Tax Season Snags, Inflation, Environmental Policy
Tax Policy:
February 14: Few snags so far this tax season
In announcing the start of filing, the Internal Revenue Service itself warned of complexities that will be faced regarding Economic Impact Payments or advance Child Tax Credits taken last year, and the issues caused by the ongoing backlog in processing returns. The National Taxpayer Advocate highlighted how delays in processing Form 2848, "Power of Attorney and Declaration of Representative," and Form 8821, "Tax Information Authorization," may cause delays and violate taxpayer rights.
"There's been a very little surprise or drama. The IRS is processing returns as expected with no urgent system-wide updates." Some tax professionals are anecdotally complimenting the IRS for its handling of potential problems over the phone.
After some early-season confusion on the part of some preparers over new Schedules K-2 and K-3, a quick phone call to the Large Business and International Division solved the issue for Beanna Whitlock, of Whitlock Tax Services and executive director of the National Center for Professional Education Fellowship.
Steps forward In response to a coalition of practitioner groups led by the American Institute of CPAs, the IRS has announced that it is suspending the mailing of more than a dozen additional letters, including the mailing of automated collection notices, which are normally issued when a taxpayer owes additional tax and the agency has no record of a taxpayer filing a tax return.
"The IRS entered this filing season with several million original and amended returns filed by individuals and businesses that have not been processed due to challenges of the historic pandemic and is taking this step to help avoid confusion for taxpayers and tax professionals." The IRS has sent letters regarding the advance Child Tax Credit.
"Our clients want us to be thinking ahead of what we want them to do about tax compliance. The last couple of years we've been in a reactive situation for our clients, and it was a challenge to service them the way they would like. Now we're in a better situation to be proactive on their behalf." After waiting for all of 2021 for tax law changes, all that happened was the November 15 Infrastructure Act, Whitlock noted.
February 14: Manchin wants Sinema to take a fresh look at tax rate hikes on corporations and the rich, but she's not budging
Sen. Joe Manchin is starting to turn up the heat on another Democratic holdout with competing demands on President Joe Biden's spending bill.
The conservative West Virginia Democrat has ramped up calls this month to step up taxes on the richest Americans and large firms. But he's likely to encounter resistance from Sen. Kyrsten Sinema of Arizona, who shut the door on hiking tax rates on both of those groups last fall.
"I respect her and what her concerns maybe, but I think basically our financial situation is getting worse, not better, so maybe we can take another look at it," Manchin told The Wall Street Journal. "I would hope so." "Why can't we just get a good solid tax plan that works? That's the first thing to do," he told the Journal.
"There are many ways to pay for such ideas that do not include tax-rate increases that hurt small businesses and our economic competitiveness while we continue to emerge from a pandemic and economic downturn," a Sinema spokesperson told the Journal.
The competing demands from the pair underscore the difficult and tricky path ahead for Democrats trying to resuscitate the spending plan. Manchin torpedoed the House bill in December, and all Senate Democrats must coalesce around another package to muscle it through the 50-50 chamber along party lines.
Sinema's opposition to tax rates prompted Democrats to scramble in the fall for new ways to finance their plans to expand healthcare, childcare, and education. Many in the party appeared taken by surprise at the prospect that Democrats could blow a campaign pledge to roll back the Republican tax law.
Manchin has said he backs hiking the corporate tax rate to 25% as part of a future spending bill. He told NBC News earlier this month that he's on board with a 15% corporate minimum tax, a 28% capital gains tax, and closing other loopholes.
February 11: Tax Season Threatened By Previously Unreported IRS Backlog Of 24 Million Returns
Nearly 24 million taxpayers are still waiting for the Internal Revenue Service to process their tax returns from last year - a number far larger than previously reported by the agency - with many refunds being held up for 10 months or more.
"The backlog of tax returns is but one symptom of the fundamental issue that has been ailing the IRS for too long: inadequate resources."
The number includes 9.7 million paper returns awaiting processing; 4.1 million that were suspended because of errors with stimulus payments, pandemic relief or other issues; 4.1 million amended returns; and 5.8 million pieces of correspondence awaiting action between the agency and taxpayers to resolve issues before the returns are completed.
In January, National Taxpayer Advocate Erin Collins had reported a backlog of at least 10 million returns based on IRS data. An IRS official, meanwhile, said the agency counts the inventory from last year's filing season at about 6 million paper returns for individual taxpayers.
Both numbers are far higher than the unprocessed returns the IRS faced before the pandemic - in the past, the agency typically carried 1 million or fewer returns into the next tax season.
The IRS is taking at least 10 months to process paper returns filed for the 2020 tax year and has caught up only to April 2021 for returns without errors, according to the most recent data on its website.
Economic Policy:
February 15: U.S. Temporarily Bans Avocados From Mexico, Citing Threat
In the United States, where 80 percent of the avocados consumed come from Mexico and the average price of $1.43 an avocado was already nearly 11 percent higher than a year ago, analysts said even a two-week ban could sharply reduce availability and further increase prices. The move is a blow to the western state of Michoacán in Mexico, the only region approved in Mexico to send avocados to the United States.
In a statement, the Association of Avocado Exporting Producers and Packers of Mexico, which represents 29,000 avocado farmers and 65 packing houses, said its board of directors had met to review security plans and protocols in order to continue to collaborate with Mexican and U.S. authorities and to resume exporting as soon as possible.
Now, U.S. inspectors in Mexico play a crucial role in the expansion of Mexico's avocado market because they watch each step of the process - from the orchards to transportation systems to shipping areas - to make sure that the fruit imported to the United States is free from pests, said David Orden, a professor in the department of agricultural and applied economics at Virginia Tech."This was a nice story about how a group of agribusinessmen and farmers used scientific methods to reduce pest risk and allow a trade to occur where there wouldn't normally be an opportunity," Mr. Orden said.
California, which supplies roughly 15 percent of the U.S. avocado market, simply cannot produce enough to meet demand from consumers nibbling on chips and guacamole and putting avocados in smoothies.
February 12: Five obstacles Biden faces in the battle against inflation
President Biden was delivered a blow this week amid the news that inflation is rising and showing no signs of slowing down. The consumer price index rose 7.5 percent annually by the end of January, the fastest rate since 1982.
Consumer spending has returned to pre-pandemic levels, but the rush of demand, lack of supply, labor shortages, and shipping bottlenecks have caused high inflation to linger. Here are five obstacles in Biden's battle against inflation.
Pandemic-driven supply chain snarls: The rapid recovery from the depths of the coronavirus recession has been too fast for many manufacturers, suppliers, retailers, and shipping companies to handle.
Labor shortages: The pandemic is boosting pressure on prices by making it harder for businesses to hire and retain workers. While the U.S. added 6.4 million jobs in 2021, businesses ended the year with more than 10 million open positions. Workers have also quit jobs, often to take another with better compensation or career opportunities, at a record rate — a phenomenon deemed the Great Resignation.
Rents are rising: After collapsing during the onset of the pandemic, rents rose 4.4 percent in the year since January 2021, and economists expect them to steam ahead. While house prices and rents have both been fueled for years by an affordable housing shortage, the latter is a key component of inflation and a major force behind the 7.5 percent annual inflation rate.
Inflation momentum: Economists have paid close attention to how high consumers and businesses expect inflation to rise since the rapid price increases of the 1970s. Steadily rising inflation led to what economists call a wage-price spiral: a cycle of workers requesting higher wages to cover rising prices, forcing businesses to boost prices to cover higher employment costs.
Energy Shocks: Gasoline prices rose 40 percent between January 2021 and January 2022, while used car and truck prices increased 40.5 percent and new vehicle prices rose by 12.2 percent.
February 11: Border blockade hits US economy
The Canadian trucker blockade is blocking car production, potentially driving prices even higher. Blockades at major U.S.-Canada border crossings caused by truckers protesting COVID-19 vaccine mandates could worsen the existing car shortage that has driven up prices to record levels.
The skyrocketing cost of cars and trucks - which has played a major role in fueling the nation's 40-year-high inflation rate - was just beginning to level off before truckers blocked the Ambassador Bridge and with it the most efficient way to transport auto parts between Canada and the U.S. Without access to key components, auto manufacturers were forced to shut down some of their plants this week, and some factories remain closed or are operating at reduced capacity.
Insufficient supply caused the price of used cars and trucks to increase by a whopping 40.5 percent over the last year, while the price of new vehicles grew by 12.2 percent. A Canadian judge on Friday ordered the protestors to end the blockade, though it remained unclear just how and when their trucks would be removed.
FOR TRUCK'S SAKE. Biden tells Trudeau US workers experiencing 'serious effects' from trucker protests. The Canadian Prime Minister spoke on Friday about the ongoing trucker protests over COVID-19 restrictions that have blocked a bridge between the North American countries, and President Biden explained the impact the situation is having in the U.S. ADVERTISEMENT. The protest, which started in Ottawa, has blocked the Ambassador Bridge, which connects Windsor, Ontario, and Detroit, for four days in a row.
February 10: Democrats see inflation as growing problem for their agenda
Democratic lawmakers are acknowledging that rising inflation is becoming a significant political problem that is adding to the difficulty of reviving 's agenda. Senate Democrats are discussing the possibility of trying to resuscitate the Build Back Better Act, or major parts of it, as soon as next month but that timeline is now in more doubt than ever after a new report showed that inflation is rising faster than expected.
The Bureau of Labor Statistics reported Thursday that prices have risen 7.5 percent over the past year and 0.6 percent from December to January, exceeding expectations that annual inflation and month-to-month inflation would come in at 7.2 percent and 0.4 percent, respectively.
Other Senate Democrats acknowledge that rising inflation is becoming a bigger political problem that doesn't bode well for Biden's plan to pass another spending package that would be well in excess of $1 trillion.
"Clearly we'd like to see that go down, I think the Fed's got to act," Sen. Mark Warner (D-Va.). As for what inflation means for Build Back Better, he replied: "Nothing comes easy."
Rising inflation has also fueled talk among centrist Democrats about setting aside a portion of the money raised by tax increases on deficit reduction instead of using it to spend on new social programs.
Sen. Tim Kaine (D-VA) said the latest inflation reading will put pressure on Democrats to limit whatever package they advance to proposals that will lower the cost of living for average Americans, such as a proposal to empower Medicare to negotiate lower prescription drug prices, something that Biden touted Thursday at an appearance in Culpepper, Va. "I think it will pass in a pared-down version," he said.
February 8: U.S. Trade Deficit Hit Record in 2021 as Americans Spent on Computers, Games
Continued strong consumer appetite for overseas goods pushed up the U.S. trade deficit in December, sending the full-year import-export gap to a record level in 2021. The December deficit in the trade of goods and services grew by 1.8% to a seasonally adjusted $80.7 billion, the Commerce Department said Tuesday, just less than the record deficit of $80.8 billion in September.
The full-year trade deficit for 2021 increased 27% to $859.1 billion, larger than the previous record of $763.53 billion in 2006. The trade deficit with China grew 14.5% for the full year to $355.3 billion, as U.S. demand for Chinese goods surged amid the post-pandemic economic recovery. The level was still well below the record trade deficit of $418.2 billion the U.S. set with China in 2018.
A trade pact with China implemented by former President Donald Trump to reduce the bilateral deficit with Chinese purchase commitments for U.S. goods expired on Dec. 31.
Sarah Bianchi, deputy U.S. Trade Representative, said the U.S. is "Actively engaged with China" to address bilateral trade issues.
Environmental Policy:
February 15: Biden administration announces green manufacturing push
The Biden administration announced a series of steps on Tuesday aimed at promoting green manufacturing and taking on climate change contributions from the industrial sector. The Energy Department announced that it will take a step toward carrying out programs initiated by the Bipartisan Infrastructure Law on clean hydrogen — which is when hydrogen energy is produced using clean energy — by issuing new requests for information from stakeholders. Its purchasing efforts include efforts from the General Services Administration to buy low-carbon concrete and asphalt.
The green manufacturing effort at large also comes as the industrial sector, which includes manufacturing and construction, is responsible for nearly a quarter. The White House's fact sheet said that its hydrogen efforts will be particularly important for hard-to-decarbonize sectors and processes, including steel manufacturing.
There will also be requests for a $1 billion initiative that supports research, development, and demonstration to commercialization and deployment in an effort to cut costs and boost efficiency as well as a $500 million program supporting the fuel's manufacturing and recycling. The administration also announced plans that will affect the Bipartisan Infrastructure Law's $12 billion investment in carbon capture and sequestration - still-developing technology that aims to capture carbon emissions and prevent them from going into the air and worsening climate change.
The efforts announced on Tuesday come as the Biden administration has been eager to tout the climate change provisions in its bipartisan infrastructure legislation while the future of its signature Build Back Better legislation, which had much more robust climate action, remains uncertain.
February 10: The Biden administration outlines a plan to build a network of electric vehicle chargers
The Biden administration said on Thursday that it would require states to submit proposals to line highways with electric vehicle chargers, part of a $5 billion plan to fill a gap in the infrastructure needed to support booming sales of battery-powered cars. Administration officials hope the plan will act as a catalyst, encouraging utilities and private operators to build additional chargers.
All 50 states, as well as Washington, D.C., and Puerto Rico, would be required to submit plans by the beginning of August explaining how they would install high-voltage chargers along or very close to major highways.
Later, the administration plans to spend another $2.5 billion on chargers in rural areas or other communities where private sector operators may be less inclined to invest.
The money "Will help us win the E.V. race by working with states, labor, and the private sector to deploy a historic nationwide charging network that will make E.V. charging accessible for more Americans," Transportation Secretary Pete Buttigieg said in a statement.
Administration officials billed the interstate charger plan as a way to create jobs for electricians and other workers.
For Fun:
February 9: Dolly Parton's Dollywood Says It'll Pay All Tuition Costs For Employees Pursuing Higher Education
For Dolly Parton's generations of fans, the country music icon's Dollywood amusement park in Tennessee is an experience that keeps visitors entertained and giddy, from roller coasters and waterslides to stylish lodging and over-the-top dinner shows.
Herschend Enterprises, Dollywood's parent company, announced Tuesday that Dollywood will pay 100 percent of the tuition costs, fees, and books for employees who pursue higher education.
"When our hosts feel appreciated and are given opportunities like this, they feel cared for and they can pass that feeling on to their guests," Wes Ramey, a spokesman for Dollywood Co., told The Washington Post.Eugene Naughton, president of Dollywood Co., told WATE that one of the Dollywood Foundation's key tenets is to "Learn more." Ramey said the program from Herschend that affects roughly 3,000 Dollywood employees had Parton's full backing.
A spokesman for Parton directed questions about the program to Dollywood representatives.
Parton took over the Tennessee amusement park in 1986 and rebranded it as Dollywood, a 150-acre experience known for its down-home charm. As the news of the higher education program spread on social media, fans were quick to praise Parton as being "Among the best of us."
If the past 24 hours is any indication, he said, there will be even greater interest among those wanting to work and pursue higher education at Dollywood and the other Herschend attractions.