Tax Update (November 2)
Negotiations over a COVID-19 stimulus package stalled once again this week. House Speaker Nancy Pelosi (D-CA) wrote a letter to Treasury Secretary Steve Mnuchin on Thursday (Oct. 29) and said she was “still awaiting” replies from the White House on multiple items of “critical importance.” Mnuchin responded and said Pelosi was misrepresenting the status of the talks.
Both the White House and Pelosi have signaled they want to restart talks after the election.
Record numbers of new infections in the U.S. and the threat of winter economic restrictions have already started to impact the economy.
On Monday (Oct. 26), the Senate voted 52-48 to confirm Amy Coney Barrett to the Supreme Court. Senator Susan Collins (R-ME) was the only Republican to vote against Barrett’s confirmation. Barrett’s term as an Associate Justice began on Tuesday (Oct. 27).
Commitment to Defeat the Virus and Keep America Healthy Act
On Friday (Oct. 30), House Minority Leader Kevin McCarthy (R-CA), Ways and Means Ranking Member Kevin Brady (R-TX), and other House Republicans introduced H.R. 14, the “Commitment to Defeat the Virus and Keep America Healthy Act.”
The legislation includes various tax incentives to improve health care, some of which include: a domestic medical and drug manufacturing tax credit, the Healthy Workplace Tax Credit, qualifying advanced medical manufacturing equipment tax credit, and a temporary increase in contributions for health savings accounts. The bill consists of over 50 pieces of bipartisan legislation.
“Defeating Covid-19 means investing in healthy families and safe workplaces, and becoming medically independent from China. Through tax incentives we expand access to affordable, quality health care, help businesses create safe workplaces for their employees and customers, and reward businesses for producing crucial medicines and medical supplies here in America rather than in China,” Brady said.
Additionally, H.R. 14 addresses pandemic preparedness, domestic manufacturing and supply chains, the Strategic National Stockpile (SNS), public health infrastructure, COVID-19 health disparities, and COVID-19 health impacts on mental health and substance use.
To view a section-by-section summary, click here.
To view the bill text, click here.
Securing a Strong Retirement Act of 2020
On Tuesday (Oct. 27), House Ways and Means Chairman Richard Neal (D-MA) and Ranking Member Brady introduced the “Securing a Strong Retirement Act of 2020.” The legislation builds on the SECURE Act of 2019 to help increase retirement savings. The bill would boost tax-advantaged savings opportunities for IRS and 401(k) accounts. Additionally, the legislation would increase a tax credit for small-employer pension plan startup costs.
“With the Securing a Strong Retirement Act, Ranking Member Brady and I build on the landmark provisions in the SECURE Act and enable more workers to begin saving earlier – and saving more – for their futures. This bill will help Americans approach old age with the confidence and dignity they deserve after decades of hard work and sacrifice,” Neal said.
To view a section-by-section summary, click here.
To view a short summary, click here.
Third Quarter GDP Report
On Thursday (Oct. 29), the Bureau of Economic Analysis found the U.S. economy grew at a 33.1 percent annualized rate in its third quarter GDP report. This marks the fastest pace of economic growth on record, however, U.S. economic output is still below pre-pandemic levels. National Economic Council Director Larry Kudlow said “I think it exceeds all expectations” when referencing the report. Vice Chair of the Joint Economic Committee Don Beyer (D-VA) said the reason the third quarter numbers were the “best on record” was because the second quarter had such a dramatic decline.
To view the Bureau of Economic Analysis’ third quarter GDP report, click here.
Speaker Pelosi on Taxes
On Thursday (Oct. 29), Speaker Pelosi said she hopes both parties will agree on major tax policy decisions if Democratic nominee Joe Biden wins the presidency, and noted that the 2017 Tax Cuts and Jobs Act (TCJA) was passed without any Democratic votes. Additionally, she said when the Obama administration floated the idea of lowering the corporate tax rate to 28 percent, plenty of Democrats were on board at the time.
“I think there’s quite an agreement that we should have brought down the corporate rate but we should not have given away the store at the expense of America’s working families,” Pelosi said.
Biden’s proposed tax plan would increase the corporate tax from 21 percent to 28 percent. President Trump and Republican lawmakers have criticized Biden’s tax plan on the campaign trail and said it would put the U.S. at a “competitive disadvantage.”
To view a transcript of Pelosi’s press conference, click here.
Warren as Treasury Secretary
According to three Democratic officials, if Biden wins the election, Senator Elizabeth Warren (D-MA) will “make her case” to become Treasury Secretary. Warren is seen as a favored choice by progressives and would likely face major opposition from Wall Street and moderate Democrats.
Allies of Warren say the position would enable her to enact “big structural changes” to the agency. However, there are concerns from industry that if Warren becomes Treasury Secretary, she could “spook the markets.”
Under current Massachusetts law, Republican Governor Charlie Baker would appoint her replacement. However, Democrats could amend the current law to require her replacement to be from the same political party, due to their supermajority in the state legislature.
If Trump wins re-election, the administration said it plans to expand the Opportunity Zone (OZ) program that was created in the 2017 TCJA. Benjamin Hobbes, special assistant to the president for domestic policy, said he supports an extension of the deadline for investors to avoid tax on 15 percent of the gains they direct into OZs. Additionally, he said they would like to give governors “another shot” to make sure they pick important communities for OZs.
This week, the United Nations’ (U.N.) Committee of Tax Experts voted to add digital tax measures to a model tax treaty that helps governments regulate tax relationships. The move adds to the already existing conflict between the U.N. and the Organization for Economic Cooperation and Development (OECD) about which organization should have the most influence on international tax laws.
Both the U.N. and OECD have made efforts to ensure a portion of digital service tax revenue is paid where the service is consumed, instead of where the company is located. Daniel Bunn, Vice President of Global Projects at the Tax Foundation, said the U.N. approach would provide more digital service tax revenue to developing economies compared to the OECD approach.
Portman on Stimulus
On Friday (Oct. 30), Sen. Rob Portman (R-OH) participated in a Tax Policy Center webinar and said boosting the U.S. economy into the early part of next year would bridge an “essential” time period before a COVID-19 vaccine becomes available. He noted that prospects for a COVID-19 stimulus deal in the lame-duck session are “quite good.” Additionally, Portman said he is pushing for three tax breaks to be included in a potential COVID-19 stimulus package: tax credits for businesses to recoup some costs for redoing their workplaces to guard against COVID-19, expanding the work opportunity tax credit, and making the tax credit for businesses to keep employees on payroll more generous and available to large employers.
SBA Inspector General Report on EIDL
On Wednesday (Oct. 28), Small Business Administration (SBA) Inspector General Hannibal Ware released a report that raised concerns about fraud in the Economic Injury Disaster Loan (EIDL) program. The report cites $58 billion that was disbursed in multiple loans to businesses that used the same IP addresses, email addresses, bank accounts, or physical addresses. Ware said the SBA “lowered the guardrails” to try to expedite loans to businesses which resulted in “lax” oversight. SBA Administrator Jovita Carranza said the report findings, “rest on hasty, incomplete conclusions.”
To view the SBA’s Inspector General’s report, click here.
Paid Leave Tax Credits
The “Families First Coronavirus Response Act,” enacted in March 2020, created a new payroll tax credit for paid family and sick leave for some workers. The provision was projected to cost $105 billion, however, the IRS said it has processed $296 million in payroll tax credits for the initiative thus far. Democrats have blamed the low numbers on the Department of Labor, and said it has undercut the program. A Department of Treasury official said “the data just doesn’t exist to try to draw conclusions at this point.”
House Financial Services Hearing Schedule
On Tuesday (Oct. 27), House Financial Services Chairwoman Maxine Waters (D-CA) announced the committee’s November virtual hearing schedule:
November 12 at 12:00 PM ET – Full Committee hearing entitled, “Oversight of Prudential Regulators: Ensuring the Safety, Soundness, Diversity, and Accountability of Depository Institutions during the Pandemic.”
November 19 at 10:00 AM ET – Subcommittee on Housing, Community Development and Insurance hearing entitled, “Insuring against a Pandemic: Challenges and Solutions for Policyholders and Insurers.”
 Lorenzo, Aaron. “New retirement bill proposes tax break bonanza.” Politico Pro, 27 Oct. 2020. https://link.edgepilot.com/s/42ae93c6/0RinRB9NNUCbkx7-TfIjYw?u=https://subscriber.politicopro.com/article/2020/10/new-retirement-bill-proposes-tax-break-bonanza-2013988
 “Neal and Brady Introduce New Bipartisan Legislation to Strengthen Americans’ Retirement Security.” Ways and Means Press Release, 27 Oct. 2020. https://link.edgepilot.com/s/e44069d1/ii6_h9egC0O5mQGrN5cpPQ?u=https://waysandmeans.house.gov/media-center/press-releases/neal-and-brady-introduce-new-bipartisan-legislation-strengthen-americans
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