How government funding might affect the tax bill

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Feb 26, 2024 View in browser   By Bernie Becker Presented by Driving the day WELCOME BACK: Congress returns to Washington this week — and comes back for a race against the clock to avoid a partial shutdown come the end of Friday. The four top congressional leaders are now set to travel over to the White House on Tuesday, another sign that the race could come down to the wire. That's after Senate Majority Leader Chuck Schumer and House Speaker Mike Johnson spent Sunday sniping at each other, with Democrats and Republicans still battling over both potential funding cuts and policy provisions that might be attached to spending measures. A range of agencies would run out of funding if no deal is reached by the end of the week, with even more — including Treasury and the IRS — set to see their financing lapse after March 8 without congressional action. Those funding battles could have a direct impact on tax administration and policy, given that the IRS is smack in the middle of the current filing season. The agency also continues to try to show the benefits of the extra $80 billion that Democrats gave it in the Inflation Reduction Act, most recently announcing it was taking a broader look at whether companies were properly writing off their private jet use. Meanwhile, the deal that Johnson and Schumer actually made at the beginning of the year — to cut $20 billion of those IRA funds in one year, instead of two — also remains up in the air as the two sides stare each other down. But it’s also worth looking into a more indirect effect that a partial shutdown or very short funding punt might have — and that’s on whether the bipartisan tax bill currently in limbo might have another way through the Senate. MORE ON THIS IN A BIT, but thanks once again for joining us here at Weekly Tax. Big question here: How many of these concerts were at Merriweather Post Pavilion? Banana-flavored probably tastes better: Today marks a full half-century since Nike got its patent for the waffle soles it put on its running shoes, which were, in fact, first made on the waffle iron of Bill Bowerman, the famed track coach at the University of Oregon. Help keep this newsletter on the move. Send your best tips and feedback. Email: bbecker@politico.com, bfaler@politico.com, bguggenheim@politico.com and teckert@politico.com. You can also reach us on Twitter at @berniebecker3, @tobyeckert, @brian_faler, @ben_guggenheim, @POLITICOPro and @Morning_Tax. A message from Intuit, powering prosperity and financial health worldwide with TurboTax, Quickbooks, Credit Karma, and Mailchimp: Congress writes the tax code. We simplify it. For years, Intuit has been calling for tax simplification because we believe taxes should be transparent, simple, and fair. Americans deserve a tax code that families and small businesses can easily understand. An easier tax code means they never miss out on important deductions or credits—helping everyone maximize their refund. Learn more about why a simple tax code is a better tax code.   ABOUT THAT TAX BILL: The Senate has now been out of Washington for going on two weeks — and according to aides and others, not much progress has been made on the tax bill during that time. In fact, lots of GOP senators still have a variety of objections to the measure negotiated between Senate Finance Chair Ron Wyden (D-Ore.) and House Ways and Means Chair Jason Smith (R-Mo.). Still, some lobbyists and aides have been wondering for a while whether the tax bill — which would both expand the Child Tax Credit and restore some key incentives for businesses, among other things — might end up getting attached to a broader spending vehicle in order to make it through the Senate. Given where matters stand right now, Congress could very well need a very short stopgap funding bill in the coming days, maybe of a couple weeks or so. And put it this way: It’s hard to see how that would be a bad development for the Wyden-Smith tax package. Those extra couple weeks could give Democrats and Republicans in the Senate the time they need to work the issues that GOP senators have with the bill, which would then allow them to attach it to a more robust spending package later in March. Or maybe Democrats and Republicans come to an agreement on amendment votes that allows the bill a standalone vote in the Senate. Or perhaps Democrats get tired of the gridlock in mid- to late-March, and just seek to attach the tax bill to a spending measure and dare Republicans to stand in the way. The broader point is that a little extra time for the tax bill in the Senate right now probably can’t hurt, even though it’s not clear whether it will actually help. At least for now: Keep in mind that Smith and Wyden reached this agreement in mid-January, with Wyden hoping for a time that the bill could be enacted before the IRS filing season opened later that month. The House passed the bill on Jan. 31, and IRS chief Danny Werfel has said that his agency could quickly send out any additional refunds that a taxpayer might receive this year because of an expanded child credit. Still, this is a tax bill with benefits attached to the current tax filing season, which ends in about a month and a half, and that is being debated with just over eight months before a presidential election. So without a breakthrough, the Wyden-Smith plan would probably reach a make-or-break moment at some point in the coming weeks or months, though when exactly isn’t clear. ABOUT THOSE GOP OBJECTIONS: Sen. Mike Crapo (R-Idaho), the ranking member on the Finance Committee, and Sen. Marco Rubio (R-Fla.), a key advocate for the child credit expansion in the GOP’s 2017 tax law, are among the Republicans who have problems with the so-called lookback provision in the bipartisan tax plan. That provision would allow recipients to use income from either the previous or current year to claim the child credit — something that skeptics, including scholars from the conservative American Enterprise Institute, believe would give parents an incentive to drop out of the workforce. Plenty of right-of-center analysts disagree with that assessment, as have groups on the left, like the Center on Budget and Policy Priorities. CBPP analysts argued in a report released Friday that the lookback provision was quite modest, and would largely serve as a buffer when workers in lower-income positions face trying times. The provision’s “impact on labor supply would be exceedingly small and, as some have noted, it is not even clear whether the provision’s impact is positive or negative,” the CBPP authors wrote, adding that it would “provide a temporary modicum of relief” for families that suffered a temporary decline in earnings.   SUBSCRIBE TO GLOBAL PLAYBOOK: Don’t miss out on POLITICO’s Global Playbook, the newsletter taking you inside pivotal discussions at the most influential gatherings in the world, including WEF in Davos, Milken Global in Beverly Hills, to UNGA in NYC and many more. Suzanne Lynch delivers the world's elite and influential moments directly to you. Stay in the global loop. SUBSCRIBE NOW.     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. Around the World Bloomberg: “Mexico City Tax Strategy Could Go National, Sheinbaum Ally Says.” Reuters: “Vietnam's VinFast seeks India EV import duty cut as plant construction starts.” Reuters, too: “British Columbia to impose up to 20% tax on homes sold within two years.”   A message from Intuit, powering prosperity and financial health worldwide with TurboTax, Quickbooks, Credit Karma, and Mailchimp:   Around the Nation Bloomberg: “Chicago’s Contentious Mansion Tax Vote Struck Down by Court.” Washington Post: “Va. House and Senate snub Youngkin tax plan in rival budget bills.” The Maine Monitor: “Maine considers exempting all nonprofits from sales tax.”   Don’t sleep on it. Get breaking New York policy from POLITICO Pro—the platform that never sleeps—and use our Legislative Tracker to see what’s on the Albany agenda. Learn more.     Also Worth Your Time Pro Tech: “FTC sues H&R Block for allegedly deceptive marketing.” Associated Press: “Alabama IVF ruling puts spotlight on state plans for tax breaks and child support for fetuses.” More AP: “Tax-free status  of movie, music and games traded online is on table as WTO nations meet in Abu Dhabi.” Did you know? The actors R. Lee Ermey and Donald Sutherland both played Bill Bowerman, in movies about the runner Steve Prefontaine. A message from Intuit, powering prosperity and financial health worldwide with TurboTax, Quickbooks, Credit Karma, and Mailchimp: 6,000+ pages of tax code is a lot. But that's the tax code Congress has given Americans. In fact, that's 3X longer that it was in the 1980s. Intuit knows that tax refunds are critical and often the largest checks of the year for many Americans, especially low- and middle-income families who rely on them for everyday expenses. Taxpayers should not have to spend unnecessary time or energy to navigate and understand an increasingly complex process. That's why Intuit is committed to working with policymakers to craft a simpler tax code. Until that becomes a reality, we will continue helping millions of individuals, families, and small businesses navigate an increasingly complex tax filing process. Find out why simpler is better.     Follow us on Twitter Toby Eckert @tobyeckert Bernie Becker @berniebecker3 Brian Faler @brian_faler Benjamin Guggenheim @ben_guggenheim   Follow us

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