OH, IT’S BUDGET WEEK: President Joe Biden releases his third budget this week — and in perhaps classic Biden fashion, he’s been more than happy to offer some previews ahead of the time.
Perhaps most bluntly, Biden said last week at an event in Virginia that he wanted “to make it clear I’m going to raise some taxes,“ while also protecting Social Security and Medicare.
In fact, Biden sure seems to think that a budget chock full of tax increases will help Democrats win the messaging battle with Republicans in the struggle over how to raise the debt limit.
“He says he won’t raise taxes on anyone, on the wealthy or big corporations. He just wants to cut programs,” Biden said about Speaker Kevin McCarthy last week in remarks to House Democrats.
The details on how exactly Biden will spell out that contrast will become clearer on Thursday, when that next White House budget is released.
But as The Wall Street Journal noted over the weekend, it won’t be the most surprising thing if the Biden administration picks some tax increases for the budget from its greatest hits bin, given that so many of them got blocked by the Democratic-led Senate last year.
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All worked up for nothing: Today marks 31 years since the Michelangelo computer virus struck thousands of computers — though the virus was also something of a bust, since some folks were afraid it would infect millions of computers.
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ABOUT THOSE POTENTIAL PROPOSALS: They include hiking both the corporate tax and rates for high-earning individuals, not to mention implementing the global tax deal that the Biden administration was crucial to developing.
The flip side of that: Biden will also continue to talk up the one large tax increase Democrats did get done in 2022, the new minimum tax on large corporations’ financial statement income, as well as his vow to not raise taxes on anyone making under $400,000 a year. (Sticklers will say he’s not always giving the full picture on that minimum tax, either.)
Further reading: Biden will be rolling out the budget in Philadelphia on Thursday, as The Philadelphia Inquirer reports.
Not all that related reading: Something else to watch out for this week — the House Ways and Means Committee will be holding its second committee hearing in about a month outside of Washington, heading this time to Oklahoma.
Related note to that: “House Committee Budgets Swell as G.O.P. Plans Road Shows Across U.S.,” via The New York Times.
DID WE SAY GLOBAL TAX DEAL? Republicans don’t like that agreement one bit, as you might have noticed.
But let’s take a deeper look at just one of their objections to the deal negotiated through the Organization for Economic Cooperation and Development — the idea that it raises some constitutional questions.
“The Biden administration cannot override Congress’s sole tax-writing authority under the Constitution,” House Ways and Means Chair Jason Smith (R-Mo.) said last month.
On some level, that’s a weird charge to make — what exactly could be unconstitutional, given that Congress hasn’t implemented either pillar of the global agreement?
But several tax experts told Weekly Tax that they’re sympathetic to the notion that the Biden administration is trying at least in spirit to supersede Congress’ constitutional right to write the tax laws.
Here’s how: Biden administration officials have said they believe that other countries implementing the global minimum tax portion of the agreement will end up prodding Congress to do the same..
That’s because the minimum tax has a mechanism known as the top-up tax — which allows governments that have implemented what’s known as Pillar Two to tax multinational corporations based elsewhere if their effective domestic tax rates dip under the 15 percent threshold. (The EU and South Korea are among those moving toward that goal.)
In other words, that would let other governments siphon off revenue from American companies that could otherwise be collected here — a situation that advocates for the global tax deal believe Congress can’t let stand forever.
We’ll see about that, but it’s definitely an approach that has rubbed some tax people the wrong way.
“The U.S. government officially invites foreign governments to enact extra-jurisdictional tax increases on the purely U.S. activity of U.S. companies so that the U.S. executive branch can hold a gun to the head of the U.S. Congress,” said George Callas of Arnold Ventures, a former senior GOP tax counsel in the House.
“Maybe it’s constitutional, but it’s appalling in that it puts foreign interests over U.S. interests,” he added.
But former Biden administration officials who helped craft the global tax deal don’t see it that way.
Kim Clausing, who’s back to being a law professor at UCLA after a stint at Treasury, rejected the idea that the administration was overstepping its bounds with the global tax deal.
Clausing didn’t deny that the global minimum tax being implemented elsewhere could and should influence Congress, but argued that should be seen as a positive — especially given that the U.S. has already enacted a minimum tax on the foreign profits of corporations, known as GILTI.
“The fact that other countries are doing it makes it so much easier for us to do it. They’ve adopted an idea that we started, and they’re following in our footsteps. And now it’s time for us to follow suit,” Clausing told Weekly Tax.
She added that top-up tax was needed to help governments protect their own corporations, and said the Biden administration’s role in putting that idea into action was perfectly reasonable.
“In Washington D.C., there are a lot of turf battles that are more about people’s sense of their own importance than the substance,” Clausing said.
Tax legislation, she added, is “often shaped by the full process, which is going to include input from the executive branch and stakeholders, for both good and bad. We do live in this bigger world, where there are a lot of issues that we have to collaborate with other countries on.”
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Financial Times: “Saudi Arabia looks at tax relief for multinationals relocating HQs.”
Reuters: “EU orders Italy to recover unpaid property taxes by the Catholic Church.”
Bloomberg: “Czechs Pledge More Budget Cuts After $2.4 Billion Pension Revamp.”
Associated Press: “Montana legislature passes $1B in tax relief, rebates.”
Austin American-Statesman: “Lt. Gov. Patrick shoots down Speaker Phelan’s property tax proposal, lauds school choice.”
Cleveland.com: “Ohio GOP tax bill that primarily benefits the wealthy could jeopardize public services such as parks, libraries and schools.”
Pro Trade: “EU wants agreement with U.S. on electric vehicle concerns by von der Leyen visit.”
The Wall Street Journal: “The Tax Play That Saves Some Couples Big Bucks.”
Nerd Wallet: “As March Madness Looms, So Do Sports Betting Taxes.”
Michelangelo, the famous sculptor, painter and poet of the Renaissance, was born on March 6, 1475.
