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 TALK FTC: The subtext to the new letter is that the lawmakers remain worried that the foreign tax credit regulations are far too expansive — a concern most certainly shared by the business community. In fact, Hern and Schneider also spearheaded a letter to Yellen last year outlining those problems, before returning with this latest note that does thank the department for its “acknowledgment that the 2022 FTC final regulations may have been broader than the original intent.” “We look forward to working together on FTC-related policy to ensure we focus on long-term economic growth that protects U.S. companies’ competitiveness abroad,” the lawmakers added in the most recent letter. Yellen and other Treasury officials have made it clear that the new rules are intended to ensure that companies can’t get a foreign tax credit — essentially giving companies a break on taxes paid to other governments — when it pays a digital services tax to another country. Those DSTs have been discussed and enacted in a range of countries — but generally haven’t gone into effect, as governments around the world have been working on trying to get a global tax deal into place. (As it stands, Canada is scheduled to bring its digital tax into force in January.) For their part, critics of the regulations say they understand that goal. But they also believe that Treasury way overshot the mark with the rules, which would lead to companies being double taxed on income that was previously covered by the foreign credit. So now what? Let’s see any next steps that Treasury might take, though certainly tax lobbyists and lawyers think (or at least hope) that there’s a decent chance that the Biden administration might ease off on the FTC rules. Related note: “Treasury pushing to extend pause on digital services taxes,” via Pro Tax’s Brian Faler. THE WEEK AHEAD: It’s basically mid-November now, so there will be lots of people searching for any progress on a year-end tax deal in the days to come. The big news last week was that Senate Democrats had whittled down what they were seeking in an expansion of the Child Tax Credit to $49 billion over two years — essentially the same cost as a top priority for Republicans, which is reversing three business tax increases from their 2017 tax law. Of course, the push for a tax deal will be a secondary concern for most this week — with a potential government shutdown looming on Friday, and some serious questions hanging over the current House GOP strategy for avoiding it. Pulling back even more: Those issues keeping the government funded, and the general unrest among House Republicans, are the major reasons that lots of people are skeptical about a tax bill happening this year. But it’s also worth keeping in mind: Any year-end tax deal would be a mere appetizer to 2025, when the individual provisions from the Tax Cuts and Jobs Act are scheduled to expire. And in case anyone had any doubts, policymakers’ choices in two years’ time could get very, very expensive. The budget hawks at the Committee for a Responsible Federal Budget projected that the price tag could soar past $7 trillion, as Pro Tax’s Benjamin Guggenheim noted on Friday. That number includes interest costs, and assumes that, for instance, lawmakers will bring back and then extend the expensive monthly child payment program that Democrats enacted in 2021 — which might not be very likely, given GOP opposition. Still, both CRFB and the right-leaning Tax Foundation have estimated recently that extending the expiring TCJA provisions would cost in the range of $3 trillion over a decade. The Tax Foundation projected that cost at $3.7 trillion over a decade if scored conventionally, and $3.1 trillion when accounting for economic growth spurred by keeping the tax cuts. That projection also assumes that Congress reverses those TCJA tax increases for businesses, and then keeps those tax cuts, too. (That would mean allowing companies immediate deductions for research, a more generous interest deduction and full expensing of investments.) And looking ahead: It’s quite possible that both Democrats and Republicans would easily agree to keeping a healthy portion of the expiring TCJA policies, given that President Joe Biden has vowed not to raise taxes on anyone making under $400,000 a year. It’s far from a sure thing that Biden will be in office to negotiate this coming fiscal cliff. But if Democrats do keep to that basic guideline, Erica York of the Tax Foundation told Weekly Tax in a follow-up email that it could add up to about three-quarters of the cost of just extending all the expiring provisions, based on some back-of-the-envelope projections. (That would be close to $2 trillion for extending the expiring provisions up to $400,000, and about $2.6 trillion to extend them all.)
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