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The Federal Government Remains Open, For Now


Good news for federal funding. The House and Senate voted yesterday to keep the government open through December 3, when they likely will have to do it all over again.

Yellen wants to scrap the debt limit entirely. Treasury Secretary Janet Yellen told the House Financial Services Committee yesterday, “I believe it’s very destructive to put the president and … the treasury secretary … in a situation where we might not be able to pay the bills that result from…past decisions.” Democrats and Republicans remain at odds over raising the debt ceiling  before default sometime in mid-October. Senate Democratic leader Chuck Schumer says he may ask the Senate to pass a debt increase with Democratic voters only. But Republicans are likely to block that too.

As for the bipartisan infrastructure bill… Speaker Nancy Pelosi delayed the vote last night as Democrats in the House could not reach an agreement. The House is set to reconvene today with continuing negotiations. 

And the big social spending bill. Moderate and progressive Democrats continue to talk. Sen. Joe Manchin will not “guarantee” to vote for the bill if its cost is more than $1.5 trillion, far below the current bill’s $3.5 trillion ten-year price tag. However, in a July private memo Manchin also said he’d support raising income tax rates on corporations, high-income households, and capital gains tax rates. 

Will Congressional Democrats eliminate “backdoor” Roth conversions? CBS News reports on how a tax-advantaged retirement savings plan became a tax dodge for wealthy individuals. The Roth IRA was established to allow those earning less than $95,000 to withdraw investment earnings tax free. But Congress allows high-earners to convert traditional IRAs into Roths. Wealthy investors can use backdoor Roths to stash valuable stocks, or pre-IPO shares that could one day skyrocket in value. Democratic lawmakers are trying  to close this backdoor in their $3.5 trillion spending plan. 

Washington State’s Supreme Court upholds a tax on big banks. Banks  sued the state when the legislature passed a 1.2 percent business and occupation surtax in 2019. The surtax applies to banks that earn more than $1 billion in annual profits and is assessed only on economic activities in the state. The industry said the tax discriminated against banks that conduct interstate commerce. Washington’s high court upheld the tax since it  applies equally to banks based in and out of the state.  

 

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 dailydeduction@taxpolicycenter.org.



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