Lately on the Hill
Here are your latest legislative updates:
- Let the debt ceiling games begin. Treasury Secretary Janet Yellen has let Congress know that the U.S. has reached its statutory debt limit and Treasury has begun taking “extraordinary measures” to ensure the U.S. does not default on its debt obligations. This should buy the U.S. at least six more months. “Extraordinary measures” is a fancy way of saying Treasury will use accounting strategies to draw out officially reaching the debt limit for a few more months. This includes temporarily disinvesting certain trust funds, like a retirement fund that the government has for federal employees and retirees, and a “debt issuance suspension period” until June 5, 2023. Think of it as cashing out your 401(k) to pay your electricity bill.
- So, expect things to get to down to the wire this summer, because it likely will take that long for Congress to come to an agreement on a bill that would raise the country’s debt limit again. Republicans are saying they will not raise the debt limit without significant federal spending cuts. In response, the White House refuses to negotiate with House Republicans, saying that the debt limit should be raised “without conditions” and that Republicans are being “reckless” and “disgraceful” with their tactics on this.
- Senate Majority Leader Chuck Schumer says that “America pays its debts. Period. There should be no political brinkmanship with the debt limit.” Senate Minority Leader Mitch McConnell (R-KY) agrees and says he’s not too worried and that an agreement will be reached in negotiation eventually to raise the debt limit because the U.S. “never has and never will” default on its debt.
- House Speaker Kevin McCarthy is trying to work with Sen. Joe Manchin (D-VA) on a possible compromise, but that’s an uphill battle since House Republicans have shown thus far that they have a lot of strong, competing voices at the negotiation table. So, a group of Republicans led by Rep. Chip Roy (R-TX) are working on a back-up plan just in case by drafting a payment prioritization plan to cover 80% of federal programs in case the U.S. does default.
- For his part, Manchin is trying to form a bipartisan group of House and Senate members to negotiate an accord that would increase the debt ceiling and cut federal spending, in hopes that this could be the springboard for a final bill. His approach would be to create committees to consider bipartisan solutions for each of the major trust funds: Medicare, Social Security, and Highway Trust. This approach has previously been led by Sen. Mitt Romney (R-UT) in previous sessions.
- More progress on the committee front. Democrats and Republicans have agreed to the ratios of Democrats versus Republicans in the four major committees in the House, which will largely be like the prior session, with a few minor changes. Appropriations is getting one more seat for each party, while Energy and Commerce lose three seats per party. Each party also has one less seat on the Financial Services committee and Ways & Means will remain the same as far as the number of seats. Republicans have staffed their committee assignments, but Democrats won’t choose their committee representatives until the House is back from their recess today.
- Appropriations: Republicans = 34 seats; Democrats = 27 seats
- Energy and Commerce: Republicans = 29 seats; Democrats = 23 seats
- Financial Services: Republicans = 29 seats; Democrats = 23 seats
- Ways and Means: Republicans = 25 seats; Democrats = 18 seats
- A new social security investment fund? Sens. Bill Cassidy (R-LA) and Angus King (I-Maine) are working on potential legislation to revamp the Social Security trust fund by creating a new sovereign wealth fund that would invest in stocks to fund future retirement benefits. This fund would be adjacent to the existing Social Security fund, which is estimated to run out in 2034.
- Brownley trying to bring back the disaster relief tax deduction. Rep. Julia Brownley (D-CA) introduced the Protecting Homeowners from Disaster Act, which proposes to restore the tax deduction for uninsured property and casualty losses. This deduction was limited by the Tax Cuts and Jobs Act to apply only to presidentially declared disasters.
- First things first: GOP priorities. House Republicans have an ambitious agenda right out of the gate as they will attempt to pass the Illegal Alien NICS Alert Act (requiring a background check for immigrants in the U.S. illegally who are trying to buy a firearm), the Border Safety and Security Act (immigration bill), and a bill to increase oil and gas production under oil and gas leases on federal land while limiting withdrawals from the Strategic Petroleum Reserve.
IN CASE YOU MISSED IT
- The U.S. Supreme Court declined to take up a case where a federal appeals court held that Missouri lacked legal standing to bring a lawsuit over a provision in the American Rescue Plan Act (ARPA) that says states can’t use ARPA funds to offset direct or indirect tax cuts.
- Seven states—California, Connecticut, Hawaii, Illinois, Maryland, New York, and Washington—are coordinating to each introduce wealth tax legislation.
- A group of 205 millionaires and billionaires from across the world wrote an open letter calling on world leaders meeting in Davos for the World Economic Forum to introduce wealth taxes to combat “extreme inequality.” Specifically, the signatories wrote: “Tax the ultra rich and do it now. It’s simple, common-sense economics. It is an investment in our common good and a better future that we all deserve, and as millionaires we want to make that investment.”
- The United States Government Accountability Office released a report with recommendations on additional steps the IRS can take to further the agency’s efforts to detect and deter promoters of abusive tax schemes, starting with improving how the IRS instructs the general public on reporting tax schemes.
- The Treasury Inspector General for Tax Administration issued a report assessing IRS efforts to implement the Inflation Reduction Act (IRA). The IRS estimates, due to changes under the IRA, the agency will need to create or revise 24 tax forms, 29 tax form instructions, and three publications before the start of the 2023 filing season.
- The IRS released Rev. Proc. 2023-14 with annual depreciation deduction limits for passenger automobiles (including trucks and vans) placed in service in 2023.
- Victims of severe storms, straight-line winds, and tornadoes in Georgia and Alabama now have until May 15, 2023 to file various federal individual and business tax returns and make tax payments.
This newsletter features developing content that is subject to change at any time. It does not constitute legal or tax advice. Consult your professional advisors prior to acting on the information set forth herein.