When will Finance produce?

Politico

2 days ago

Presented by NFIB
With help from Benjamin Guggenheim
WHAT YOU GOT? It's all eyes on the Senate Finance Committee, which is working to produce its especially key portion of the GOP megabill.
Senate GOP leaders had hoped that the Finance Committee would be able to release its work this week. But it looks like the panel's portion of the Republican fiscal package will get pushed into the following week, as it deals with dicey issues like the higher cap for state and local deductions that might be crucial to getting a bill through the House and the phasing out of green energy incentives that has caused some heartburn in the Senate.
All of which underscores the particular microscope currently on Finance Chair Mike Crapo (R-Idaho), who's charged with producing a tax section that responds to the concerns of his Senate colleagues — without upending a fragile peace in the House, where the Republican fiscal package passed by a single vote.
It's far from Crapo's first difficult set of negotiations, as Pro Tax's Benjamin Guggenheim noted. But it might be the highest stakes that the Finance chair has faced in his more than three decades in Congress — six years in the House, followed by 26 and counting in the Senate.
The questions for Crapo are likely to only get tougher this week, with his committee now expected to need more time to craft a tax section. The Finance chair is expected to start briefing his Senate GOP colleagues on the measure by the middle of the week.
Still, don't expect him to let too much slip in public about where Finance might go on key issues in the interim, as he works on a tax package that seeks to preserve the expiring parts of the Trump tax cuts and deliver on other tax relief items.
MORE ON THAT in a bit. Welcome back to Weekly Tax, where we have to say that this is among our parental fears.
Back when there were fewer metaphors in a horse race: Today marks 52 years since Secretariat won the Triple Crown by dominating the Belmont Stakes — winning by 31 lengths and in a time (2:24) that's still the fastest a horse has ever run a mile and a half on dirt in the U.S.
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A QUICK BACKWARDS GLANCE: Let's be clear — Crapo might work quietly, but he's also not afraid to throw his weight around.
He had no issues, for instance, killing a bipartisan tax bill a year ago that had broad support in both the House and among Senate Democrats.
That's made for some interesting dynamics between Crapo and House Ways and Means Chair Jason Smith (R-Mo.), who helped write that bipartisan agreement, as Benjamin noted — though the two promise they've had no issues working closely on the tax negotiations in front of them.
Worth discussing: Crapo's decision to work against the 2024 bipartisan agreement affected more than just the interpersonal dynamics in this year's talks.
For instance, Crapo has been very explicit about wanting to permanently restore a trio of incentives for businesses that are either lapsed or phasing out. He's not alone in that among Senate Republicans, though the House was only able to revive those preferences through 2029.
But here's the wrinkle: The math on enacting immediate research write-offs, full expensing for capital investments and a more generous interest deduction might be easier if last year's bipartisan tax deal had been enacted.
That's because the 2024 agreement would have already brought back those three tax breaks for businesses, which is important because Crapo also wants to use a budget baseline that assumes that it costs nothing to extend the temporary parts of the Tax Cuts and Jobs Act.
It's not clear whether the current policy baseline will fly with hardline deficit hawks in the House. But if it does, then having the three business incentives currently in place likely would mean that extending them would cost nothing against the baseline as well, instead of being a roughly half-trillion dollar proposition.
Now, Republicans are in the midst of an internal debate about both the budget math in enacting those provisions permanently, and how they can best be employed to help the economy.
LOTS OF TRADE-OFFS: Still, advocates for those three business breaks sound confident that Senate Republicans will find a way to make them permanent.
And it's worth noting that Crapo scored other victories by killing last year's agreement. Crapo publicly criticized 2024's proposed expansion of the Child Tax Credit, which included help for lower-income families, arguing that it diminished work incentives for the program.
As it happens, the 2025 tax bill includes a CTC expansion that's more up Crapo's alley, with the benefits largely funneled more to the middle of the income scale.
That's prompted some criticism from advocates for lower-income people, who maintain that the proposal needlessly leaves behind those who need the child credit the most.
For instance, researchers from the Center on Poverty and Social Policy at Columbia University found that a standard family of two adults and two children would need to make a third more — $48,000 a year, instead of $36,000 — to get the full CTC under the House GOP bill.
Looking ahead: Outside advocates are still trying to nudge Republicans toward an even more generous CTC expansion in their bill, after some of the party's populists — like Vice President JD Vance and Sen. Josh Hawley (R-Mo.) — have called for a far more sweeping credit.
For instance, the National Baptist Convention of America and Jabez Ministries are out with similar letters this morning that urge Senate Majority Leader John Thune and House Speaker Mike Johnson to think more about those at the bottom of the income ladder.
GOP policymakers, the groups wrote, should 'continue exploring ways to help working families keep more of their hard-earned money through policies that make the CTC fully refundable against all taxes and by providing optional flexibility in the timing of how it's paid out.'
The driving force behind those letters was Tony Lowden, the lead pastor and founder of Jabez Ministries. Lowden was formerly the pastor of Maranatha Baptist Church in Plains, Ga., where his congregants included former President Jimmy Carter and his wife, Rosalynn Carter.
A NOT SO MID INCENTIVE: Here's something that hasn't proved to be much of an issue for Republicans this year — extending the limits on the mortgage interest deduction first enacted in TCJA.
The mortgage interest deduction was for many years thought to be a third rail in tax policy — too controversial for policymakers to restrain, despite many experts thinking its benefits accrued too much to better-off taxpayers.
Then the Trump tax cuts lowered the amount of mortgage on which a taxpayer can deduct their interest, from $1 million to $750,000. And now, the Yale Budget Lab is out today with a new report examining further possibilities for cutting the deduction.
For instance, getting rid of the MID for second homes could raise more than $100 billion over a decade, the group found. Also worth noting, from the group: The House's proposal to hike the SALT cap from $10,000 to $40,000 would nearly double how much the tax system subsidizes mortgage interest.
Around the World
Financial Times: 'UK special investigations team doubles tax haul in crackdown on the rich.'
Bloomberg: 'Brazil Lawmakers Gear Up for Fight Over Corporate Tax Exemptions.'
Also Bloomberg: 'ION Founder to Pay €280 Million to Settle Tax Probe: Carlino.'
Around the Nation
Cleveland.com: 'Ohio has spent a decade cutting income taxes: How much has it saved you?'
Iowa Capital Dispatch: 'Gov. Kim Reynolds signs unemployment insurance tax bill into law.'
Wyoming Public Radio: 'Electeds might do away with Wyoming's ability to tax property.'
Also Worth Your Time
From the Golden State: 'Newsom floats withholding federal taxes as Trump threatens California.'
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Associated Press: 'Trump's tariffs could pay for his tax cuts — but it likely wouldn't be much of a bargain.'
Did you know?
Secretariat also holds the record for fastest time in the Kentucky Derby and the Preakness Stakes.