DOGE, IRS Layoffs, and Reciprocal Tariffs
Probity Tax Recovery is a tax consulting firm specializing in tax credits and incentives for small to mid-sized businesses. We work with business owners and their CPAs to identify tax credits and incentives while saving them time and money. As of November 1, 2024, Probity began operating as a division of MS Consultants. Read more about the exciting news here.
Tax Policy/News:
February 18: DOGE Seeks Access to IRS Taxpayer Data, Raising Privacy Concerns
Elon Musk’s Department of Government Efficiency (DOGE) is seeking access to the IRS’s Integrated Data Retrieval System, a move that has sparked privacy concerns among lawmakers and advocacy groups.
The White House supports the effort, claiming it aims to reduce fraud and misuse of tax dollars. However, Senators Ron Wyden and Elizabeth Warren have warned that granting DOGE access to taxpayer records could violate privacy laws and disrupt tax processing.
Meanwhile, the IRS is also preparing to lay off thousands of probationary workers in the middle of tax season, raising further concerns about agency operations. Attorneys general from 14 states have filed a lawsuit challenging DOGE’s authority, arguing that such actions require a Senate-confirmed official.
In addition to its IRS push, DOGE has launched accounts on X for the IRS and SEC, seeking public input on identifying waste and inefficiencies within these agencies.
February 15: IRS Will Lay Off Thousands of Probationary Workers in the Middle of Tax Season
The IRS is set to lay off thousands of probationary workers amid the ongoing tax season as part of the Trump administration’s federal workforce reduction efforts.
The administration previously launched a "deferred resignation program" offering buyouts to most federal employees, though IRS staff involved in the tax season were barred from accepting until after the April 15 filing deadline.
The exact number of impacted workers remains unclear, and the IRS has not commented on the layoffs. The Biden administration’s $80 billion investment in the IRS, aimed at improving customer service and enforcement, has been significantly rolled back by Republicans.
Additionally, Elon Musk’s Department of Government Efficiency (DOGE) has called for drastic agency cuts, leading to legal challenges from 14 state attorneys general. The layoffs come as the IRS prepares to process over 140 million tax returns, raising concerns about service disruptions.
Economic News/Policy:
February 14: Treasury, Congress Watchdogs Launch Audits Into DOGE Access to Payment System
The Treasury Department’s Office of Inspector General and the Government Accountability Office (GAO) have opened audits into the Department of Government Efficiency’s (DOGE) access to a sensitive federal payment system.
The system, managed by the Bureau of the Fiscal Service, handles 90% of federal payments, raising concerns about security and oversight. Treasury Deputy Inspector General Loren Sciurba confirmed that the audit, launched on February 6, will assess access controls and investigate potential improper or fraudulent payments. GAO also confirmed it will review DOGE employees’ “unprecedented access” to the system following a request from Senators Elizabeth Warren and Ron Wyden.
DOGE, led by Elon Musk, has claimed widespread fraud in entitlement payments, justifying its push for deeper financial scrutiny. Treasury officials initially resisted DOGE’s access requests, but a senior official who opposed the move was placed on leave and later resigned. The audits are expected to continue through August, with interim reports if urgent issues arise.
February 13: House Panel Advances Budget Resolution After Marathon Meeting
The House Budget Committee approved a budget resolution in a 21-16 party-line vote, advancing President Trump’s legislative agenda.
The resolution includes $1.5 trillion in spending cuts, a $4.5 trillion cap on deficit impact from tax cuts, and $300 billion in additional funding for border security and defense. House Republicans plan to use budget reconciliation to bypass Democratic opposition in the Senate.
Hard-line conservatives initially withheld support, demanding deeper cuts and regulatory rollbacks, but a last-minute amendment secured their backing. The measure now heads to the full House, where its passage is uncertain due to the GOP’s slim majority.
The resolution sets the stage for a showdown with the Senate, which has passed its own version with differing priorities. Democrats condemned the resolution, calling it a giveaway to the wealthy at the expense of working Americans. The final legislative package must align with reconciliation rules, adding further complexity to negotiations.
February 13: Small-Business Optimism Waning After Trump’s Rapid-Fire Policy Changes
Small-business owners are growing more uncertain about future economic conditions following President Trump’s rapid policy changes, according to the latest Small Business Optimism Index from the National Federation of Independent Business (NFIB).
While optimism remains above the 51-year average, the NFIB’s uncertainty index surged 14 points in January, marking its third-highest level ever. Hiring remains a major challenge, with 35% of owners reporting unfilled job openings due to a lack of qualified applicants.
Concerns over tariffs, supply chain disruptions, and immigration crackdowns are adding to uncertainty, particularly for businesses reliant on imported goods or labor. Inflation fears have slightly decreased, but rising prices remain a concern, especially after January’s 3% inflation report.
Business investment plans have also slowed, with only 20% of owners planning capital expenditures in the next six months. While some states, like Colorado, are considering additional regulatory measures, NFIB is urging lawmakers to support policies that ease small-business burdens. The coming months will determine whether these concerns translate into broader economic slowdowns.
February 13: Trump Signs Plan for Reciprocal Tariffs on US Trading Partners, Ushering in Economic Uncertainty
President Donald Trump has signed a proclamation imposing reciprocal tariffs on imports, aiming to match tax rates set by other countries.
The move, designed to address trade imbalances, could escalate tensions with key trading partners, including Canada, Mexico, China, and the European Union. The administration argues the tariffs will level the playing field, but critics warn they will likely raise costs for American consumers and businesses.
The tariffs will be customized per country, with additional levies on steel, aluminum, autos, and pharmaceuticals. Analysts caution that the policy could fuel inflation, which has already risen to 3%, and slow economic growth.
Several nations, including China and the EU, have prepared countermeasures, raising fears of a broader trade war. While the White House claims tariff revenues will help offset the projected $1.9 trillion deficit, financial experts predict short-term economic disruption. Trump dismissed concerns about inflationary impacts, stating, “There’s nothing to study. It’s going to go well.”
February 11: Key Takeaways from Fed Chair Jerome Powell’s Congressional Hearing
Federal Reserve Chair Jerome Powell told lawmakers that the central bank is in no rush to cut interest rates, reaffirming expectations that rates will remain steady at the Fed’s March meeting.
Powell faced extensive questioning on the dismantling of the Consumer Financial Protection Bureau (CFPB), a move led by the Trump administration that has sparked protests. Democrats highlighted the CFPB’s role in protecting consumers, while Republicans argued it lacked accountability.
Powell also briefly addressed tariffs and China’s trade practices but avoided taking a stance. Trump’s recent tariffs and regulatory changes have raised concerns about inflation and economic stability, with uncertainty among businesses surging.
Despite economic shifts, Powell reaffirmed his belief in free trade, though he acknowledged challenges posed by countries that do not follow trade rules. The U.S. economy remains strong, with 2.5% growth in 2024 and a 4% unemployment rate, allowing the Fed to take a patient approach to inflation control. Fed officials have signaled that holding interest rates steady for an extended period may be necessary. Powell continues his testimony before the House Financial Services Committee on Wednesday.
Technology:
February 17: What the US’ First Major AI Copyright Ruling Might Mean for IP Law
A U.S. federal judge ruled that legal tech firm Ross Intelligence infringed on Thomson Reuters’ intellectual property by using copyrighted content to train its AI legal research platform.
The decision could influence the 39 ongoing AI-related copyright lawsuits but does not guarantee a broader precedent for plaintiffs. The case centered on Ross’ use of Westlaw’s headnotes, with the judge rejecting the company’s argument that its use was transformative.
The ruling emphasized that Ross’ AI directly replicated Westlaw’s service without adding new meaning or purpose. Experts believe the decision strengthens copyright holders' positions but note its narrow scope, as it distinguishes between Ross' AI and generative AI models like those from OpenAI and Midjourney.
The judge’s focus on market impact may influence generative AI cases, especially regarding concerns over AI-generated content closely resembling original works. Legal experts caution that the ruling may be appealed and that broader implications for AI copyright law remain uncertain. AI companies and rights holders will closely watch how courts handle upcoming cases.
February 16: What Changes to the CHIPS Act Could Mean for AI Growth and Consumers
President Trump’s proposed changes to the CHIPS and Science Act, combined with new semiconductor tariffs, could disrupt AI growth and increase consumer costs.
The CHIPS Act, a Biden-era initiative, has funded U.S. semiconductor production, but Trump has signaled he may end government contracts and impose tariffs on foreign-made chips.
Experts warn that higher chip costs could raise prices on AI technology, smartphones, gaming devices, and automobiles. Companies like Taiwan Semiconductor Manufacturing Co. (TSMC) have begun U.S. expansion with federal subsidies, but Trump argues they should build plants without government aid.
If tariffs are enacted, prices for semiconductor-dependent products will likely rise, and U.S. tech firms could face increased costs. Economic analysts caution that restricting global chip imports while cutting CHIPS Act incentives may stifle AI innovation and deter future investment. Industry leaders and foreign governments are closely watching Trump’s next moves, as potential policy shifts could reshape the semiconductor and AI sectors.
February 11: JD Vance Rails Against ‘Excessive’ AI Regulation at Paris Summit
Vice President JD Vance criticized excessive AI regulation during his speech at the Artificial Intelligence Action Summit in Paris, reinforcing the Trump administration’s hands-off approach to AI policy.
He warned that overregulation could stifle innovation just as the industry is taking off, contrasting the U.S. stance with Europe’s push for stricter AI rules. His remarks align with President Trump’s recent executive actions, including repealing former President Biden’s 2023 AI regulatory order.
The administration’s position highlights a clear divergence from Europe, where regulations have been tightened over safety concerns. Vance emphasized AI’s potential in economic growth, job creation, and national security while rejecting fears that automation would displace workers.
He stressed that the U.S. must lead AI innovation while ensuring American-designed AI systems and chips remain dominant. Despite calls for international cooperation, the U.S. declined to join a global pledge signed by over 60 nations advocating for ethical and transparent AI development. Vance clarified that prioritizing AI growth does not mean disregarding safety but rather fostering an environment that encourages innovation.
Energy and Environmental Policy/News:
February 13: Biden’s EPA Issued $20 Billion in Green Grants. Now Trump’s Administration Wants That Money Back
The Trump administration is attempting to rescind $20 billion in climate and clean-energy grants awarded by the Biden-era Environmental Protection Agency (EPA) under the Greenhouse Gas Reduction Fund, commonly known as the "green bank."
EPA Administrator Lee Zeldin announced the move in a video, citing concerns over waste and transparency. The funds were awarded to nonprofits and financial institutions to support clean energy projects, particularly in disadvantaged communities.
Republicans have criticized the green bank as a “slush fund,” while environmental advocates argue that revoking the grants is unconstitutional and politically motivated.
Legal challenges are expected as recipients of the grants, including groups like Habitat for Humanity and Rewiring America, prepare to fight the directive. The grants were announced last year by then-Vice President Kamala Harris, marking a major investment in clean energy under the Inflation Reduction Act.
February 13: Senate Republicans Propose Bills to Kill EV Tax Credit, Add Road Repairs Tax
Senate Republicans have introduced legislation to eliminate the $7,500 federal electric vehicle (EV) tax credit and impose a $1,000 fee on EVs to fund road repairs.
Led by Sen. John Barrasso (R-Wyo.) and Senate Majority Leader John Thune (R-S.D.), the ELITE Vehicles Act aims to prevent tax dollars from subsidizing what they call “luxuries of the nation’s elite.” Supporters argue that the tax credit benefits high-income buyers and increases reliance on Chinese supply chains.
A separate bill, the Fair SHARE Act, introduced by Sen. Deb Fischer (R-Neb.), would impose a one-time EV fee at the manufacturer level and point of sale to contribute to the Highway Trust Fund. Lawmakers claim EVs cause more road wear due to their weight and should pay into infrastructure maintenance like gas-powered cars.
The proposals contrast sharply with Biden-era policies that promoted EV adoption and charging infrastructure. The Trump administration has already frozen EV charging funds, signaling a shift away from federal support for electrification.
February 13: Pennsylvania Gov. Shapiro Sues Trump Administration, Citing Frozen IRA Funding
Pennsylvania Gov. Josh Shapiro has filed a lawsuit against the Trump administration, alleging that federal agencies are unlawfully blocking access to over $3.1 billion in congressionally appropriated funds.
The lawsuit, filed in the U.S. District Court for the Eastern District of Pennsylvania, claims that the funding freeze affects programs such as Solar For All, greenhouse gas emissions mitigation, and weatherization assistance.
The lawsuit argues that President Trump’s executive order pausing Inflation Reduction Act (IRA) and Infrastructure Investment and Jobs Act (IIJA) funds violates the Constitution by unilaterally restricting state funds. Despite temporary restraining orders requiring federal agencies to restore access, Pennsylvania agencies have yet to receive the funds.
The suit names multiple federal agencies, including the EPA and DOE, as defendants. Shapiro is the first governor to initiate legal action, though Kentucky Gov. Andy Beshear has joined a separate multistate lawsuit. The case seeks a court order declaring the freeze unlawful and mandating the immediate release of funds.
February 12: Record-Breaking Growth in Renewable Energy in US Threatened by Trump
The U.S. saw a record 48.2 gigawatts of new renewable energy capacity in 2024, driven by falling costs and incentives from the Inflation Reduction Act (IRA), according to a Cleanview report.
Despite this growth, the sector faces uncertainty as President Trump pledges to end federal support for clean energy. Renewables accounted for 93% of new capacity last year, with solar and battery storage leading the expansion, particularly in Republican-led states like Texas and Florida.
Wind power, however, has struggled due to supply chain disruptions, rising costs, and infrastructure challenges. Experts warn that scaling back federal support could undermine U.S. competitiveness in the global renewable energy market. While some projects already in progress may proceed, future expansion is uncertain.
Republican and local officials are urging Congress to maintain renewable energy tax credits, highlighting economic benefits such as job creation and lower energy costs. The extent of Trump’s impact on the sector remains unclear, with experts warning of potential setbacks depending on policy decisions.
For Fun:
February 18: Researchers Link a Gene to the Emergence of Spoken Language
Scientists have identified a genetic variant that may have played a crucial role in the evolution of human speech, according to a new study published in Nature Communications.
The research focuses on the NOVA1 protein, which is essential for brain development and found only in humans. Using CRISPR gene editing, researchers replaced the NOVA1 protein in mice with the human variant, leading to changes in how the animals vocalized.
Baby mice with the human version squeaked differently when their mothers approached, while adult males chirped differently when encountering a female in heat. This suggests NOVA1 influences vocal communication, much like speech in humans.
Unlike the previously studied FOXP2 gene, which is also found in Neanderthals, the human-specific NOVA1 variant appears unique to Homo sapiens. Scientists hope these findings will not only shed light on the origins of speech but may also help in diagnosing and treating speech-related disorders in the future.