IRS Audit Concerns, Climate Deal Funding, Railroad Strike
Tax Policy:
September 17: IRS Faces Tight Job Market and Competition for Talent as It Recruits Thousands
The IRS will need to sustain hiring over several years while offsetting expected retirements of its aging workforce. To meet its hiring needs, the IRS might target both young workers and those nearing retirement. The IRS might try to revive on-campus recruiting efforts that have been dormant while the agency wasn't hiring much.
At the back end of careers, the IRS could take advantage of mandatory retirement ages at some accounting firms and hire senior experts in areas such as partnership law to finish their careers in the government with more-regular hours.
Because of Senate procedural constraints, the new law lacks some salary flexibility and hiring rules that IRS executives and Democrats had wanted.
Staffing shortages in the IRS Human Capital Office represent "One of the biggest obstacles" to agency hiring, according to Erin Collins, the national taxpayer advocate, and an in-house IRS critic.
"The bad news is that these things have atrophied," said Ron Sanders, who ran IRS hiring under Mr. Rossotti before helping intelligence and defense agencies expand rapidly after the Sept. 11, 2001, terrorist attacks.
September 15: Yellen hails text message tax filing in a speech to IRS
Treasury Secretary Janet Yellen praised the notion of filing taxes via text message in a Thursday speech delivered to IRS employees in Maryland while championing the $80 billion funding boost for the agency recently passed by Congress. Her remarks come as the IRS works to deliver a report to Congress on how it could set up a free, direct e-filing tax return system.
Tax experts say that such a system could resemble widely available commercial software products that lead taxpayers through the process of filling out their tax returns, or it could send taxpayers pre-populated forms that they would simply need to approve.
Yellen praised IRS software developers for converting more than 200,000 lines of Assembly Language Code to the more modern Java programming script. Yellen in her speech again made the case that the intended target of increased enforcement at the IRS is wealthier Americans and big business.
"The top 1 percent of Americans were estimated to owe over a fifth of unpaid taxes - totaling around $160 billion," Yellen said.
In an interview with The Hill, newly appointed IRS Whistleblower Office Director John Hinman said that his department is looking forward to having more resources to better carry out its work.
September 14: Lucrative IRS program targeting wealthy tax cheats is withering from lack of funds
An IRS program with a 6-to-1 return on investment is withering from a lack of resources, lawmakers and tax experts told The Hill. The IRS whistleblower program rewards people for coming forward with information about tax cheats and typically pays rewards between 15 and 30 percent of the money the government collects using the whistleblower's information.
Tax advocates say that a high-functioning whistleblower program could be a more efficient way of increasing revenues from wealthier Americans and corporations, which the Biden administration has said is its intended target for increased IRS enforcement.
In an interview with The Hill, IRS Whistleblower Office Director John Hinman said that his department hopes to have more compliance resources at its disposal in order to help reduce the tax gap, which is the amount of money owed to the government each year that is not collected.
IRS "Operating divisions have had very limited compliance resources for many years, and those compliance resources have many priorities for them because they're so limited. So my goal of getting high-quality, actionable claims accepted by the operating divisions, to the extent that they do get additional compliance resources, that's going to be one of the biggest factors helping the whistleblower program here at the IRS," Hinman said.
"There appears to be solid bipartisan support for whistleblower programs across government and for the tax whistleblower program. There's equally broad support across Senate Finance. I know Sen. Grassley has spoken glowingly about how the program has functioned and how it can function even better," Pete Sepp, president of the National Taxpayers Union (NTU), a Washington lobbying group, said.
Dean Zerbe, a whistleblower attorney at ZMF Law and former tax counsel for the Senate Finance Committee under Grassley, told The Hill that the program is valuable because it can target wealthy tax avoiders more directly than generalized audits can. "I don't think people realize how much the IRS kind of shoots blanks, meaning that they audit folks and it just kind of comes up to zero or next to a zero. The whistleblower program is much better at really targeting the bad actors," he said.
September 14: IRS's extra enforcement funding brings audit worries
The additional $80 billion in funding over the next decade for the Internal Revenue Service from the Inflation Reduction Act is supposed to go toward improving taxpayer service, modernizing the IRS's outdated technology, increasing enforcement efforts, and hiring more staff to process tax returns and replace retiring employees, but many taxpayers are concerned the funds will lead to more audits.
The bill's full text has not yet been released, but according to a summary, it would also temporarily prohibit the hiring of additional IRS employees "Until a certain level of taxpayer services have improved, and for other purposes." That could well hamstring the IRS at a time when it needs the extra resources to deal with the continuing backlog of unprocessed tax returns from earlier this year and last year, as well as the millions of tax returns that are expected to flood the agency from tax extensions.
The IRS also has to deal with various other tax provisions from the Inflation Reduction Act, such as tax credits for renewable energy and electric vehicles, as well as implement the new "Book tax" on billion-dollar corporations and the excise tax on corporate share buybacks.
That has left some tax pros skeptical that the IRS can avoid using the extra funding it receives to avoid doing any audits of taxpayers who earn less than $400,000 per year.
"With the IRS getting that much additional funding and doing more audits, it's probably going to affect people at all levels and businesses as well," said Jim Brandenburg, a tax partner at Sikich.
Brandenburg doubts the dire warnings from Republicans about the IRS hiring an extra 87,000 agents to audit taxpayers will happen, pointing to the other needs at the IRS, including a wave of retirements at the overworked agency. To help tax pros advise clients on what to do in the meantime, the IRS quickly issued immediate guidance on the tax credit after the passage of the legislation.
Railroad Strikes:
September 18: Deal averting railroad strike has potential to fall apart
Rail workers are set to vote on the tentative deal reached between unions and railroads Thursday morning. If any of the 12 rail unions fail to ratify a new contract, nearly 125,000 rail workers could be headed for a strike.
Ron Kaminkow, an organizer at Railroad Workers United, which represents rank-and-file railroaders, said that there's "a lot of anger, confusion, and hostility" toward the new agreement, which many workers feel is intentionally vague.
For the strike threat to end, workers would need to feel that the proposed contract is far stronger than the deal offered by the PEB. A survey of rail workers at the SMART Transportation Division found that nearly 8 in 10 would have voted to reject that contract.
Another dilemma is that the tentative agreement reached Thursday only applies to SMART and the Brotherhood Of Locomotive Engineers and Trainmen, the two largest rail unions, but not the other unions that agreed to contracts based on the less worker-friendly PEB guidance. Those include nearly 5,000 rail workers at the International Association of Machinists and Aerospace Workers who voted to reject the PEB contract and authorize a strike last week.
Robert Bruno, a professor of labor and employment relations at the University of Illinois said that the fact that sick leave and voluntarily assigned days off are the sticking points and not wages may inspire more “no” votes from workers. “Usually, there’s a way to kind of figure out money,” he said."It's very often issues that go to respect and go to treatment, working autonomy, and worker ability to have some control over their life. I think it reflects just how much power employers can have, even under a collective bargaining agreement."
There's a sense of dread among some rail workers that Congress, not workers, will ultimately decide on the next rail contract if they vote down the newest agreement.
September 15: Railroad Strike Appears Averted As Biden Announces "Tentative" Deal
Biden had grown animated in recent days about the lack of scheduling flexibility for workers, expressing a mixture of confusion and anger that management was refusing to budge on that point, according to two people who spoke on the condition of anonymity to share details of private conversations with the president.
"These rail workers will get better pay, improved working conditions, and peace of mind around their health care costs: all hard-earned," Biden said in a statement announcing the deal.
Biden appointed an emergency board in July to mediate the dispute that had reached an impasse, following two years of negotiations between six of the largest freight carriers and 12 unions that represent 115,000 railroad workers.
The deal also includes the biggest wage increases for railroad workers in more than four decades.
The tentative deal marks the first time that railway carriers have bargained and reached an agreement over attendance policies that affect workers at three of the largest railway carriers - BNSF, Union Pacific, and CSX. The National Carriers' Conference Committee, which represented the railroads in negotiations, previously said that its ability to determine attendance policies is necessary to ensure that enough train operators are available to work amid labor shortages.
"The solidarity shown by our members, essential workers to this economy, who keep America's freight trains moving, made the difference in our obtaining an agreement with provisions that exceeded the recommendations of the Presidential Emergency Board," said Jeremy Ferguson, president of SMART Transportation Division, and Dennis Pierce, President Brotherhood of Locomotive Engineers and Trainmen, two of the unions backing the tentative deal, in a joint statement.
Congressional Republicans on Wednesday advanced legislation to force workers to accept those terms, making clear they would direct blame at the president should the impasse lead to a strike.
September 14: Rail union becomes first to authorize a strike, threatening supply chain
Nearly 5,000 railway workers at the International Association of Machinists and Aerospace Workers voted to reject a tentative contract agreement with railroads and authorize a strike, the union said Wednesday. IAM members are the first to approve a strike and reject a contract based on recommendations released by a White House-appointed board last month.
The vote reveals that rail workers are not satisfied with the agreement, which calls for 24 percent raises and back pay but doesn't address workers' demands for more predictable scheduling and the ability to take time off for doctors' appointments without being penalized.
IAM said that it would delay strike action until Sept. 29 at noon to allow union leaders to continue negotiations with railroads. "We look forward to continuing that vital work with a fair contract that ensures our members and their families are treated with the respect they deserve for keeping America's goods and resources moving through the pandemic," IAM said in a statement.
More than 115,000 rail workers are legally allowed to strike as of Friday, a move that would shut down the transport of food, fuel, and other goods, likely damaging the nation's strained supply chains and driving up prices.
"We are working with other modes of transportation, including shippers and truckers, air freight, to see how they can step in and keep goods moving in case of this rail shutdown," White House press secretary Karine Jean-Pierre told reporters Tuesday.
Economic News/Policy:
September 20: What Comes Next in the Fed’s Fight Against Inflation?
Higher interest rates temper inflation by making it more expensive to borrow money, discouraging both consumption and business expansions. "While higher interest rates, slower growth, and softer labor market conditions will bring down inflation, they will also bring some pain to households and businesses," Mr. Powell said last month.
As inflation has lingered, economists have come to expect the peak rate to move higher. Fed officials want to adjust policy with enough vigor to bring inflation under control but without overdoing their rate moves and inflicting more pain on the economy than necessary.
"The faster the Fed hikes rates, the less likely a soft landing becomes," Gennadiy Goldberg, a U.S. rates strategist at TD Securities said because officials are not waiting to see how their moves play out.
Economists at Goldman Sachs wrote in a note this week that they expected the Fed to raise interest rates half a point at each of the next two meetings after this one so that the federal funds rate will end the year in a range of 4 to 4.25 percent.
The slowdown will come "Because the funds rate will be at a higher level, concern about overtightening will eventually rise, and the drop in consumer inflation expectations should reduce concern about unanchoring," the Goldman economists wrote.
September 18: Economy Week Ahead: Federal Reserve and Other Central Banks in Focus
Monday: Japan’s Statistics Bureau releases annual inflation data through August. Consumer prices in Japan rose 2.6% in July from a year earlier, exceeding the Bank of Japan’s 2% target for four straight months.
The National Association of Home Builders releases its September housing-market index, based on a survey of home builders that gauges conditions in the single-family housing market. In August, the index declined for the eighth consecutive month amid supply-chain challenges, rising interest rates, and worsening home affordability.
Tuesday: The Commerce Department releases August figures on house construction and building permits. Housing starts fell 9.6% in July from the month before while building permits declined 1.3%.
Wednesday: The Federal Reserve announces its latest interest-rate decision on the heels of an inflation report showing that underlying price pressures strengthened in August. Officials will release updated projections of interest rates, inflation, unemployment, and economic growth, and Chairman Jerome Powell holds a news conference.
The Bank of Japan announces its latest monetary-policy decision as inflation exceeds its targeted 2% inflation threshold. The central bank has indicated it plans to continue its monetary stimulus until it achieves sustainable wage growth and price increases.
Thursday: The Bank of England announces its latest monetary-policy decision as the U.K. grapples with high inflation. The central bank raised interest rates by the most in a quarter-century in its previous meeting.
The Labor Department releases the number of workers’ filings for unemployment benefits for the week ended Sept. 17. Initial jobless claims have declined for five consecutive weeks, hovering near the 2019 weekly average of around 218,000.
Friday: S&P Global releases September surveys of purchasing managers from around the world that measure global business activity. The August surveys pointed to a sharp slowdown in economic growth that month.
September 19: Federal Reserve To Raise Interest Rates 0.75 Points To Fight Inflation
When the Federal Reserve first raised interest rates by a whopping three-quarters of a percentage point in June, Chair Jerome H. Powell said the hike was an "Unusually large one." After misjudging inflation for much of last year, the Fed is now scrambling to hoist rates from historic lows and get its benchmark rate high enough to where it slows the growth and consumer demand.
"You're taking very big steps on rates, moving rates higher very rapidly, before you have time to learn from the data, and learn whether the level of rates is about right, a bit too much or a bit too little," Krishna Guha, vice chairman of Evercore ISI said.
Last year, the Fed held off on raising rates at all, with officials saying the inflation that was bubbling up would be a temporary feature of the covid recovery. It is now on track to push rates past the "Neutral" zone of roughly 2.5 percent, where rates don't slow or juice the economy, and into "Restrictive territory" that dampens consumer demand and gets inflation down. The Fed's supersized hikes could pack that much more of a punch as the world's major economies ramp up their inflation fight at the same time.
The grim reality, however, is that pain in the United States and abroad may be necessary to rid the economy of its biggest problem. Kaleb Nygaard, an expert on Fed history and host of the Reserve Podcast, compared the economy to a forest, and the Fed to park rangers who sometimes have to set small fires to clear out unwanted underbrush.
“This time around, rangers are trying to do more controlled fires, trying a lot harder not to burn down so many trees,” Nygaard said. "But they're nervous that the interest rate hikes they've done so far haven't slowed inflation enough. These large interest rate hikes are like the rangers loosening the reins on the fire and letting them burn just a little bit hotter and a little bit wider."
September 15: New Inflation Developments Are Rattling Markets and Economists. Here’s Why.
When inflation began to accelerate in 2021, price pressures were clearly tied to the pandemic: Companies couldn't produce cars, couches, and computer games fast enough to keep up with demand from homebound consumers amid supply chain disruptions. A pronounced cool-down is proving elusive, suggesting to economists and investors that the central bank may need to be even more aggressive in its efforts to temper growth and bring inflation back down.
Gas prices dropped sharply last month, which many economists expected would pull overall inflation down. Core inflation, which strips out food and fuel costs to give a sense of underlying price trends, reaccelerated to 6.3 percent in August after easing to 5.9 percent in July.
In the wake of Tuesday's worrying inflation data, investors began to speculate that officials might make an even more drastic full-point rate increase next week, or that they might push rates higher than they otherwise would have in an effort to clamp down on the economy.
Manchin Deal:
September 19: GOP’s bad blood threatens Manchin side deal
Senate Republicans are threatening to sink Sen. Joe Manchin's side deal on permitting reform, partly because they are still angry over the West Virginia Democrat's flip-flop on the sweeping climate, health, and tax bill that Congress passed last month. They say there's little appetite for giving Manchin a big political and policy victory after he shocked them over the summer by announcing a deal with Schumer on the Inflation Reduction Act.
"Generally speaking, Republicans are for permitting reform. I think given what Sen. Manchin did on the reconciliation bill has engendered a lot of bad blood," Cornyn added. "There's not a lot of sympathy on our side for providing Sen. Manchin a reward for his flip-flop on the reconciliation."
While House progressives voiced their opposition to Manchin's deal with Schumer to combine the government funding bill and permitting reform, they stopped short of pledging to vote against the package.
Schumer is paving the way to round up as many Democratic votes as possible for his controversial side deal with Manchin.
Sen. Richard Shelby (Ala.), the top-ranking Republican on the Appropriations Committee, who is negotiating the short-term funding bill, said that it would have an easier time passing without Manchin’s permitting reform attached. "The cleaner, the better," he said, acknowledging that many Republicans don't want to vote for a side deal with Schumer that secured Manchin's vote for the budget reconciliation bill in August.
September 18: Tensions rise amid frustration over mystery Manchin deal
Lawmakers are frustrated about being kept in the dark as Democratic leaders strategize how to jimmy an energy deal struck with Sen. Joe Manchin behind closed doors through Congress - while also averting a government shutdown. Democratic leadership is aiming to use a must-pass government-funding bill to advance an energy permitting proposal by Manchin by the end of the month.
Pressed on Thursday whether the text would be released before legislation is unveiled for the funding bill, Manchin told The Hill he believes it will be "Released in the CR," referring to the continuing resolution, which is expected to push the government funding deadline to December as the midterm cycle picks up.
It's not totally clear how different the Capito and Manchin plans will be, though Manchin has suggested his plan will be similar to the plan of his fellow West Virginia senator. Like the Manchin outline, the Capito legislation would limit environmental review timelines, restrict states' authorities to block projects, and require the completion of the Mountain Valley Pipeline.
Some in the GOP view the Capito legislation as a starting point for negotiations, while others appear less willing to meet Manchin in the middle. Nearly 80 House Democrats are calling on the party leadership to separate Manchin's deal from the funding bill, though some are wary of threatening to vote against the deal if it means a government shutdown.
September 16: Markey opposes Manchin's push to include permitting reform in the stopgap funding bill
Sen. Ed Markey is joining a group of liberal House members in opposing Sen. Joe Manchin's push to pass changes to the environmental review process in a stopgap funding bill. Democratic leadership promised Manchin they would pass changes to the country's permitting system to expedite the approval of both fossil and renewable energy projects in exchange for his vote on their climate, tax, and health care bill.
"As a way forward is discussed, and especially as new anti-environment proposals are being brought to the permitting discussions, we should not attach the permitting overhaul package to the must-pass government funding legislation," Markey said in a statement on Friday.
Any funding measure, with or without permitting reforms, would require 60 votes to pass the Senate. Republicans have long-sought changes similar to those that Manchin is pushing, but some have said that his changes may not go far enough and that they don't want to reward him for going along with Democrats' climate and tax bill.
On the House side, a lot of the opposition has come from Democrats, with nearly 80 of them opposing the idea of tying the funding measure to the permitting changes. Markey has long been a leading voice on environmental issues as one of the namesakes of the ill-fated Obama-era Waxman-Markey bill and, more recently, as the Senate sponsor of the Green New Deal.
Energy and Environmental Policy/News:
September 20: Billions in Climate Deal Funding Could Help Protect U.S. Coastal Cities
Escalating climate threats have prompted a continuing debate among policymakers and experts about how best to guard against devastating damage, between those who prioritize building man-made infrastructure like sea walls - sometimes called "Gray infrastructure" - and those who favor nature-based solutions, or so-called green infrastructure.
Tom Cors, a government relations official at the Nature Conservancy, said the resilience funding in the climate law, in combination with resources in the infrastructure law, passed last year, represented the most significant influx of money for green infrastructure, the latest move in a shift that began about a decade ago.
The bipartisan infrastructure measure added $3 billion to the federal pot for projects related to habitat restoration and climate resilience, but funding has yet to be disbursed as the application process is still underway, according to the National Oceanographic and Atmospheric Administration.
In 2020, Mr. Biden signed legislation that mandated that the U.S. Army Corps of Engineers, the main civil engineering agency of the government that has historically favored gray infrastructure, consider nature-based solutions during the early planning stage of some projects.
A New York City study in Queens showed that using gray infrastructure would be twice as expensive as incorporating both gray and green projects. Gray infrastructure has traditionally been preferred by homeowners along the coast who are willing to part with their beach access if it means creating concrete fixtures that can safeguard their homes, as well as city officials who are skeptical about the effectiveness of green infrastructure. Proponents of gray infrastructure also argue that green projects need constant maintenance, whereas gray infrastructure can be easier to maintain.
For Fun:
September 19: Jupiter is at its closest to Earth in 59 years, NASA says
The solar system's most massive planet, Jupiter, will make its closest approach to Earth for 59 years on Sept. 26 even as the gas giant will be directly opposite the sun as viewed from Earth, an astronomical arrangement known as opposition.
Opposition is common for Jupiter, happening every 13 months, and the planet and Earth make close approaches roughly once a year.
The arrangement that sees Earth in between the sun and Jupiter rarely coincides with the massive planet's closest approach to our planet, known as perigee.
The planets of the solar system orbit the sun in flattened circles or ellipses, rather than in perfect circles, so Earth and Jupiter cross paths at varying distances.
While Earth takes around 365 days to orbit the sun, Jupiter takes a more leisurely route around the star, completing an orbit every 4,333 Earth days or 12 Earth years.
At its farthest, Jupiter is about 600 million miles away from Earth.
The last time Jupiter was so close to our planet - and the last time skywatchers could see it so large and bright in the sky - was in October 1963