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Politico
12-05-2025
- Business
- Politico
Go time in the House
Presented by With help from Benjamin Guggenheim LET'S DO IT: Here's some of the bad news for House GOP tax writers — they still need to bring down the cost of their tax bill ahead of a planned Tuesday mark-up, as Pro Tax's Benjamin Guggenheim noted over the weekend. Now, for some good news for them: There are certainly feasible paths for House Republicans to bring the cost of the tax portion of their one large fiscal package to around $4 trillion over a decade — which is about where they'll need to land, given the amount of spending cuts they're poised to compile. And then more bad news: Those paths might require difficult political decisions on ways to generate more cost-savings in the tax code. JCT estimated over the weekend that the more bare-bones version of the Ways and Means tax plan, released deep into Friday evening, would cost around $5 trillion over a decade. But by design, those 28 pages of text avoided hot-button issues like how Republicans might raise the $10,000 cap on state and local deductions, whether they'll seek to limit companies' ability to write off their SALT payments and how they might try to wring savings out of the green energy incentives passed by Democrats during the Biden administration. House Ways and Means Chair Jason Smith (R-Mo.) is expected to release fuller details on the tax plan as soon today, ahead of that Tuesday mark-up. Smith will be hosting a briefing on the full tax bill this afternoon, along with his fellow House GOP tax writers. All of that suggests that House Republicans likely have already made some of the hard choices they were faced with on the tax bill. Smith and the other Ways and Means Republicans largely have succeeded in keeping the details close to the vest, and they surely have incentive to keep that going as long as they can heading into the markup — to keep any opposition from mobilizing against their more controversial decisions. So stay tuned also for more on how House Republicans plan to disperse further tax goodies, including President Donald Trump's favored tax relief ideas and restoring incentives prized by the business community. And keep in mind: This is far from the final stage for a big GOP tax bill in 2025. House and Senate Republicans also have stayed in close contact in recent weeks as the Ways and Means Committee was developing its tax bill. Senate Republicans will face the larger procedural hurdles in trying to pass a large fiscal package by budget reconciliation. But by most accounts, top GOP tax writers in both chambers have tried to coordinate to avoid a particularly bumpy process if and when the House sends the one big, beautiful bill to the Senate. MORE ON ALL THIS in a bit, after we welcome you to a mark-up week version of Weekly Tax. What's a better combo than Barcelona and Travis Scott, we ask? A winter coat and 1100 Longworth. Is this part in the movie? Today marks 62 years since a then-unknown Bob Dylan declined to appear on 'The Ed Sullivan Show,' after lawyers at CBS raised concern that the singer-songwriter's number 'Talkin' John Birch Paranoid Blues' might open the network up to a defamation suit. The tax times definitely are a changing. Tell us about it. Email: bbecker@ bfaler@ bguggenheim@ and teckert@ You can also reach us on X at @berniebecker3, @tobyeckert, @brian_faler, @ben_guggenheim, @POLITICOPro and @Morning_Tax. Want to receive this newsletter every weekday? Subscribe to POLITICO Pro. You'll also receive daily policy news and other intelligence you need to act on the day's biggest stories. LET'S DIVE IN FURTHER: Perhaps the most contentious issue still facing House Republicans is what to do on SALT deductions for individuals. And we know this is an issue where the GOP still needs to find some common ground: House GOP leaders, tax writers and blue-state Republicans are set to huddle again this morning to work toward a solution. It's not just a political issue for House Republicans, either. They need a SALT deal because the House has to have the revenue to make the math work. (Even a SALT cap a fair bit higher than $10,000 would raise hundreds of billions of dollars against the budget baseline the House is using.) Negotiations over the last week or so underscored that Republicans from California, New Jersey and New York aren't totally on the same page on what kind of SALT cap might be acceptable. And there's also some debate over just how much leverage the truly committed members of the SALT caucus have. More hardline SALT Republicans have said they're willing to tank an entire GOP tax bill over the issue. But would they follow through? Allowing the temporary provisions of the 2017 Trump tax cuts to expire would mean a net tax increase on the vast majority of residents in even those wealthier blue-state districts. The waiting is the hardest part: The business community has made it clear for weeks that they're worried that House Republicans might eat into their SALT deductions. Probably with good reason, too — there's still chatter that Republicans are eyeing that area for fresh revenues. Business advocates argue that such a move would amount to keeping companies from deducting ordinary expenses — a long-accepted part of the tax system. (They'd also say it's a false symmetry to say that business SALT should be capped because individual taxpayers face SALT limits.) 'Business SALT is an important tax tool used by companies of all sizes across the country, and capping it is a backdoor corporate rate increase that would reduce the ability of retailers to invest in their workers, operations, and communities,' Courtney Titus Brooks, the vice president for tax at Retail Industry Leaders Association, said over the weekend. How about some immediate benefits: House Republicans did fiddle around with some of those expiring parts of the Tax Cuts and Jobs Act, at least in part to offer some added benefits to voters before next year's midterms. That includes a temporary boost to the Child Tax Credit, which would max out at $2,500 (instead of the current $2,000) for the current tax year. The standard deduction would increase by $2,000 for married couples for this year, as well for taxpayers to claim in the 2026 filing season. Still, progressive advocates knocked the House GOP's proposed CTC expansion, arguing that it gave more assistance to better off families than to those who need it the most. Around 17 million children currently live in families where the parents don't earn enough to get the maximum $2,000 credit, and the new House bill doesn't give them a boost. 'Republicans' new Child Tax Credit proposal pushes MORE children into poverty,' said Adam Ruben of Economic Security Project Action. The House GOP proposal also requires that both parents have a Social Security number to claim the CTC, something that could make around 4.5 million children who were born in the U.S. or are legal permanent residents ineligible for the credit. But it's probably not too big of a surprise that House Republicans went in that direction, given the party's current stance on immigration. And how about one more: The House GOP proposal also makes some changes to the current 20 percent deduction for pass-through businesses — boosting it to 22 percent, while also making a variety of eligibility changes. That change comes as business lobbyists are pressing Republicans to make sure that they extend the expiring TCJA provisions for good, as well as taking care of the pass-through deduction and lower rates on the foreign income of multinational corporations, among other things. 'For the past two years, we've worked in lockstep with Congress to ensure the success of this bill,' said Stef Webb of the National Association of Manufacturers, which sent a letter on the matter to Smith and Speaker Mike Johnson on Friday. Around the World Bloomberg: 'Nigeria Overhauls Colonial-Era Tax Rules in Pro-Business Push.' Financial Times: 'Uber wins multimillion-pound reprieve on disputed UK tax payments.' Reuters: 'Congo gold miner halts operations in tax dispute with M23 rebel administration.' Around the Nation Atlanta Journal-Constitution: 'Georgia's tax-cutting binge may come with a cost. Alabama Reflector: 'Gov. Kay Ivey signs grocery tax cut into law.' Alaska Beacon: 'Dunleavy administration is blocking billion-dollar audit of oil tax disputes, legislators say.' Also Worth Your Time The latest on DOGE: 'Judge temporarily blocks Trump administration from laying off federal employees.' Washington Post: 'Even as pope, Leo XIV might have to deal with U.S. tax returns.' Financial Times: 'US military leaders wade into fight over tax breaks for critical minerals.' Did you know? Tedham Porterhouse and Blind Boy Grunt were among the various aliases used by Bob Dylan over the year.
Politico
27-01-2025
- Business
- Politico
Lots of tax cuts, not a lot of growth?
Presented by ISO SOME GROWTH POLICY: One of Republicans' longstanding arguments for cutting taxes is that it helps spark the economy. The problem with that argument now? The parts of the Trump tax cuts that expire at the end of the year don't do a lot to spark the economy, as Pro Tax's Brian Faler reports this morning. GOP lawmakers are aware of this, mind you, and looking for other tax relief ideas they might be able to add to a tax bill this year to further goose up the growth aspect. But the bottom line is that Republicans knew when they passed the Tax Cuts and Jobs Act in 2017 that the permanent policies in the law — like the drastically lower corporate rate — did the most to spur the economy. They also made a bet that a future Congress wouldn't allow the tax cuts helping individuals, which provided less economic zing, to expire. Supporters of the law have said that allowing individual rates to rise or a special 20 percent deduction for pass-through businesses to expire would put a crimp on businesses. Still, both official scorekeepers and outside analysts aren't buying it. CBO has even said that letting all the temporary TCJA provisions go away would be better for the economy in the long-run, while groups like the Penn Wharton Budget Model find just a trickle of growth from their extension. MORE ON THAT in a bit, but first thanks for coming back for a 'go get that refund' version of Weekly Tax. Or maybe that's a 'controversial fourth down call' version. A first for America: Today marks 31 years since a Hawaiian named Chad Rowan, also known as Akebono, became the first non-Japanese sumo wrestler to achieve the top rank of yokozuna. Bowl us over with your great scoops. Email: bbecker@ bfaler@ bguggenheim@ and teckert@ You can also reach us on X at @berniebecker3, @tobyeckert, @brian_faler, @ben_guggenheim, @POLITICOPro and @Morning_Tax. Want to receive this newsletter every weekday? Subscribe to POLITICO Pro. You'll also receive daily policy news and other intelligence you need to act on the day's biggest stories. WE'RE WORKING ON IT: Here's the second problem for Republicans. Leading GOP lawmakers say they're looking at a lot of additional tax ideas that would give a boost to the economy. But a lot of the extra floated tax cuts that already are front-and-center in this year's debate wouldn't actually do that. Republicans will almost certainly have to include some kind of relief from the $10,000 cap on state and local deductions to win the support of more than a dozen GOP lawmakers from states like California, New Jersey and New York. Not much growth would come from that, nor would it come from some of the proposals to greatly expand the Child Tax Credit, which currently maxes out at $2,000-per child and would drop to $1,000 if no tax deal arises this year. Another idea to keep in mind: President Donald Trump went to Las Vegas on Saturday for his first rally after starting his second term. That location was no accident, either, as the event was billed as a chance for Trump to further pitch his idea to eliminate taxes on tips. Now, the president didn't really use that opportunity to pound an 'economic-focused message,' as his aides put it, even with 'no tax on tips' emblazoned behind him. But those closely watching this year's tax debate believe it's quite likely that some kind of tax exemption for tips appears in a final deal, and congressional staffers have already been working through the various permutations of that idea — like whether to include payroll taxes, and how to install limits to prevent salaried workers from repurposing their income. This probably should be no surprise — 'no tax on tips' was the first of Trump's various targeted tax cut ideas from the campaign, the one that got the most attention and also happens to poll pretty well. Rohit Kumar of PwC also noted on Friday that excusing taxes on tips also wouldn't be as expensive as some of Trump's other tax cut proposals. 'It has the virtue of being very popular and not terribly expensive, and you can see why it moves to the front of the line,' Kumar said at a media breakfast hosted by the company. It's also not an idea that Republicans can necessarily count on for lots of growth, even as they also grapple with big-picture questions like the trade-off between how progressive a cut 'no tax on tips' should be and how much it should cost. In fact, lots of economists believe eliminating taxes on tips is a bad idea — and there appears to be some uncertainty about how it might affect the economy, in no small part because it's such an untested idea. THE TIME IS NOW: These and many other questions are hanging over House Republicans as they head to a Trump property in Florida for a retreat. Those kinds of details — that is, the contours and costs of individual tax proposals — might not need answers yet. But GOP lawmakers still have a lot to decide while they're down there, particularly if they want to meet their goal of considering a fiscal framework in the Budget Committee as soon as next week, as our Meredith Lee Hill noted over the weekend. That includes specific instructions for how much taxes can be cut in a reconciliation bill, and the scale of cost savings required of a variety of committees. Republicans already have floated a variety of potential spending cuts, including a good number aimed at safety net programs, and some potential revenue-raisers as well. GETTING CLOSE TO A SWEARING-IN: Scott Bessent, Trump's pick for Treasury secretary, got a bit of a rough reception from Democrats on the Senate Finance Committee during his confirmation hearing. But the Senate floor consideration of his nomination has been rather low-drama, particularly compared with some of the president's other picks. Fifteen Democrats in all supported Bessent in a procedural vote on Saturday, setting him up for what looks to be an easy final vote as soon as today, as our Michael Stratford noted. GOOD TIMING: Today also happens to be the opening day of the tax filing season, which is coming at a particularly stressful time for the IRS. Trump put extra restrictions on the IRS in his executive order for a federal hiring freeze last week, giving a soon-to-be Secretary Bessent a say in when the agency could start bringing on staffers again. He then underscored why the agency currently is in a particularly vulnerable position at that Las Vegas rally on Saturday. The president repeated the at best misleading claim that the IRS was hiring 87,000 new agents with the extra funding granted by Democrats during the Biden administration. In fact, Trump bumped that up to 88,000 and cracked that he would seek to fire them all — or force them to transfer to border control. All this attention is likely to put even more of a microscope on the IRS and its handling of the filing season, after the agency has dealt with a variety of challenges in recent years, like a pandemic-induced backlog of unprocessed tax returns. Generally speaking, close observers of the IRS have said they don't think the hiring freeze will have too much direct effect on the filing season, because most of the temporary workers that the agency hires for this part of the year should already be on board. But that's not a unanimous view. 'Freezing hiring at the IRS will severely impact the level of service provided to American taxpayers when they need it most,' Doreen Greenwald, the national president of the National Treasury Employees Union, said last week. And even those who believe the freeze won't have much impact on filing season, like the American Institute of CPAs, say they'll be watching the situation closely. 'We are greatly sensitive to the filing season service challenges for members and taxpayers,' Melanie Lauridsen of AICPA wrote in a LinkedIn post on Friday. Around the World Bloomberg: 'Brazil Government Will Cut Some Import Taxes to Lower Food Costs.' CNN: 'Edinburgh to tax tourists for overnight stays.' BBC: 'Farmers rally against inheritance tax changes.' Around the Nation Missouri Independent: 'Gov. Mike Kehoe holds to tax cut pledge as he forecasts a tighter Missouri budget.' Chicago Tribune: 'Municipalities worried about impact of Indiana Senate property tax bill.' Honolulu Civil Beat: 'Green Wants To Extend Excise Tax Surcharge On Neighbor Islands.' Also Worth Your Time Tax Notes: 'Republicans Are Trashing the CBO Before They Have a Tax Bill.' Bloomberg: 'Supreme Court to Weigh Tax-Supported Religious School Case.' Bloomberg Tax: 'Trump Freeze to Chill Regulations on 'Double-Dipping,' Book Tax.' Did you know? Akashi Shiganosuke, who lived in the first half of the 17th century, is thought to be the first yokozuna.
