New IRS Developments, the Artificial Intelligence Task Force, and ERCOT
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Tax Policy/News:
February 15: 6 takeaways as IRS chief takes heat from House panel
IRS Commissioner Danny Werfel faced the House Ways and Means Committee to discuss various pressing issues in U.S. tax policy and administration, including new tax legislation, a public online filing program, and concerns about the IRS budget and systemic unfairness.
Werfel expressed confidence in the IRS's ability to implement new tax measures, such as business credits and an expanded child tax credit, within weeks if passed by the Senate.
The discussion also touched on the potential end of the employee retention tax credit, sparking concern among businesses.
Republicans criticized the IRS's direct file pilot program, questioning its authority and funding, especially given the private sector's existing solutions. The IRS's funding, partially reduced due to political compromises, was debated, with Democrats highlighting the potential revenue increase from the Inflation Reduction Act's IRS funding boost.
Additionally, there was frustration over the new 1099-K reporting requirements for third-party payment apps, with the lowered threshold for reporting income causing concern among lawmakers and advocacy groups.
February 15: 5 IRS developments to watch this tax season
In 2024, the IRS is navigating several new tax developments, including technological advancements, pending regulations, and the integration of cryptocurrency into tax forms.
The IRS introduced systems like the Information Returns Intake System (IRIS) and the Filing Information Returns Electronically (FIRE) system to streamline processes, although these systems have faced technical issues.
Despite these glitches, the IRS anticipates a smooth tax season, bolstered by an increased workforce funded by the Inflation Reduction Act of 2022.
This year, the IRS is also adjusting its approach to digital assets, requiring taxpayers to report income from cryptocurrencies and other digital assets across various tax forms.
Additionally, the IRS is preparing for potential tax law changes, such as an expanded Child Tax Credit, and is resuming normal collection activities paused during the COVID-19 pandemic.
The Direct File pilot program is also being rolled out to offer a free tax preparation service in select states, reflecting the IRS's ongoing efforts to improve service and technology for taxpayers.
Economic News/Policy:
February 17: A US productivity boom may explain how inflation slowed amid a strong economy
The United States is potentially on the brink of achieving a "soft landing" in its economy, a situation where inflation returns to normal levels without leading to a recession, largely attributed to a recent surge in productivity growth.
In 2023, the U.S. experienced significant productivity, allowing workers to enjoy wage increases without a corresponding rise in consumer prices, as industries managed to produce more efficiently.
This productivity, measured by the output per hour worked, saw a notable 2.7% increase in the fourth quarter from the previous year, surpassing the average growth of the past two decades.
Factors contributing to this productivity boom include the adoption of generative artificial intelligence (GenAI), which may streamline operations, although its full impact might unfold slowly as workers and companies adapt to its integration.
Additionally, some businesses increased their efficiency in anticipation of a recession that did not occur, with significant layoffs in major companies potentially leading to leaner operations that inadvertently boosted productivity.
However, measuring productivity, especially in a service-dominated economy like the U.S., remains challenging, and it's too early to declare last year's productivity increase as a definitive shift in the economic landscape.
February 14: Budget chief faces heat as Congress feuds over spending
During a House Budget Committee hearing, CBO Director Phillip Swagel was questioned about the nation's fiscal future and faced criticism from Republicans, including Rep. Drew Ferguson, over past inaccuracies in the CBO's projections.
Ferguson highlighted significant discrepancies in spending and revenue forecasts from 2017 compared to current figures, questioning the reliability of CBO projections.
Swagel defended the CBO's work but acknowledged the need for more resources to improve their analyses.
The hearing also addressed the recent CBO report predicting rising federal budget deficits and public debt, sparking debate between Republicans, who criticized government spending and inflation under President Biden, and Democrats, who pointed to economic gains and criticized tax policies from the Trump administration.
The discussion also touched on the impact of immigration on the economy and the potential solvency threats to entitlement programs, emphasizing the importance of a proposed fiscal commission to address these issues.
The hearing occurred amidst ongoing negotiations over annual government spending bills, with a tight schedule to avoid a funding lapse.
Technology:
February 20: House leaders launch bipartisan artificial intelligence task force
Senate Majority Leader Chuck Schumer has been actively engaging in discussions on artificial intelligence (AI), and now, House Speaker Mike Johnson and Minority Leader Hakeem Jeffries are establishing a bipartisan AI task force.
This initiative aims to position America as a leader in AI innovation while addressing potential risks such as deepfakes, misinformation, and job displacement.
The task force, led by Jay Obernolte and Ted Lieu, both of whom have computer science backgrounds, will produce a comprehensive report with principles, recommendations, and policy proposals.
The task force comprises 24 members, with an equal split between Republicans and Democrats, including notable figures such as Reps. Neal Dunn, Kat Cammack, Darrell Issa, Michelle Steel, Anna Eshoo, Ami Bera, Yvette Clarke, and Alexandria Ocasio-Cortez.
Additionally, a separate AI forum hosted by Rep. Ro Khanna focused on worker equity, deception, manipulation using AI, and preparing society for an AI-integrated future, featuring participants from various fields including AI scholars, labor leaders, and science fiction writer Ted Chiang.
The task force's creation underscores Congress's intent to foster AI advancements, ensure national security, and implement necessary safeguards for safe and equitable technology development.
This move reflects a broader congressional effort to understand and legislate AI, amidst concerns over the technology's rapid advancement and the potential for misuse by malicious actors.
February 15: Guiding how AI will take flight in the Government Sector: Policy v. regulation
Government agencies are increasingly exploring generative artificial intelligence (Gen AI) adaptations, including Large Language Models (LLMs) like ChatGPT, to enhance public service delivery.
Despite the private sector's rapid adoption of these technologies, government entities are cautiously moving towards integrating LLMs, mindful of the need to balance efficiency with privacy protection and resource management.
The Biden Administration's Executive Order on AI, issued on October 30, 2023, outlines policy areas and actions for federal entities to ensure safe and trustworthy AI development.
The GAO report highlights the potential for AI to improve federal efficiency but stresses the need for regulation to prevent misuse.
With AI applications expanding across various government sectors, there's a push for internal policy changes and eventual regulation to guide ethical and practical AI use, drawing parallels to the evolution of air travel regulation.
Over the next 12 to 18 months, as AI development progresses, the focus will likely be on establishing policies to navigate the benefits and challenges of Gen AI, with an eye towards future regulatory frameworks.
Energy and Environmental Policy/News:
February 18: Biden administration considering delaying switch to electric vehicles: Report
The Biden administration is reportedly planning to relax the proposed rules for the transition to electric vehicles (EVs), according to The New York Times.
This adjustment by the Environmental Protection Agency (EPA) would reduce the short-term requirements for vehicle emissions, allowing a lower percentage of a car manufacturer's fleet to be electric by 2030 compared to the original proposal.
This move is seen as beneficial for car manufacturers and labor unions, providing more time to enhance EV production and charging infrastructure.
Despite the growth of the EV market, sales have not met expectations, with EVs accounting for only 7% of the market in the previous year, contrasting with the administration's projection of EVs constituting two-thirds of sales by 2032.
The rule change, expected to be announced this spring, aims to address political concerns and opposition from various stakeholders, including the United Auto Workers union and car dealers, while acknowledging the slower-than-anticipated adoption of electric vehicles.
February 14: House bill would connect Texas’s ERCOT with national grid
Reps. Greg Casar (D-Texas) and Alexandria Ocasio-Cortez (D-N.Y.) introduced the Connect the Grid Act on the third anniversary of the extreme winter weather event that disrupted Texas's power grid and resulted in numerous fatalities.
This legislation aims to integrate Texas's independent grid with the national grid and place the Electric Reliability Council of Texas (ERCOT) under Federal Energy Regulatory Commission (FERC) oversight. It also proposes a study on connecting with Mexico's grid.
The bill highlights the potential for Texas, a leader in wind and solar energy production, to contribute to reducing national carbon emissions through grid interconnection.
Criticism was directed at Texas officials, including Gov. Greg Abbott and Sen. Ted Cruz, for their handling of the crisis, with an emphasis on the structural and leadership failures that exacerbated the storm's impact.
The Senate version is sponsored by Sen. Ed Markey (D-Mass.), with support from progressive House members. However, the bill faces challenges in the GOP-majority House.
ICYMI:
February 20: Neuralink's first human patient able to control mouse through thinking, Musk says
Elon Musk announced that the first human patient implanted with a Neuralink brain-chip has fully recovered and can now control a computer mouse with their thoughts, marking a significant milestone for the company.
During a social media event, Musk shared the patient's progress, emphasizing the absence of adverse effects and the ability to move a mouse cursor by merely thinking.
Neuralink, which received human trial approval last September, aims to enable individuals to control digital interfaces through thought by implanting a brain-computer interface in areas of the brain associated with movement intention.
Despite its groundbreaking advancements and a valuation of around $5 billion, Neuralink has faced scrutiny over its safety protocols and was recently fined for violating hazardous material transportation rules.
For Fun:
February 14: Bats can sing—and this species might be crooning love songs
In 2010, researchers discovered a unique form of bat communication outside an abandoned mine in British Columbia, Canada, using bat detectors to capture sounds that were not related to echolocation.
These sounds, described by Cori Lausen of the Wildlife Conservation Society Canada, consisted of a complex pattern of calls, suggesting a form of bat "song" potentially used for courtship, a behavior previously undocumented in silver-haired bats.
This discovery, published in the Wildlife Society Bulletin in December 2023, could significantly enhance our understanding of mating behaviors in North American bats and has broader implications for bat conservation, particularly in relation to habitat mapping and assessing the impact of wind turbines on bat populations.
The research also highlights the evolving technology in wildlife study, promising a future rich with discoveries about bat communication.
This work not only contributes to the scientific understanding of bats but also to conservation efforts, illustrating the intricate and previously underappreciated aspects of bat behavior.