The Senate is likely to take at least a month to “Build Back Better.” The Senate is start on its version of the Build Back Better (BBB) tax and spending package the House passed on Friday. The Senate is almost certain to make changes. Among the most contentious issues: The fate of the $10,000 cap on the state and local tax (SALT) deduction and a requirement that many employers offer workers four weeks of family and medical leave. White House National Economic Council Director Brian Deese told Fox News yesterday that he’s optimistic that the Senate will pass the bill despite concerns from moderates.
The Senate must raise the debt ceiling and pass a federal spending bill too. Congress probably has until mid- or late-December to raise the debt ceiling or the nation may default on its debt. Are Senate Majority Leader Chuck Schumer and Minority Leader Mitch McConnell moving toward an agreement to allow a vote? Sen. John Thune told reporters “I don’t know that it’s necessarily a thaw, I just think there’s a realization that this has to get done.” Congress also needs to pass an omnibus appropriations bill or a continuing resolution to fund federal agencies for the fiscal year that began last Oct 1.
House-passed BBB would close Roth IRA's “mega back door.” Under current law, participants in 401(k) plans can contribute as much as $58,000 annually in after-tax earnings into a traditional plan and then convert a substantial share of that money to a tax-free Roth account. The House’s Build Back Better bill would eliminate conversions of after-tax contributions. Starting in 2032, it would bar all conversions for singles earning more than $400,000 a year and married couples with incomes above $450,000. It also would require annual withdrawals of half of account balances in excess of $10 million.
How can state and local governments build an inclusive economic recovery from the COVID-19 pandemic? TPC’s Aravind Boddupalli, Nikhita Airi, Tracy Gordon, and Solomon Greene share lessons from federal aid to state and local governments during the Great Recession. Comparing the American Recovery and Reinvestment Act of 2009 with the American Rescue Plan Act of 2021, they focus on mechanisms to improve transparency and accountability and make equity and inclusion a key element of the way state and local governments spend federal economic recovery funds.
Can electric vehicle tax incentives be too good? For Norway and its car taxes, maybe. The country’s tax incentives for EV purchases have been so successful that battery-powered electric vehicles now account for over 75 percent of all new car sales. EVs have been exempt from Norway’s vehicle purchase tax, for example. But facing an estimated $2.32 billion annual revenue gap, the government is repealing many of the special EV tax subsidies. That could make it harder to reach a national goal of selling no new cars with combustion engines by 2025.
December 1 deadline for proposing papers for the 2022 IRS/TPC Joint Conference on Tax Administration. It will take place next June 16. Topics may include measuring and influencing taxpayer compliance, estimating taxpayer compliance costs, complexity, administration, and understanding taxpayer behavior. Learn more here. Proposals are due on December 1. For more information about, including previous conference programs and papers, visit the IRS website.
Congress is currently not in session. The Daily Deduction will return to its regular schedule on Monday, November 29. Happy Thanksgiving!
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