LONG WAY TO GO: To maybe put a slightly different spin on Friday’s leak — the fact that Republicans still have 50 pages worth of potential cost-savings simply illustrates just how much work they have to do, and suggests they’re still in the tossing-out-ideas stage of fiscal planning. Still, some of these ideas couldn’t have come as a huge surprise to downtown. Republicans limited the mortgage interest deduction in the 2017 tax law, so the real estate industry will have known it might need to play further defense this year.
Meanwhile, there has been bipartisan concern over how nonprofit hospitals have been operating, while Republicans have been all but telegraphing that they’d be interested in ratcheting up TCJA’s tax on the endowments of rich colleges, meaning it likely wouldn’t be a shock to nonprofit advocates to see those on the menu. And then there are the potential tax changes that have seemingly been debated for decades, like whether credit unions still deserve an exemption from federal income tax. (The banking industry doesn’t think so, for the record.)
From the opposition: Democrats clearly think this suite of pay-for options is to their political advantage, amplifying their case that Republicans’ main goal is to further enrich the wealthy even if it comes at the expense of the middle- and working-class. That’s why many of their statements on the GOP list sounded so similar. “This ‘menu’ is a bait and switch for working families who voted for Donald Trump,” Senate Minority Leader Chuck Schumer said Sunday.
The menu does float potential changes to the Earned Income Tax Credit and the Child Tax Credit, as well as the repeal of an incentive to help those of more modest incomes to pay for college expenses. Still, most of the concern on the left about the Republican options was over potential cuts to safety-net programs, like Medicaid and food stamps.
And not for nothing: The floated change to the EITC — essentially splitting it into two incentives, one for workers and another for parents or guardians — has been endorsed by the national taxpayer advocate, the in-house IRS watchdog. GETTING THAT TEAM IN PLACE: The Senate Finance Committee is set to consider Scott Bessent’s nomination for Treasury secretary on Tuesday, as our Michael Stratford reported over the weekend. Bessent has broad support from Senate Republicans, and certainly seems on the fast-track to confirmation, with a floor vote likely not too far behind Tuesday’s committee action.
But it’ll be interesting to see how many votes he gets tomorrow from Democrats on the Finance Committee, who frequently took a hard line with Bessent — particularly over his steadfast support for extending all the expiring parts of the Trump tax cuts — in his confirmation hearing last week. (As a reminder, the Finance Committee unanimously supported Janet Yellen’s nomination four years ago, with 15 Senate Republicans eventually opposing her on the floor.)
Not just the senators, either: Outside progressive groups have been quite critical of Bessent, too. The Center for American Progress released a report that found that Bessent’s “3-3-3” fiscal plan would almost by definition lead to rolling back safety net programs — and that came out before the Republicans’ menu of cuts leaked. The three 3’s in Bessent’s plan refer to growing the economy by 3 percent a year, reducing the yearly deficit to 3 percent of gross domestic product and increasing oil production by 3 million barrels a year by 2028.
And to CAP’s Brendan Duke and Bobby Kogan, trying to make all happen only becomes more difficult if Bessent and the Trump administration are hellbent on keeping all of the expiring Tax Cuts and Jobs Act provisions, or if they show no interest in higher taxes on the well-to-do and corporations. “This suggests a deficit target of 3 percent of GDP would require large taxes on imported goods and enormous cuts to programs such as Medicaid, reducing low- and middle-income families’ living standards,” Duke and Kogan wrote.
BOWING OUT: IRS chief Danny Werfel is leaving office today, just as Trump is going back in, as Pro Tax’s Brian Faler reported on Friday. Werfel hadn’t given any indication that he would leave in the middle of his five-year term, even after Trump had selected former Rep. Billy Long to replace him. In fact, former IRS Commissioner John Koskinen said that Werfel had reached out to the incoming Trump administration to discuss how he might help hand off the position to Long — and got no response.
It’s still not clear when the Senate will dig into Long’s nomination. But Werfel’s exit could start bringing extra scrutiny to Long, who already has come under some criticism for his work in hawking the troubled Employee Retention Credit. With perhaps more to come: Bloomberg Tax reported last week that a consulting group that Long worked with on the ERC has marketed other tax incentives that the Treasury Department says aren’t actually real.
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