Surprise! Sen. Joe Manchin, who held up a Democrats-only climate, social spending, and tax bill for more than a year, has agreed with Senate Majority Leader Chuck Schumer on a measure that includes tax increases, health care reforms, energy subsidies, and deficit reduction. The Inflation Reduction Act of 2022 includes a minimum tax on book income of very large corporations, new funding for IRS enforcement, curbs on carried interest, a wide range of energy tax subsidies, and $300 billion in deficit reduction.
Senate passes $280 billion chips and science bill. The House likely has enough votes to pass the measure designed to boost domestic semiconductor production, says Majority Leader Steny Hoyer. The bill creates a temporary 25 percent tax credit for investments in semiconductor manufacturing and provides tens of billions of dollars in funding for US companies that produce chips. It also adds tens of billions of dollars for scientific research.
Fed raises interest rates by another 0.75 percent. With its fourth interest rate hike this year, the Fed raised its target range for short-term borrowing costs from 2.25 percent to 2.5 percent. However, the central bank said the US is not in a recession: “Recent indicators of spending and production have softened. Nonetheless, job gains have been robust in recent months, and the unemployment rate has remained low." Chair Jay Powell said the pace of rate hikes is likely to slow but offered no additional guidance about future actions.
CBO released its long-range budget forecast… It isn’t pretty. These long-term estimates always are sketchy, but the Congressional Budget Office projects the annual deficit will top 11 percent of Gross Domestic Product by 2052. The federal government will collect 19.1 percent of GDP in taxes but spend 30.2 percent. Nearly one-quarter of all federal spending—more than 7 percent of GDP—will be just for interest on the debt. The national debt will nearly double to 185 percent of GDP in 30 years.
Tune in at noon for TPC’s Prescription: Can the IRS fill out our tax returns in advance? Federal Reserve Bank of Minneapolis economist Katherine Lim co-authored a study that estimates the IRS could accurately pre-populate nearly half of all individual tax returns with the data it has on hand. Register and tune in here for TPC’s noontime webcast; she’ll discuss the findings with TPC’s Howard Gleckman.
Columbus renews affordable housing tax credits, even if the housing isn’t built. There’s a city-wide housing shortage, so Columbus is offering developers a 15-year, 100 percent property tax abatement if they set aside 20 percent of units for affordable housing in high-need neighborhoods. But Axios reports the policy allows developers to buy their way out of that requirement by paying some fees upfront.
Ford still will get Michigan tax incentives even if it lays off thousands. Last month, Michigan lawmakers approved $100 million in tax incentives for the auto giant in return for a promise to spend about $3.7 billion and create 6,000 new jobs, mostly in Michigan. But the Detroit Free Press found the agreement allows Ford to cut thousands of salaried positions in its Michigan locations and still get the money. Last week, Bloomberg reported that Ford plans to lay off up to 8,000 workers to offset investments in electric vehicles.
There’ll be tax-subsidized development in Detroit, too… The City Council approved a $60 million, ten-year tax abatement to Bedrock, which will finish building a skyscraper in the city. Bedrock promises to increase affordable housing and rental space for small businesses.
Shakira’s hips can’t lie in a tax trial. The Colombian pop star rejected a settlement with Spanish prosecutors in a $15 million tax dispute. She’s opted for a trial to defend against charges that she evaded Spanish taxes between 2012 and 2014. She says she was a resident of the Bahamas. Prosecutors insist she lived in Spain.
For the latest tax news, subscribe to the Tax Policy Center’s Daily Deduction. Sign up here to have it delivered to your inbox weekdays at 8:00 am (Mondays only when Congress is in recess). We welcome tips on new research or other news. Email Renu Zaretsky at [email protected].
