Tax Policy/News:

March 9: Treasury releases 'Greenbook' on Biden's tax proposals

The Treasury Department detailed the tax provisions in the Biden administration's newly released budget plans for the fiscal year 2024 on Thursday. The budget proposal doesn't address the thorny issue of tax extenders with most of the temporary provisions of the Tax Cuts and Jobs Act of 2017 due to expire in 2025.

The budget plan would also levy a billionaire minimum tax of 25% on the wealthiest taxpayers to ensure the top 0.01% pay taxes as they go, just like everyone else who earns a paycheck. In addition, the plan would raise the tax rate on corporate stock buybacks to help reduce the differential tax treatment between buybacks and dividends and encourage businesses to reinvest profits in their workers or in the company's growth.

Other provisions would aim to make the Medicare Trust Fund solvent for another 25 years by expanding the Net Investment Income Tax on income over $400,000 to cover all pass-through business income not otherwise covered by the Net Investment Income Tax or self-employment taxes, and by increasing the additional Medicare tax rate and the Net Investment Income tax rate by 1.2 percentage points above $400,000 for a total Medicare tax rate of 5% on high-income taxpayers.

Among the main proposals is implementing a global minimum tax to strengthen the taxation of corporations' foreign income by ensuring that all multinationals pay at least the minimum rate on their earnings in each jurisdiction, thereby stopping the race to the bottom on corporate tax rates and leveling the playing field for U.S. businesses.

The plan would raise the tax rate on corporate stock buybacks to help reduce the differential tax treatment between buybacks and dividends and encourage businesses to reinvest profits in their workers or in the company's growth.

"As we anticipate the Biden administration's 2024 budget proposal and corresponding Treasury"Greenbook," it will be interesting whether there is a position stated with respect to tax extenders," said Jen Acuna, a principal in the federal legislative and regulatory services group in the Washington National Tax office of KPMG, in a statement Thursday ahead of the Greenbook's release.

"Especially the tax provisions that are set to expire in 2025, which will significantly impact individual and corporate taxpayers across the board. The expiring 2025 TCJA tax provisions are a hurricane that should be on everyone's radar. While they may be brewing a distance away, they'll come at taxpayers full force when they hit." The proposal would establish a "Presumptive eligibility" concept to determine when a taxpayer would be eligible to claim a monthly specified child allowance or receive a monthly advance child payment.

Another proposal is often talked about too but seldom makes its way into law, aiming to close the estate and gift tax breaks that allow the wealthy to reduce their tax by using complicated trust arrangements to transfer assets to their heirs.

"While the tax proposals that will be put forth by the administration later today are unlikely to get much traction in a divided Congress, it is the job of the President to reinforce the current administration's view of the tax system for the American people and to keep these ideas alive in their minds as we head into the 2024 elections," said John Gimigliano, principal-in-charge of the federal tax legislative and regulatory services group in the Washington national tax office at KPMG, in a statement.

March 9: Here’s what Biden’s 2024 budget does on taxes

President Biden is playing the hits on tax policy in his budget for the fiscal year 2024, revisiting a number of Democratic classics proposed by his and previous administrations that are sure to be ignored by Republicans.

The proposals include a beefed-up version of the child tax credit, a boost in the corporate tax rate from 21 to 28 percent, a minimum income tax on billionaires, an expansion of the corporate buyback tax from 1 to 4 percent, an expanded earned income tax credit for low-income workers, tax credits for affordable housing, as well as an increase in the Medicare tax rate for high earners that was announced earlier this week.

The largest single revenue raiser in the proposal is the increased corporate tax rate, which the White House Office of Management and Budget says will bring in $1.3 trillion over the next decade.

"The only thing that might see some real legislative potential here is something on the child tax credit - may be refundability for the child tax credit paired with some things that aren't here in the budget, like bonus depreciation and research and development," said Erica York, an economist with the Tax Foundation, a right-leaning non-partisan think tank, in an interview.

Advocates for the CTC also celebrated its inclusion in Biden's 2024 budget, along with the earned income credit, after the tax deal fizzled last December.

Bipartisan interest in stock buyback taxes: Another tax change proposed by Biden that could potentially gain some traction is on stock buybacks. Buybacks were taxed last year at 1 percent as part of the Democrats’ Inflation Reduction Act and the new budget proposes boosting that tax at 4 percent.

Buybacks were illegal and considered a form of market manipulation until 1982, according to the Harvard Law School Forum on Corporate Governance.

"The tax code currently offers special treatment for the types of income that wealthy people enjoy," a summary of the president's budget provided by the White House reads.

Democrats are keen to broadcast such messages despite the lack of political feasibility for many of the proposals.

“[The budget reforms] our tax code to reward work, not wealth,” Shalanda Young, director of the White House Office of Management and Budget, said on a call Thursday morning. “That’s a very clear contrast with Congressional Republicans.”

March 7: Tax season so far: ERC abuses and new frauds

Third-party marketing of the Employee Retention Credit is causing concern, with the IRS reaching out to employers to be cautious in claiming a credit that they may not be eligible for, and to practitioners, reminding them of their Circular 230 due diligence responsibilities.

Stephen Mankowski, tax chair of NCCPAP, the National Conference of CPA Practitioners, shared a number of other important points of the season so far: There are over 8 million refunds averaging $1,900 each meaning refunds are running about 10% lower than last year.

There are over 8 million refunds averaging $1,900 each meaning refunds are running about 10% lower than last year. This trend is expected to continue due to there being no more stimulus payments, Recovery Rebate Credits, Child Tax Credits, and above-the-line charitable contributions.  Earned Income Tax Credits and Additional Child Tax Credits were already released with deposits set for February 28 unless there are issues with the return.

"These companies are very aggressive at promoting themselves," said Mankowski. "In some cases, they will lower their fee if the businessman pays them upfront. For example, they tell them that they qualify for a $100,000 credit. They will lower their normal fee from 15% to 10% if they are paid upfront. They will amend the Form 941, but the taxpayer - and their CPA - has to amend the corporate and/or the personal return to reflect the Form 941." 1040 forms Section 10.34 of Circular 230 describes a tax professional's duties and obligations while practicing before the IRS and authorizes specific sanction for violations of those duties and obligations.

Forms 14157 and 14157-A are to report tax preparer fraud or misconduct and/or to file a complaint against a tax return preparer or tax preparation business.

"Regarding ERC, the practitioner community is asking for guidance from the Office of Professional Responsibility," Mankowski said. "The goal is to work on compliance on a pre-filing basis rather than during filing. If a question arises as to the extent of due diligence on the part of the preparer with regard to ERC, it is unclear how the IRS will check to make sure the affected returns were properly amended." Practitioner awareness of fraud schemes are getting more complicated, but many are simplistic in nature and mitigated by due diligence and common sense, Mankowski noted.

Economic News/Policy: 

March 12: Economy Week Ahead: U.S. Inflation and Retail Sales in Focus

Tuesday: The Labor Department releases its February consumer-price index, a closely watched measure of what consumers pay for goods and services. Consumer prices rose 6.4% in January from a year earlier, reflecting a slight cooling of still-high inflation.

China’s National Bureau of Statistics releases January and February figures on industrial production, retail sales, and fixed-asset investment, a measure of infrastructure and equipment investing.

Wednesday: The Commerce Department releases February retail sales figures covering spending at stores, online, and at restaurants. Retail spending increased a seasonally adjusted 3% in January from the prior month, the largest monthly gain in nearly two years, following two consecutive months of declines.

The Labor Department releases its February producer-price index, a measure of prices that suppliers charge businesses and other customers. The index rose 6% in January from a year earlier, compared with the prior month’s 6.5% rise.

Thursday: The Commerce Department releases February figures on new residential construction and building permits. Housing starts fell 4.5% in January from the prior month, while building permits inched up 0.1% in the same period.

The Labor Department reports the number of worker filings for unemployment benefits in the week ended March 11. Initial jobless claims rose in the prior week but remained historically low.

The European Central Bank announces its latest interest-rate decision. The ECB raised interest rates by a half-percentage point last month, its fifth large increase in a row, and signaled another half-point rate increase is possible in March.

Friday: The Federal Reserve releases February industrial-production figures, which measure the output of factories, mining, and utilities. U.S. industrial production increased 0.8% in January from a year earlier, the smallest annual gain since March 2021.

The University of Michigan releases its preliminary reading of U.S. consumer sentiment for March. Consumer sentiment improved last month for the third consecutive month as households became more optimistic about the economic outlook.

March 12: Yellen says banking system is strong in wake of Silicon Valley Bank collapse

Treasury Secretary Janet Yellen addressed the widespread concern in the U.S. banking system after the collapse of Silicon Valley Bank last week, arguing that Americans should feel confident the banking infrastructure is "Safe and sound."

"America's economy relies on a safe and sound banking system," Yellen said in an interview with CBS's "Face The Nation." "Americans need to feel confident that the banking system is safe and sound."

The failure of the bank last week sent shockwaves through the tech industry, as many startups and tech companies relied on the bank for financing. After bank officials announced plans to raise billions of dollars in capital to sure up its books, depositors flocked to pull their money from the bank.

Its collapse even saw shares in other major banks drop last week, but Yellen said the federal government was working to ensure depositors would be able to get their money and to contain any risk of contagion in the banking system.

Yellen was reserved in saying what the ultimate outcome would be for Silicon Valley Bank after the Federal Deposit Insurance Corporation took the bank into receivership. The Fed has hiked interest rates as it tries to tame inflation, and Yellen said it was up to the central bank to continue to decide how best to proceed in that regard.

March 10: Economy adds 311K jobs in February, unemployment rises to 3.6 percent

The U.S. economy added 311,000 jobs in February and the unemployment rate rose to 3.6 percent, according to data released Friday by the Labor Department.

Economists had been expecting around 225,000 jobs to be added in February and for the unemployment rate to remain at 3.4 percent. Despite the strong headline jobs gain, the report showed signs the labor market may finally be buckling under the pressure of eight consecutive interest rate hikes by the Federal Reserve.

Average hourly earnings - a measure of wages - rose 0.2 percent in February to land at a 4.6 percent annual increase, falling below expectations. Prices were up 6.4 percent annually in the consumer price index and 5.4 percent annually according to the personal consumption expenditures price index in January.

The report comes on the heels of a surprisingly strong January jobs report in which 517,000 jobs were added to the economy.

The labor force participation rate also increased slightly to 62.5 percent in February from 62.4 percent in January. Friday's jobs number means the ratio of job seekers to open jobs dropped down to 1.8 from 1.9, another sign that inflation pressure from the job market could be easing.

March 10: Biden budget vs. House GOP: Values on display in debt fight

For President Joe Biden, his federal budget is a statement of values — the dollars and cents of a governing philosophy that believes the wealthy and large corporations should pay more taxes to help stem deficits and lift Americans toward middle-class stability

In the view of his chief congressional critics led by House Speaker Kevin McCarthy, the budget is also the arena where they intend to challenge the president with values of their own - slashing the social safety net, trimming support for Ukraine, and ending the so-called "Woke" policies rejected by Republicans.

While Republicans newly empowered in the House have bold ideas about rolling back government spending to fiscal 2022 levels and putting the federal budget on a path to balance within the next decade, they have no easy ideas for how to meet those goals.

Squaring off, it's a fresh take on the budget battles of a decade ago when Biden, as vice president, confronted an earlier generation of "Tea party" House Republicans eager to cut the debt load and balance budgets.

Beyond the dollars and cents, the new era of House Republicans sees the coming debt ceiling fight as a battle for their very existence - a test of their mandate in the new House majority to push back against liberals in Washington.

The White House's budget plan would cut the deficit by $2.9 trillion over 10 years, a rebuttal to GOP criticism that Biden's deficit spending to address the pandemic has fueled inflation and hurt the economy.

McCarthy believes he has won a first round in the budget battles by pushing Biden to negotiate over the debt ceiling.

"The House Republican budget plan is in the witness protection program," said Rep. Hakeem Jeffries, the chamber's Democratic leader. “It’s in hiding.”

Energy and Environmental Policy/News:

March 9: House Republicans announce major energy package as a top priority bill

House Republicans on Thursday announced that a major energy package that has been in the works for weeks will be known as H.R.1, signifying that it's the party's top priority for the congressional session. The bill, called the Lower Energy Costs Act, is expected to include a large slate of energy policy proposals.

It includes proposals aimed at speeding up the country's approval process for energy and mining as well as limiting states' ability to block projects like pipelines that run through their waters, according to press releases from the House Natural Resources and Transportation and Infrastructure Committee.

The bill is also expected to include suggestions from the House Energy and Commerce Committee, which on Thursday took up legislation that would prohibit a ban on fracking, limit the president's authority to block cross-border project permits - such as President Biden's blocking of the Keystone XL pipeline - remove restrictions on natural gas imports and exports, as well as repeal portions of the Inflation Reduction Act that provided funding to address climate change and pollution.

Majority Leader Steve Scalise issued a statement Thursday saying he’ll formally introduce the bill next week.

"I am proud to announce that I will be introducing our H.R. 1, the Lower Energy Costs Act, to cut red tape and increase energy production here at home to lower energy costs and stop our reliance on hostile foreign dictators for our energy and minerals," Scalise wrote.

"With the introduction of the Lower Energy Costs Act, we will put a stop to the war on American energy, become energy independent again, and lower costs for families who are struggling," he added.

While the legislation overall is not expected to cross the finish line, there are bipartisan talks on speeding up energy project approvals, a subject that's also known as permitting reform.

For Fun: 

March 9: The first wiring map of an insect's brain hints at the incredible complexity

Scientists have created the first detailed wiring diagram of an insect brain.

The brain, of a fruit fly larva, contained 3016 neurons connected by 548,000 synapses, the team reported Thursday in the journal Science.

Previous wiring diagrams, known as connectomes, were limited to worms and tadpoles with just a few hundred neurons and a few thousand synaptic connections.

The fruit fly larva connectome is an important advance because it's "Closer in many regards to a human brain than the other ones," says Joshua Vogelstein, an author of the study and an associate professor of biomedical engineering at Johns Hopkins University.

The challenges scientists faced in producing the fruit fly larva connectome show just how far they still have to go to map a human brain, which contains more than 80 billion neurons and hundreds of trillions of synapses.

Mapping the complete human connectome is still many years off. So in the meantime, researchers hope this new wiring map of the fruit fly can offer clues to how all brains learn, for example, and remember, and control an animal's behavior.

The brain of a fruit fly larva, like a human brain, has a right and left side. But when researchers mapped the connections in the insect brain, "one surprise [was] how similar the right and the left sides are," Vogelstein says.

In humans, the right and left sides of the brain can have very different wiring. Circuits involved in speech tend to be on the left, for example, while circuits that recognize faces tend to be on the right.

The new map will help scientists study the ways learning changes the brain, how brain wiring differs by sex, and how wiring changes during an animal's development.

Despite the difficulty, mapping more complex brains is worth the effort, Nuno Maçarico da Costa, an associate investigator at the Allen Institute in Seattle says because it could eventually help scientists understand how a human brain can be affected by disorders like schizophrenia.