-IA) and Ranking Member Ron Wyden (D-OR). The report did not make strong recommendations to resolve the issue, however, said Congress and the administration should take “further action to preserve the integrity” of the deduction.
To view the report, click here.
CBO Working Paper
On Thursday (Aug. 27), the Congressional Budget Office (CBO) released a working paper that examined how the “effects of legislated tax changes on labor market outcomes vary with the amount of slack in the economy, as measured by the rate of unemployment.”
The analysis found that changes to taxes have an impact on labor market outcomes. However, the impact varies depending on the state of the economy when a tax change is implemented. Of note, the paper is not the view of the CBO, but instead will be used to create discussion and commentary.
To view the working paper, click here.
House Financial Services
On Friday (Aug. 28), House Financial Services Chairwoman Maxine Waters (D-CA) released the September hearing schedule for the committee. The hearings will be both virtual and hybrid.
To view the schedule, click here.
 Faler, Brian. “White House estimates $75B in capital in Opportunity Zones.” Politico Pro, 24 Aug. 2020. https://link.edgepilot.com/s/0819d342/MuCWBl9vo0GI_ET4vGwsXg?u=https://subscriber.politicopro.com/article/2020/08/white-house-estimates-75b-in-capital-in-opportunity-zones-3983487
 Rubin, Richard. “Trump Administration Begins Payroll Tax Deferral Plan.” Wall Street Journal, 28 Aug. 2020. https://link.edgepilot.com/s/638fd16b/ACMIBvQbyUGhyBnF2pPpYw?u=https://www.wsj.com/articles/trump-administration-begins-payroll-tax-deferral-plan-set-to-start-sept-1-11598649525?mod=hp_lead_pos3
 “TRUMP CAMPAIGN ANNOUNCES PRESIDENT TRUMP’S 2ND TERM AGENDA: FIGHTING FOR YOU!” 23 Aug. 2020. https://link.edgepilot.com/s/bae40e5f/jlvgpn_HRkWEggb7mac5OQ?u=https://www.donaldjtrump.com/media/trump-campaign-announces-president-trumps-2nd-term-agenda-fighting-for-you
 Sword, Doug. “Biden retirement proposal would upend traditional 401(k) plans.” Roll Call, 24 Aug. 2020. https://link.edgepilot.com/s/0475e088/S4m2W1B_gUK63LVeIcQwcQ?u=https://www.rollcall.com/2020/08/24/biden-retirement-proposal-would-upend-traditional-401k-plans/
 Faler, Brian. “How Biden’s capital gains rate hike could turn into a loss for the government.” Politico Pro, 28 Aug. 2020. https://link.edgepilot.com/s/4ac4b48b/rVR7QFk6WUWCZnAUW9nGQA?u=https://subscriber.politicopro.com/article/2020/08/how-bidens-capital-gains-rate-hike-could-turn-into-a-loss-for-the-government-1986703
 Lorenzo, Aaron. “IRS expands scope of forms eligible for e-signature through end of year.” Politico Pro, 28 Aug. 2020. https://link.edgepilot.com/s/3f073b7d/z7IWJAyM006USY0OtjXXwQ?u=https://subscriber.politicopro.com/article/2020/08/irs-expands-scope-of-forms-eligible-for-e-signature-through-end-of-year-3983565
 Lorenzo, Aaron. “Senate report supports crackdown on abusive land donation deals.” Politico Pro, 25 Aug. 2020. https://link.edgepilot.com/s/cd5a2e25/TCYMBS8ZH0KjRQSTE_N8qw?u=https://subscriber.politicopro.com/article/2020/08/senate-report-supports-crackdown-on-investments-bundled-in-land-donation-tax-deductions-3983510
 Demirel, U. Devrim. “Labor Market Effects of Tax Changes in Times of High and Low Unemployment.” CBO, 27 Aug. 2020. https://link.edgepilot.com/s/5d8a7b1c/bMcw27iIL0SRst9Pg_7IEw?u=https://www.cbo.gov/publication/56522?utm_source=feedblitz%26utm_medium=FeedBlitzEmail%26utm_content=812526%26utm_campaign=Express_2020-08-27_14:30:00%26utm_medium=FeedBlitzEmail%26utm_content=812526%26utm_campaign=Express_2020-08-27_14:30:00