The TCJA’s long-term cost could affect the bond market. The Wall Street Journal considers (paywall) how willing the bond market will be to finance the $1.5 trillion Tax Cuts and Jobs Act. “Even as the government boosts its borrowing, the Federal Reserve has stepped away from bond purchases and is now shrinking its holdings, raising worries about the appetite from private investors who will need to make up the difference.”
TPC’s conference on business taxes finds some consensus. Panelists at yesterday’s TPC event agreed on two big ideas: The TCJA’s international tax provisions probably will make the US a more attractive place for business to invest, though it may not be quite as wonderful as the bill’s backers claim. And the new law’s 20 percent deduction for pass-through businesses is an incomprehensible mess that is unlikely to generate much new economic activity.
And the national debt could compromise national security. Director of National Intelligence Dan Coats told the Senate Intelligence Committee yesterday that he worries that the US government’s “increasingly fractious political process, particularly with respect to federal spending, is threatening our ability to defend our nation, both in the short term and especially in the long term.”
Trump’s infrastructure bonds hit a Capitol Hill speed bump. A key component of President Trump’s infrastructure plan is an expansion of private activity bonds (PABs) and use of advance refunding bonds. But during consideration of the TCJA, the House voted to scrap both forms of bond financing entirely and while the PABs ultimately survived, neither has gotten much love since. Yesterday, Ways & Means Committee Chair Kevin Brady told reporters, "I don't see either of those ideas moving forward.”
Treasury: US multinationals can’t change accounting periods to game the TCJA’s transition tax. The new law taxes past untaxed foreign profits of US multinationals. Some firms want to change the accounting periods of their foreign affiliates to lower their liability but in new guidance Treasury says, “no can do.”
Treasury plans to repeal 298 tax rules it says are a dead letter. Many implement code provisions that have been repealed or revised. Others are outdated. Treasury Secretary Steven Mnuchin said he looks forward to “continuing to build on our efforts to make the regulatory system more efficient and effective.”
In Oklahoma, a tax bill dies on the House floor. The $581 million bill would have raised taxes on tobacco, diesel fuel, and wind energy, and hiked the gross production tax on oil and gas wells from 2 percent to 4 percent. The revenues would have funded pay raises for public school teachers. House leaders kept the floor vote open for over six hours, but the bill, developed by a group of business and community leaders, fell 14 votes short of passage.
Bitcoin’s US investors aren’t paying their taxes. Fortune reports on early data from online tax preparation service Credit Karma. Only 0.04 percent of US tax filers have reported cryptocurrency gains or losses to the IRS so far. But an estimated 7 percent of Americans own bitcoin or another cryptocurrency. Are investors just waiting to file… using another service? One million people filed their tax returns through Credit Karma Tax last year.
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.
