BBB update — and a new take on retail consolidation

Delivered every Monday by 10 a.m., Weekly Tax examines the latest news in tax politics and policy.

Jan 10, 2022 View in browser   By Bernie Becker CHECKING IN ON THE BBB: So what's happening on President Joe Biden's Build Back Better agenda? Honestly, not a ton. Senate Democrats are continuing to prioritize voting rights for the time being, and it's not clear when that might change. The big picture view on the Democrats' efforts to pass a big climate and safety net package is pretty similar, too. On some level, it certainly seems like the White House and Democratic leaders should be able to strike a deal with Sen. Joe Manchin (D-W.Va.), who opposes the House-passed version of the big tax-and-spend bill. "I do think there's an agreement to be reached," House Speaker Nancy Pelosi said on CBS' "Face the Nation." It's easy to see why: Manchin basically has blessed the Democrats' climate provisions and has shown enough interest in various health and education initiatives to suggest there should be sufficient common ground for a deal — even if Manchin is somewhat lukewarm on the expanded Child Tax Credit. But as The Washington Post's Jeff Stein reported, Manchin might have pulled back on a counter-offer to the White House offered last month, leaving the next steps for the BBB further up in the air. MORE ON ALL THIS IN A BIT, but first welcome to the "snow was nice while it lasted" version of Weekly Tax. Anyone have any thoughts left on what happened in the finale? Today marks 23 years since "The Sopranos" premiered on HBO. Don't stop believing … that we need your tips and feedback. Email: bbecker@politico.com, alorenzo@politico.com, bfaler@politico.com and teckert@politico.com. You can also reach us on Twitter at @berniebecker3, @aaronelorenzo, @tobyeckert, @Brian_Faler, @POLITICOPro and @Morning_Tax.   STEP INSIDE THE WEST WING: What's really happening in West Wing offices? Find out who's up, who's down, and who really has the president's ear in our West Wing Playbook newsletter, the insider's guide to the Biden White House and Cabinet. For buzzy nuggets and details that you won't find anywhere else, subscribe today.     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. TRYING SOMETHING NEW: Rep. Ro Khanna (D-Calif.) has a new idea for helping smaller local retailers — a tax break to help them offset a portion of the sales taxes owed to state and local governments. Khanna, who represents Silicon Valley in Congress, dubbed the measure a "reverse Amazon" bill in an interview with Weekly Tax — noting the advantages that Amazon got early in its existence by frequently not having to charge sales taxes, and maintaining it could help businesses in communities across the country that are increasingly crowded out by online shopping and big box stores. The 5 percent tax credit would go to businesses that earn no more than $2 million in revenue each year and make at least half of their sales at physical locations, though that requirement would be relaxed for the time being because of the pandemic. The legislation, which could be introduced as soon as today, won't just help businesses struggling to compete, Khanna argues. It would also help workers seeing fewer options for employment because of retail consolidation and consumers with fewer options to shop, the congressman added. Still, Khanna acknowledged that his proposal might be too late to reverse the trend that has already led to the closure of many local stores and businesses. "Do I think this is going to solve it? No. Do I wish it would have happened a decade earlier? Yes," he said. Khanna has already discussed his idea with Democrats on the tax-writing House Ways and Means Committee and added that he knows that the bill's best chance is as part of a larger package. He also envisions the bill working as part of a suite of proposals aimed at revitalizing rural and other areas that have been left behind as wealth and income generation increases on the coasts and in larger cities. "My bill is just one part of a quiver of tools," Khanna said, adding that he'd also like to see revitalization grants to struggling areas. Further thoughts: There is a decent line of policies aimed at offering incentives to spur the economy or investment in struggling areas — think the Opportunity Zones from the 2017 GOP tax law or the more longstanding New Markets Tax Credit. For their part, outside experts seemed intrigued by Khanna's proposal, but also had questions. From a logistical standpoint, Kim Rueben of the Urban-Brookings Tax Policy Center noted that states frequently can't tell the difference between online and in-store sales, which could make it tough to enforce a 50 percent sales threshold. Kyle Pomerleau of the American Enterprise Institute added that the credit wouldn't be much help to some businesses in states or localities that have a narrow sales base — think stores that sell food in places where the sales tax isn't charged on groceries. And on a related note: Both Pomerleau and Rueben wondered if a tax break on sales taxes was the best approach, even though Khanna's proposal is aimed at chipping away at advantages held by online shopping titans and other large multinational retailers. (One way to look at it: Would companies that don't need as much help get the most assistance?) BACK TO LIFO: Car dealers are among the businesses asking the Biden administration to offer tax relief from all the recent supply chain snafus. Auto dealers are among the sectors that use the "last in, first out" accounting method, commonly known as LIFO. Businesses using LIFO must also meet certain inventory thresholds, or else risk recapture taxes. A bipartisan group of lawmakers have asked Treasury Secretary Janet Yellen to use her authority to offer relief from that recapture tax. A Treasury official told lawmakers late last year that companies had to prove that supply chain disruptions primarily were causing drops in inventory, and that the department would continue monitoring the situation. Now, back to the auto dealers: The National Association of Minority Automobile Dealers asked the White House late last year to basically nudge Treasury on the LIFO issue. "Providing temporary LIFO relief would allow minority auto dealers to continue contributing to the communities that we help sustain," wrote Damon Lester, the owner of a Nissan dealership in Bowie, Md. Around the World LET'S WARM IT UP: The opposition Labour Party in the U.K. is proposing to lower household energy bills in part by taxing oil and gas producers , The Guardian reports. Labour's proposals would, among other things, scrap the value-added tax for a year on energy bills, part of a package the party says would offer an average of 200 pounds of relief to households. In all, Labour's plan would cost 6.6 billion pounds, with the North Sea producers offsetting about 1.2 billion pounds worth by absorbing a 10 percentage point increase in the corporate tax. (Another half would come from VAT revenues that exceeded projections, largely because of rising prices.) The Labour proposals come as the Conservative government is coming under increasing criticism for rising energy bills — and as even former Conservative ministers are starting to endorse the idea of a windfall tax.   DON'T MISS CONGRESS MINUTES: Need to follow the action on Capitol Hill blow-by-blow? Check out Minutes, POLITICO's new platform that delivers the latest exclusives, twists and much more in real time. Get it on your desktop or download the POLITICO mobile app for iOS or Android. CHECK OUT CONGRESS MINUTES HERE.     Around the Nation WELCOME BACK: Both Idaho and Iowa are kicking off their legislative sessions today, and tax cuts certainly are on the minds of the Republican governors and legislatures in those two states, The Associated Press reports. In Idaho, Gov. Brad Little has suggested that he'll bring up tax relief in his state of the state address today, perhaps no surprise given that the state has a $1.6 billion surplus. But Little and leading GOP lawmakers are also sounding like they won't get as aggressive as they could with tax cuts, with a $400 million price tag being discussed recently. Republicans will also have to work through how exactly to cut taxes, even if it seems all but a done deal that some sort of measure will pass in the coming weeks — with income, property and sales taxes for groceries all seemingly on the table. Meanwhile, Iowa has some $2 billion in reserves lying around. As in Idaho, Republican leaders in the state are having to gauge how much of the surplus was spurred by federal coronavirus aid. Gov. Kim Reynolds and GOP legislative leaders say they're planning major tax cuts, but exactly how remains to be worked out. Quick Links The Hill: "SALT change on ice in the Senate." WSJ: "What Inflation Will Do to Your 2022 Taxes." Bloomberg: "Nigerian Manufacturers Want Tax on Sugary Drinks Reversed." Did You Know? The soprano Audrey Luna recorded the highest note ever sung on the Metropolitan Opera stage.   Follow us on Twitter Toby Eckert @tobyeckert Bernie Becker @berniebecker3 Brian Faler @brian_faler Aaron Lorenzo @aaronelorenzo   Follow us

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