Tax Policy Update

November 18, 2014

Pardon Our Dust

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Hatch Backs Dynamic Scoring, But Warns It’s “Not a Panacea.” Senate Finance Committee Chairman-in-Waiting, Orrin Hatch (R-UT), says using only “static scoring” of tax and spending proposals is “downright dumb.” But Hatch also tempered expectations about the potential benefits of using “dynamic scoring” methods, in which different economic models are used to predict the impacts of legislative proposals on overall economic growth. The Joint Committee on Taxation, the congressional scorekeepers for tax proposals, currently provides dynamic revenue estimates for some tax proposals in addition to conventional estimates, but it’s the conventional estimate that counts as a proposal’s official score with respect to budget targets. Hatch indicated that dynamic scoring should be a part of the mix to better inform tax policy decisions, but stopped short of saying it should be the primary standard by which proposals are evaluated. Read Hatch’s entire statement here.

Ryan’s Dilemma. We expect the House Republican Steering Committee to vote today to recommend Rep. Paul Ryan (R-WI) to chair the House Ways and Means Committee in the 114th Congress. But the position could hamstring Ryan’s loftier political aspirations. Read more here.

Bicameral Negotiations Continue on Extenders. Extend all the expired tax breaks known as extenders for one year? Two years? Make some permanent, but give the rest a sunset? Lawmakers and their tax staffs continue to meet frequently over these questions, although the momentum right now appears to be behind a straight two-year deal. If any extender is made permanent as part of the package, our money is on the research and development tax credit. We don’t expect to see a deal taking shape until after the Thanksgiving recess.

Cadillac Tax Woes . A new analysis from the conservative-leaning American Health Policy Institute (AHPI) claims companies subject to the so-called Cadillac tax — the excise tax on high-cost health plans under the Affordable Care Act — will pay “an average of $2.1 million per year from 2018 to 2024 — equal to $2,700 per employee.” The excise tax does not go into effect until 2018. Read the study here.

The president of AHPI, Tevi Troy, also wrote an op-ed in the Wall Street Journal about the findings last week. The op-ed followed revelations that a consultant, MIT economist Jon Gruber, who helped the Obama Administration develop the Affordable Care Act, made comments (captured on video, of course) that the legislation passed in part because of the “stupidity of the American voter” and a “lack of transparency” in its funding mechanisms.

For another perspective on the story, read here about how AHPI’s Troy, a former George W. Bush administration official, previously supported policies similar to the Cadillac tax.


New Treasury Deputy Nominated . President Obama last week nominated Antonio Weiss, head of global banking for Lazard Ltd., to be a top lieutenant to Treasury Secretary Jack Lew. The nomination has ruffled some feathers among Democratic lawmakers who worry Weiss will be too friendly to Wall Street and will not prioritize the Treasury Department’s crack down on cross-border merger deals known as inversions. Weiss has advised clients on some of the largest inversion deals of recent years — a point that Democrats like Senator Elizabeth Warren (MA) and Independent Bernie Sanders (VT) will likely make in opposing his nomination Read more about him here.

G-20 Countries Continue Pledging Commitment to Anti-Tax Avoidance Measures. The Group of 20 major economies said over the weekend that by 2018 they will automatically exchange tax information with one another and other countries as outlined by the Organization for Economic Cooperation and Development. In a Nov. 16 communique released at the close of the G-20 meeting in Brisbane, Australia, members added that they are working to address the taxation issue regarding so-called “patent boxes” related to jurisdictions where companies conduct their research and development for new products.

EU Tax Probes Involving U.S. Multinationals Continue as Calls Grow for More. Members of the European Parliament (MEPs) have called for an investigation into tax evasion in the EU, threatening greater scrutiny of the new European Commission president, Jean-Claude Juncker, and his long tenure as Luxembourg’s prime minister — a tenure that apparently coincided with corporate tax strategies recently revealed in leaked documents, now aptly known as the “Lux Leaks.”

Meanwhile, the European Commission told the Netherlands last Friday that several tax rulings it issued to some Starbucks Corp. units allowed the company to make some “questionable” economic adjustments that allowed it to reduce its corporate tax burden and may have violated international standards. Read more here.


Relevant Congressional Activity

The House and Senate are scheduled to adjourn on Thursday and are not expected to return until after the Thanksgiving holiday, the week of Dec. 1. By then, lawmakers will have just nine days to wrap up negotiations on an extenders package, a continuing resolution to fund the government, and any other remaining loose ends before they are scheduled to adjourn for the year.

Relevant Agency Activity

Wednesday, November 19

  • The IRS will hold a meeting on proposed regulations that provide a simplified method of accounting for gains and losses on shares in money market funds (MMFs) that distribute, redeem, and repurchase their shares at prices that reflect market-based valuation of the MMFs’ portfolios and more precise rounding than has been previously required. More information is available here.