Legislation Updates, Crypto News, Potential ERC Changes
Tax Policy:
September 27: Opinion: ERC Needs Clearer Guidelines; Not Elimination for Q4
The ERC is a refundable tax credit against certain employment taxes equal to 50% of the qualified wages an eligible employer pays to employees after March 12, 2020, and through December 31, 2020. As of January 1, 2021 the credit amount was increased to 70% of qualified wages paid from January 1, 2021 to December 31, 2021. Eligible employers can get immediate access to the credit by reducing employment tax deposits they must otherwise make. The credit can provide up to $5,000 for each full-time employee retained from March 13, 2020 to December 31, 2020 and up to $28,000 for each retained employee for January 1, 2021 to December 31,
September 27: Senate Republicans block measure to fund government, stave off U.S. default
Senate Republicans on Monday blocked a bill that would fund the government, provide billions of dollars in hurricane relief and stave off a default in U.S. debts, part of the party's renewed campaign to undermine President Biden's broader economic agenda. Hours before the Monday evening vote, Senate Minority Leader Mitch McConnell staked his party's position - that Republicans are not willing to vote for any measure that raises or suspends the debt ceiling, even if they have no intentions of shutting down the government in the process.
"None of this needs to happen. None of it. The only reason we're here is because Republicans are making this a possibility by preventing the government from paying its bills," Senate Majority Leader Charles E. Schumer said in a speech opening the floor. He trained his fire again on Republicans after the failed 48-50 vote, saying the GOP had "Voted to drive our country straight to a government shutdown and the first default in our country's history." In doing so the Democratic leader on Monday also left the door open for the chamber to try again this week - perhaps moving a measure that funds the government without addressing the debt ceiling for now.
Officials in the past have studied whether they could prioritize certain debt payments while delaying obligations, but some at the Treasury Department previously have described such a process as largely unworkable, since many investors could still consider the U.S. government to be in default if it started missing any scheduled payments. Democrats have also pledged to prevent a government shutdown, raising the odds that lawmakers can still stave off a worst-case scenario by the end of week - so long as the two parties cooperate. Even as they voted against the suspension Monday, Republicans maintained they do not want the U.S. government to default.
September 27: Biden tax changes look uncertain in Congress
House Democrats had originally set a Sept. 27 deadline for voting on both the $1 trillion bipartisan infrastructure bill that the Senate passed in August, as well as the larger $3.5 trillion tax and spending bill that Republicans firmly oppose and that Democrats would have to pass in the evenly divided Senate through a budget reconciliation maneuver.
"We're in a bit of a holding pattern," said Marc Gerson, a former majority tax counsel to the House Ways and Means Committee who chairs the tax department at the law firm Miller & Chevalier.
It's difficult to determine what the underlying spending priorities will be and the associated tax offsets will be." The broad outlines of the tax provisions remain at play for right now, but some parts have become clearer after a markup this month in the House Ways and Means Committee.
One thing has been clear for a long time, and that's the desire of Democrats to undo many of the provisions that Republicans pushed through with the Tax Cuts and Jobs Act of 2017 when they were in control of both houses of Congress and the White House, and could use the budget reconciliation tactic. One area where there could be a tax increase is in the corporate income tax rate, which the TCJA lowered to 21%. "This is not a tax reform package," said Simmens.
"For the most part, it's a rollback of what we saw in 2017. I think rates are an issue again. We have a Democratic senator from Arizona who has indicated an unwillingness to increase taxes, but I do think it's something that at some point there's going to have to be movement. I do think there is enough support to move that 21 rate north, whether it's 25 or 26 and a half or whatever, that's one thing. But I do think there will be movement on that." He also expects to see some movement on individual income tax rates. "The capital gains rate, or timing of how capital gains tax is imposed, will probably be in play," said Simmens.
September 24: Dems agree to narrow Biden plan giving IRS bank data
Democrats have reached a deal to narrow President Joe Biden's plan to require financial institutions to report account flows to the Internal Revenue Service in a bid to improve tax compliance, according to a key House Democrat.
House Ways and Means Chairman Richard Neal said he and other Democratic leaders are planning to set a threshold higher than the $600 proposed by the Biden administration that would trigger a bank to report total account inflows and outflows to the tax collection agency.
The idea is one of dozens of tax proposals that Democrats are currently considering to fund a $3.5 trillion bill to invest in climate programs, child care, and education. The White House proposal to give the IRS more visibility into the deposits and outflows of many bank account owners has run into heavy lobbying from banks, along with resistance from Republicans and some Democrats who are concerned that it would give the IRS too much of taxpayers' personal data.
Tailoring proposal Senate Finance Committee Chairman Ron Wyden said he wants to tailor the proposal so that it focuses on high-income earners and that he is working to come up with a process to make it administrable for banks and the IRS. The original White House proposal could raise as much as $463 billion over a decade, according to a Treasury Department estimate.
The Treasury Department has pushed for the expanded bank reporting requirements as a way to reduce the tax gap, which is the difference between what is owed in taxes and what is actually collected. The Treasury estimates tax compliance is at 99% for income where there is third-party reporting.
September 23: In Push to Tax the Rich, White House Spotlights Billionaires’ Tax Rates
The White House economists published on Thursday a new analysis that seeks to show a gap between the tax rate that everyday Americans face and what the richest owe on their vast holdings. The analysis suggests that the wealthiest 400 households in America - those with net worth ranging between $2.1 billion and $160 billion - pay an effective federal income tax rate of just over 8 percent per year on average.
The White House is basing that tax rate on calculations using data on high earners' income, wealth, and taxes paid from the Internal Revenue Service and the Federal Reserve's Survey of Consumer Finances. Most measures of tax rates do not use the White House method of counting asset gains as annual income. The independent Tax Policy Center in Washington estimated this year that in 2015, the highest-earning 1,400 households in the country paid an average effective tax rate of about 24 percent, compared with an average rate of about 14 percent for all taxpayers.
The White House economists - Greg Leiserson, senior economist at the Council of Economic Advisers, and Danny Yagan, the chief economist at the budget office - wrote that their calculation of low tax rates for the very wealthy flows from two types of preferential treatment for certain income in the tax code. Mr. Leiserson and Mr. Yagan noted that "The wealthy can choose when their capital gains income appears on their income tax returns and even prevent it from ever appearing." “If a wealthy investor never sells stock that has increased in value, those investment gains are wiped out for income tax purposes when those assets are passed on to their heirs under a provision known as stepped-up basis,” they wrote.
Mr. Biden has proposed changing both those tax treatments. He would raise the capital gains rate to match the rate paid on wage income. And he would eliminate the stepped-up basis provision for wealthy heirs, But Democrats in Congress have already pushed back on both efforts. The House Ways and Means Committee approved a tax plan this month for the spending bill that left the stepped-up basis provision intact and raised the capital gains rate by much less than Mr. Biden proposed.
September 22: Senate confirms Biden nominee for top Treasury tax position
The Senate voted on Wednesday to confirm President Biden’s nominee Lily Batchelder to serve as assistant secretary for tax policy in the Treasury Department.
In the key role, Batchelder will serve as senior advisor to Treasury Secretary Janet Yellen for developing and implementing tax policy. She will oversee the Office of the Tax Legislative Counsel, the Office of the International Tax Counsel, the Office of the Benefits Tax Counsel, and the Office of Tax Analysis.
Crypto News:
September 27: Senators aim to increase oversight of cryptocurrency mining with new bill
Introduced legislation Monday intended to increase oversight of cryptocurrency mining overseas. The bill would require the Treasury Department to compile and submit to Congress a report on how nations are using and mining cryptocurrency, along with how much cryptocurrency has been mined since 2016 within both the U.S. and countries including China. The Treasury would be required to examine the impact of cryptocurrency mining on supply chains for critical resources such as semiconductors, the global shortage of which has caused major disruptions in production for products including automobiles.
Cryptocurrency markets have also come under scrutiny due to escalating ransomware attacks, with cybercriminals often using these markets to facilitate payments from victims. As a result, the federal government has taken action, with the Justice Department issuing its first sanctions against a virtual currency exchange last week due to the cryptocurrency exchange SUEX OTC allegedly facilitating ransomware attack payments.
China’s central bank went one step further last week when it ruled all cryptocurrency transactions illegal due to security concerns and the use of cryptocurrency exchanges in criminal activities.
September 23: Regulators Racing Toward First Major Rules on Cryptocurrency
Stablecoins now underpin a growing share of cryptocurrency transactions globally, at a time when the total value of outstanding crypto tokens like Bitcoin is about $2 trillion - roughly the same value as that of all United States dollars in circulation.
Regulators are worried about whether stablecoin firms hold enough liquid assets to back up the value of the currency they issue. In addition to cash and short-term Treasury bonds - which are considered safe and easy to redeem - issuers of stablecoins USDT and USDC, for example, also have at least until recently held reserve assets like unsecured debt in corporations, which is much riskier and harder to quickly turn into cash, especially in times of financial turmoil.
Federal officials said in interviews that they are considering using expansive powers created under the Dodd-Frank law, enacted in the aftermath of the 2008 financial crisis, to initiate a review and potentially declare stablecoins "Systemically important," a finding that would likely subject them to strict federal regulation.
The world's most popular stablecoin is USDT, issued by Hong Kong-based Tether; it currently represents more than half the global stablecoin supply. The stablecoin issuer Paxos, for example, supports the move to regulate stablecoins. Industry executives argued in these sessions that cryptocurrency, relying in part on stablecoins, will help extend banking and payment services globally to billions of people who now have limited access to the financial system.
September 22: Bitcoin Adoption: Which Countries Could Follow El Salvador?
The Bitcoin Law became effective on September 7, compelling businesses to accept bitcoin as a form of payment for all transactions.
El Salvador has made the first move; which other countries could follow? Panama Panama's move towards bitcoin adoption occurred on the same day that El Salvador became the first country to accept bitcoin as legal tender. Unlike El Salvador, Panama did not decree that businesses should accept bitcoin or any other cryptocurrency.
Mandatory adoption of bitcoin rollout generated criticism as retailers and consumers were not comfortable being compelled to use bitcoin as a currency all of a sudden.
Ukraine The Ukrainian Parliament voted almost unanimously to legalize and regulate cryptocurrency just a day after El Salvador's official bitcoin adoption. Major world economies are unlikely to support a cryptocurrency like bitcoin because bitcoin is decentralized and cannot be controlled by a central bank.
Bottom Line: The handwriting on the wall is easy to read. If major economies are launching digital currencies to compete with bitcoin, they're certainly not going to adopt the cryptocurrency like El Salvador.
September 22: Robinhood launching cryptocurrency wallet feature
Popular trading and investing app Robinhood on Wednesday announced the launch of a new cryptocurrency wallet feature on its platform as more users are looking to invest in digital currency.
September 7: In Global First, El Salvador Adopts Bitcoin as Currency
El Salvador on Tuesday became the first country to adopt Bitcoin as legal tender, allowing the cryptocurrency to be used in any transaction, from buying a cup of coffee to paying taxes.
"We really don't know how that system is going to work," said Evelin Vásquez, 52, who sells mobile phones in San Salvador, the capital, and knows Bitcoin's fluctuations in value could make her savings disappear.
To promote Bitcoin's use, the government launched a digital wallet, called "Chivo," which is Salvadoran slang for cool, and will pay a $30 Bitcoin bonus to citizens who download it. The World Bank and the International Monetary Fund, which is considering a separate financing deal with El Salvador, have said that adopting Bitcoin could leave a country open to money laundering and other illicit financial activity. El Zonte, a seaside village in El Salvador, became a litmus test for the currency's national adoption after an anonymous donor began seeding Bitcoin in the community in 2019.
Crypto advocates say Bitcoin is just the first step into a bigger world of alternative financial services that could facilitate receiving remittances from abroad - which Salvadorans increasingly rely upon - and attract investors.
Matthew Sigel, head of digital assets research at the global asset management firm VanEck, has questions about how the government fund will operate but believes crypto can help El Salvador "Shake off the yoke of dollar colonialism," perhaps with creative investment vehicles that bypass traditional channels and Bitcoin mining operations that harness natural resources.
Infrastructure Bill:
September 28: Pelosi Plans Infrastructure Vote as Safety Net Bill Remains Mired in Rifts
Speaker Nancy Pelosi of California signaled to Democrats on Monday that she would push ahead with a vote this week on a $1 trillion bipartisan infrastructure bill, working to salvage President Biden's agenda in Congress even as the party remained divided over a broader social safety net measure.
In private remarks to her caucus on Monday evening, Ms. Pelosi effectively decoupled the two bills, saying that Democrats needed more time to resolve their differences over the multi-trillion-dollar social policy plan.
Speaker Pelosi said her shift in strategy came only after it became clear that Democrats would have to shrink the size of the reconciliation package from $3.5 trillion. President Biden has been negotiating privately with conservative-leaning Democrats to settle on a final number. Speaker Pelosi said that Democrats had been on schedule to push through the reconciliation package until 10 days ago, when she heard that the overall cost had to come down, according to a person familiar with her remarks, who described them on the condition of anonymity.
It has been clear for weeks that conservative-leaning Democrats would not accept the size of the bill. Moderate Democrats remained confident that enough Republicans would support the infrastructure bill to allow it to clear the House, sending the legislation to Mr. Biden's desk.
Spending Bill:
September 27: Democrats scramble to satisfy disparate members on spending package
House Democrats are scrambling to make changes to their $3.5 trillion spending package in order to satisfy disparate groups of members in time for a floor vote as soon as possible. With Republicans unanimously opposed to the bill, Democrats can only afford three defections, and some moderates voted against parts of the massive legislation as it was considered by various committees.
Democrats are aiming to pass the bill using a process called reconciliation that prevents Republicans in the Senate from filibustering the measure. The exact timing of a vote is unclear as Pelosi balances demand from liberals and centrists related to the $3.5 trillion package and a separate bipartisan infrastructure bill that the Speaker now says will get a House vote on Thursday. Some moderate Democrats have also raised concerns about various tax and energy provisions that are currently in the bill.
Pelosi has signaled the figure will go lower as spending negotiations continue between the House and the Senate, where Democrats would need all members to be on board to pass the bill in the evenly split chamber. Progressive threatened to block the physical infrastructure bill, which passed the Senate last month if it's brought to a floor vote before the social spending package, concerned about the fate of the reconciliation plan in the lower chamber if the smaller measure has already passed.
September 26: For Schumer and Pelosi, the Challenge of a Career With No Margin for Error
Last week, as all outward appearances suggested gridlock on Capitol Hill, Senator Chuck Schumer, Democrat of New York and the majority leader, and Speaker Nancy Pelosi were in perpetual motion, grasping to salvage their $3.5 trillion social policy and climate change bill.
On Wednesday, Ms. Pelosi sandwiched a confab with the Ways and Means chairman, Representative Richard E. Neal, between meetings with the leaders of Britain and Australia; greeted House Democrats as they picked up lunches in her office; rushed to the White House to meet with President Biden and Mr. Schumer; joined a messaging meeting on the bill with the White House communications director, Kate Bedingfield; rallied with the League of Conservation Voters; met with the leaders of the House's factionalized caucuses; and then headed to the home of Representative Donald S. Beyer Jr. in Northern Virginia for a Democratic Congressional Campaign Committee dinner and, yes, more strategizing.
Now, Monday is upon her, and the larger bill is nowhere close to ready, so Ms. Pelosi tried to create at least the appearance of progress in hopes of securing liberal votes for the infrastructure bill. On Friday morning, she convened her top four lieutenants and the leaders of more than a dozen committees that have pieces of the bill. Several House members say they cannot accept the bill's get-tough approach to prescription drug prices.
In a letter to Ms. Sinema and Mr. Manchin, they expressed their opposition to several provisions in the bill aimed at combating climate change, and also came out against increasing a minimum tax on overseas income from U.S. companies above where it was set in 2017. Several New York and New Jersey Democrats have demanded the bill include the full restoration of the state and local tax deduction, which is vital to their constituents but is anathema to liberals who call it a giveaway to the rich. Representatives Lou Correa of California and Jesús García of Illinois have said they are "No's" unless the final bill includes "a pathway to citizenship for undocumented immigrants," a provision the Senate parliamentarian has already disallowed under the chamber's strict budget rules.
September 25: House Democrat votes against advancing party's $3.5T plan
Democratic Rep. Scott Peters (Calif.) joined Republicans in voting against advancing his party's $3.5 trillion social spending plan, as House leadership aims to vote on the package as early as next week. Peters, a member of the House Budget Committee, voted with 16 Republicans against advancing the measure from the panel on Saturday afternoon. The legislation was able to advance from the Democratic-led committee with 20 votes.
The package now heads to the House Committee on Rules, and leadership is expected to make further changes to the measure before it's brought to a full vote in the lower chamber.
In his comments during the virtual markup on Saturday, Peters said that, while the committee won't be making "Any substantive changes to the bill" during the process, he still thinks the issues he voiced "Need to be addressed before we move this bill off the House floor."
Peters is one of three moderate House Democrats that bucked party lines weeks back, voting against including a measure in the reconciliation package that would lower drug prices. His vote on Saturday highlights some of the obstacles leadership faces as it struggles to unite different factions of the party amid negotiations and ahead of a vote on a bipartisan infrastructure package slated for early next week in the House.
September 22: House Approves Spending Bill and Debt Limit Increase
September 22: Manchin: Biden told moderates to pitch price tag for reconciliation bill
Sen. Joe Manchin (D-W.Va.) said President Biden urged a group of moderate lawmakers to come up with a top-line number they could support for Democrats' sweeping reconciliation bill. Sen. Manchin told reporters that he didn't give Biden a number he could get behind and that Biden didn't give him a hard deadline for when moderates needed to turn over that number.
"The quicker the better, but I'm not sure if they're going to get there," Manchin told reporters, adding that they could get a reconciliation bill "Eventually." But that price tag has run into hurdles from moderates, including Manchin and Sen., who have said they can't support a bill of that size. The reconciliation bill won't be ready to go by Monday, the deadline that the Speaker previously agreed to with House moderates for giving the infrastructure bill a vote.
Manchin, speaking to reporters, warned progressives against holding the Senate-passed infrastructure bill "Hostage." Manchin was a part of the Senate bipartisan group that negotiated the bill in August. "To hold up a bill that every part of this country needs doesn't make any sense at all," Manchin said, adding that Biden "Would love to see that bill move forward."
September 22: 11 senators urge House to pass $3.5T package before infrastructure bill
A group of 11 Democratic senators is urging party leadership to stay on course with its original "Dual track" plan to pass a $3.5 trillion social spending bill in both chambers before taking up a bipartisan infrastructure deal in the House. The senators said they voted to pass a nearly $1 trillion infrastructure bill in August with "The clear commitment" that the deal would move alongside the Democrats' larger spending plan. They said passing the smaller physical infrastructure bill in the House before the social spending plan, which will move through the budget reconciliation process to bypass a GOP filibuster, "Would be in violation of that agreement."
"The House of Representatives should wait to pass the bipartisan infrastructure bill until the budget reconciliation bill, which enacts the rest of the President's Build Back Better agenda, is sent to the president's desk." Party leaders had previously set their sights on pushing the social spending package through the House alongside the bipartisan bill before the end of September after the Speaker promised moderates a vote on the infrastructure package by Sept. 27.
As Democrats struggle to wrap up the social safety net package before that date, progressives have threatened to withhold their support for the smaller bill if Pelosi forces a vote on it on its own. In their statement on Wednesday, the senators expressed support for progressives who say they won't vote for the bipartisan deal until the social spending bill passes.
September 22: Top Democrat: 'Virtually no chance' $3.5T bill will be finished before October
Party leaders had previously set their sights on pushing the spending package through the House before the end of September alongside a $1.2 trillion bipartisan bill already passed by the Senate. With the larger measure unlikely to hit the floor before a Monday deadline for a vote on the Senate-passed bill, progressives are threatening to withhold their support for the bipartisan package.
Rep. John Yarmuth (D-Ky.), chairman of the House Budget Committee on Wednesday said that "There is no deadline" to pass the reconciliation package and expressed concerns "That the issues are getting conflated a little bit in terms of the pressure." The Speaker last month promised moderates a vote on the bipartisan infrastructure package by Sept. 27. Yarmuth said ultimately moderates will have to vote for the package.
In recent days, moderates have stepped up their threats to vote against the reconciliation package, warning they'll vote with Republicans to down the measure in the House, where Democrats can afford only three defections to pass their plan if progressives tank the bipartisan infrastructure deal.
For Fun:
A hamster named Mr. Goxx has been trading cryptocurrencies in a rigged box since June. The hamster determines which crypto to buy or sell by running on a wheel and strolling through one of two tunnels. Since it started trading on June 12, Goxx's crypto portfolio returned 24% as of Friday.
Mr. Goxx's caretaker built the "Goxx Box," a crypto-rigged office attached to its larger home that gives the hamster the ability to perform various exercises that then execute specific cryptocurrency trades.
First, Goxx runs on the "Intention wheel" to pick which one of about 30 cryptocurrencies to trade. Once the crypto is chosen, the hamster runs through one of two "Decision tunnels" that trigger either a buy or sell trade of the chosen cryptocurrency. Mr. Goxx's unidentified caretaker and business partner told Protos that the trades the hamster makes are automatically set to 20 euro increments.
September 14: Opinion: ERC Needs Clearer Guidelines; Not Elimination for Q4
The ERC is a refundable tax credit against certain employment taxes equal to 50% of the qualified wages an eligible employer pays to employees after March 12, 2020, and through December 31, 2020. As of January 1, 2021 the credit amount was increased to 70% of qualified wages paid from January 1, 2021 to December 31, 2021. Eligible employers can get immediate access to the credit by reducing employment tax deposits they must otherwise make. The credit can provide up to $5,000 for each full-time employee retained from March 13, 2020 to December 31, 2020 and up to $28,000 for each retained employee for January 1, 2021 to December 31.