Time for the annual pre-Christmas budget posturing. Trump Administration officials say the president will likely not support a stop-gap funding measure to keep the government open after a temporary money bill expires on December 22. Trump is making a last push to get $5 billion in border wall funding from the lame duck Congress. Hill Democrats insist he will get no wall. And the House won’t even return from a very long weekend until two days before the deadline. A partial shutdown would affect one-quarter of the government and one-third of the federal workforce, including agencies that manage law enforcement, homeland security, housing, the IRS, and other programs.
The TCJA made the ACA unconstitutional, says federal judge. District Judge Reed O’Connor ruled late Friday night that because the Tax Cuts and Jobs Act eliminated the Affordable Care Act’s individual tax penalty for those who do not have insurance, the entire 2010 health care law is unconstitutional. O’Connor wrote that without the penalty the mandate, “can no longer be fairly read as an exercise of Congress’ tax power.” Trump celebrated that the law had been “struck down,” but the White House later issued a statement saying “We expect this ruling will be appealed to the Supreme Court. Pending the appeal process, the law remains in place.”
Who is running OMB? Budget director Mick Mulvaney, who seems to specialize in multi-tasking for President Trump, will become the temporary White House chief of staff. Officials said deputy budget director Russell Vought would replace Mulvaney, at least for now, though press secretary Sarah Sanders said Mulvaney would not resign from OMB.
Two new Democrats join the Senate Finance Committee. Catherine Cortez Masto of Nevada and Maggie Hassan of New Hampshire will fill the slots of Bill Nelson and Claire McCaskill, who were defeated in November.
No tax on texts in California, after all. The California Public Utilities Commission has decided to cancel next month’s planned vote to tax text messages. The commission had considered adding a surcharge to cell phone bills to fund subsidized phone service for low-income Californians. But the Federal Communications Commission ruled that a text is an “information service” and not a telecommunication service. Of note: Had the surcharge gone into effect, users of iPhone’s iMessage would not have faced the surcharge since iPhones use data plans, not text messaging plans, purchased through wireless carriers.
Speaking of Apple: It will expand in Austin, Texas, with a tax deal. The tech giant says it will spend $1 billion to expand its Austin campus and eventually employ an additional 15,000 workers. In return, the company expects to receive $25 million from the Texas Enterprise Fund, and 15 years of tax abatements from Williamson County. The deal does not specify the type of jobs Apple will create or identify wages or benefits for the new workers.
Meanwhile, how will Texas raise revenue for schools? Republican Governor Greg Abbott acknowledged that state lawmakers will have to decide how to make up for revenue loss from a plan to limit school districts’ ability to raise property taxes for schools. But he thinks oil and gas tax revenue could help fill the $3+ billion revenue gap. It is not clear how the legislature will come up with the money.
Is the three-martini lunch back? Georgetown law professor Brian Galle, a former visitor at TPC, thinks so. Galle says the IRS has opened a huge loophole in federal limits on the tax deductibility of business meals. “In its recent Notice 2018–76, IRS seems to have proclaimed that business meals and beverages are now deductible to an extent we haven’t seen since 1962,” Brian writes.
If you’d like to tell us about a new research paper or have any comments about the Daily Deduction, TPC’s summary of the day’s tax news, write Renu Zaretsky at [email protected]. You can sign up here to receive the Daily Deduction as an email newsletter every weekday morning (Mondays only when Congress is in recess) at 8:00 am.
