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Democratic Optimism About A Tax, Social Spending, and Climate Bill

Is a budget deal brewing among Senate Democrats? In another indication that Democrats may be narrowing their internecine differences over a climate, social spending, and tax bill, Senate leaders are trying to determine whether budget reconciliation rules would allow an expansion of the 2010 Net Investment Income Tax to include pass-through businesses. Including active business income in the NIIT could pay for some of the bill’s new spending. Democrats may also be closing in on an agreement to allow Medicare to negotiate drug prices, another possible pay-for. Congress returns today, and Democrats are anxious to pass a bill this month, but much work remains. 

Getting tough with Hungary. The eastern European nation, reportedly in consultation with congressional Republicans, blocked the European Union’s agreement on a 15 percent corporate minimum tax. Now, in response, the US says it will end a tax treaty with Hungary. The process will take up to six months, presumably giving Hungary time to rethink its opposition to the EU agreement.   

IRS asks TIGTA to sort out Comey and McCabe audits. The IRS asked the Treasury Inspector General for Tax Administration to review the circumstances of its detailed audits of two outspoken FBI critics of former President Trump, former director James Comey, and former deputy director Andrew McCabe. The National Research Program audits are highly intrusive but not done for enforcement purposes. IRS officials insist there was no political motive for the audits of the two men. 

Wyden releases a tax investigation of pharmaceutical giant AbbVie. The Senate Finance Committee Chair shared findings that show how the Tax Cuts and Jobs Act allowed AbbVie to avoid paying US taxes on most prescription drug sales. Among the findings: While more than 75 percent of AbbVie’s 2020 income was from US sales, the drugmaker reported 1 percent of its income in the US for tax purposes.

How partisan are gas tax holiday proposals? Very. When Democrats propose a gas tax holiday, Republicans reflexively oppose it. When Republicans ask for one, Democrats reject the idea. TPC’s Howard Gleckman argues that “this fight really isn’t over the merits. It is about supporting your team.”

The Child Tax Credit reduces child poverty but not women’s incentive to work. TPC’s Bill Gale and Ian Berlin of the Brookings Institution rebut claims that the Child Tax Credit (CTC) disincentivizes work. There is little evidence that the expanded CTC in 2021 caused women’s labor supply to decline. And there has been no significant difference in employment between households who received the payments and those who did not. Rather, they wrote, “when the costs of raising children in poverty are so great and the lifelong benefits of even small cash allowances so significant, expanding the CTC is a bargain.”

How much are taxpayers willing to pay for choice in education? In the courts and legislatures, advocates are pressing to require state and local governments to pay for religious school tuition directly or through generous tax credits. TPC’s Tax Hound wonders whether residents are prepared for one possible consequence: Less money available for public schools.

Arizona restores a tax incentive for film production. The Arizona Motion Picture Production Program will make $75 million in refundable tax credits available starting next year. The amount will increase to $100 million in 2024 and to $125 million annually from 2025 through 2043. Movie producers who primarily shoot and do pre- and post-production in the state and hire Arizona workers qualify. Legislative budget analysts say the state is unlikely to see a return on its investment, mainly because the credits are refundable.

Tune in Thursday for TPC’s Prescription webcast with Barbara Angus. The former chief tax counsel for the House Ways & Means Committee, now a global tax policy leader at EY, will talk with TPC’s Howard Gleckman about how international corporate tax rules could affect US-based multinational firms. Register and tune in to the noontime discussion here. 


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].

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