Reached a crucial week

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Jun 06, 2022 View in browser   By Bernie Becker CRUNCH TIME: It might be a cliche to write that this is a crucial week for the Democrats' chances to clinch a slimmer version of their Build Back Better agenda. But it really does seem like this is a crucial week for Democrats' chances to strike a big fiscal deal. Here's what we know for sure: Some Democrats on the Hill continue to show increased optimism that Sen. Joe Manchin (D-W.Va.) could reach an agreement with Senate Majority Leader Chuck Schumer on something that would raise taxes on the rich and businesses while enacting climate provisions and reducing deficits. And if nothing else, Manchin doesn't seem to be trying to tamp down any of that enthusiasm, insisting that his discussions with Schumer are for real. But Manchin has also been upfront about the fact that the talks might fall short in the end, something that wouldn't surprise lots of people watching these talks. Beyond that, however, there are a lot of unknowns, conjecture and rumors. MORE ON THAT IN A BIT. But first thanks for reading a "let's get some popcorn" version of Weekly Tax — where we're also thinking that it's nice that even royal parents can get the ol' thumb on the nose from their children. Frequently seen in those rewatchings of "ER": Today marks 130 years since the L, Chicago's mostly elevated train system, made its debut — making it the second city in the U.S., after New York, with a rapid transit system. Help keep this newsletter on track. Send your best tips and feedback. Email: bbecker@politico.com, bfaler@politico.com and teckert@politico.com. You can also reach us on Twitter at @berniebecker3, @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. SO NOW WHAT? Lawmakers will be back in business at the Capitol this week, and there will be plenty of eyes looking to see how close those talks between Manchin and Schumer are to bearing fruit — or perhaps falling apart. The other 48 Democratic senators have taken a very hands-off approach to the negotiations between Manchin and Schumer, so you'd have to figure the other two would need to fill them in at some point if they are nearing an agreement. All of which underscores the point: There is a lot of chatter, both on and off K Street, about the current tenor of those Manchin-Schumer talks and what a final agreement might look like, if it is to be struck. But because such a small group is taking part in these discussions, it might be even harder than usual for lobbyists or anyone else who really wants to know to get a good grasp on what's happening. Case in point: Ben Koltun of Beacon Policy Advisors tweeted over the weekend that one "supposed deal" making the rounds on K Street was actually a chart he had made and circulated back in March. (Weekly Tax is among those who have seen that chart come across their inboxes in recent days.) So what are some of the big questions left out there? One would certainly be the size of any package, should it actually materialize. The Washington Post's Jeff Stein and Tyler Pager pointed out over the weekend that any such agreement would be much smaller than what was under discussion last year, as they dissected the fallout after talks between Manchin and President Joe Biden fell apart. A key nugget in there: Manchin has asked the Penn Wharton budget modelers to look at a roughly $1 trillion package focused on energy and deficit reduction. (Which begs another question: Might Democrats not be able to extend the expanded Obamacare tax credits that they put into place last year. If not, millions of people will see their health care premiums jump, and would likely learn about that right before this fall's midterms.) One final point, for now: Whether or not Democrats can get some skinnier version of the BBB, and what might actually make the cut in that potential agreement, could easily have ripple effects on a variety of tax policies. Take the effort from the business community to bring back immediate expensing for research costs, something that went away starting this year. The House's broader version of BBB last year would have pushed back the current requirement that companies write off those research costs over at least five years, and there has been some discussion about whether a narrower version might also restore those immediate deductions. Meanwhile, a bipartisan group of supporters have been trying to get immediate expensing for research costs into a China competition bill that is currently being negotiated, though the latest chatter from on and off the Hill suggests that might be difficult to pull off. If rolling back research amortization doesn't make either of those measures, it could be on the table in a possible year-end tax deal that could come together after the November elections. But some key Democrats have said they'd have trouble giving the green light to that kind of tax cut for businesses, given that they were unable to extend the expanded version of the Child Tax Credit that went into effect last year. Might those Democrats approach a year-end negotiation differently if the party pushed even a more modest fiscal bill through budget reconciliation? Seems possible, though other factors — like the November results — will matter a lot, too. In other words, there are still a lot of moving pieces for all the various tax policies still in play this year. Around the World NOT SURE ABOUT THESE: Lawmakers in Kenya are working to either block planned tax increases or cut taxes because of concerns about how inflation is affecting consumers, Bloomberg reports. The chair of the legislature's finance committee, for instance, is pushing to cut the value-added tax rate for cooking gas in half, from 16 percent to 8 percent. Lawmakers are also working against the National Treasury's plan to double a digitals services tax to 3 percent, arguing that the costs will come down hardest on consumers, while also seeking to put in a minimum threshold based on net sales to protect smaller companies. The legislature is expected to vote this week on a tax bill, which would send the measure to the president — if it's approved, as expected. Among the other tax ideas that lawmakers are zeroing in on: Tripling the capital gains rate to 15 percent, exempting items like corn flour and fertilizer from the VAT and increasing taxes on imported mobile phones and digital lender fees. Around the Nation CAME DOWN TO THE WIRE: The New York legislature passed a big tax break for semiconductors right before it adjourned last week — and as the Albany Times-Union reports, that started drawing some criticism, once outside groups realized what happened. Businesses could get up to $10 billion over two decades for "green" semiconductor projects, under the bill that critics have labeled Albany machinations at their worst. Lawmakers introduced the bill last Tuesday, after prodding from Gov. Kathy Hochul's team, and then the Senate and Assembly each passed it on the last day of their session. The measure has a tie-in with Washington, too — Senate Majority Leader Chuck Schumer has been pushing for that China competition bill, which seeks to spur domestic production of semiconductors, and Schumer no doubt would love for some of those potential jobs to end up in New York. The new law seeks to make upstate New York a destination for new chip factories, by offering companies incentives through a state tax credit program for businesses.   DON'T MISS DIGITAL FUTURE DAILY - OUR TECHNOLOGY NEWSLETTER, RE-IMAGINED:  Technology is always evolving, and our new tech-obsessed newsletter is too! Digital Future Daily unlocks the most important stories determining the future of technology, from Washington to Silicon Valley and innovation power centers around the world. Readers get an in-depth look at how the next wave of tech will reshape civic and political life, including activism, fundraising, lobbying and legislating. Go inside the minds of the biggest tech players, policymakers and regulators to learn how their decisions affect our lives. Don't miss out, subscribe today.     Quick Links WSJ: "Individual Income Tax Payments on Pace to Reach Record Level." Brookings: "The booming economy, not the 2017 tax act, is fueling corporate tax receipts." Insider: Rep. Don Beyer (D-Va.) "plans to introduce a bill that would hit AR-15's with a 1,000% tax." Bloomberg: "Hungary Unveils Windfall Taxes, $6.1 Billion in Spending Cuts." NYT: "A financier suspected in a nearly $2 billion Danish tax fraud is arrested." Did You Know? The journalist A.J. Liebling gave Chicago the nickname of "Second City."   Follow us on Twitter Toby Eckert @tobyeckert Bernie Becker @berniebecker3 Brian Faler @brian_faler   Follow us

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