Spending plan clears $2T tax hurdle

From: POLITICO's Morning Money - Thursday Sep 16,2021 12:03 pm

Sep 16, 2021

By Katy O'Donnell and Aubree Eliza Weaver

Presented by The 1031 Impact Coalition

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Quick fix

Spending plan clears $2 trillion tax hurdle — Democrats’ $3.5 trillion plan to dramatically expand the federal social safety net cleared its first major hurdle as the House Ways and Means Committee approved $2.1 trillion in new taxes to help pay for it. But the breakdown of the 24-19 vote could spell trouble for the bill’s ultimate passage, our Brian Faler reports, after a moderate Democrat sided with every Republican member of the panel in opposing the grab-bag of tax hikes, most of which target corporations and wealthy individuals.

Democrats can afford to lose just three votes on the floor. Florida Rep. Stephanie Murphy , the committee’s Democratic holdout, had urged party leaders to “pre-conference” their plan to preempt later changes, in a bid to avoid voting for tax increases that might later be scrapped by the Senate. “Every moment we spend debating provisions that will never become law is a moment wasted and will delay much-needed assistance to the American people,” Murphy said. “House and Senate Democrats must work together, in a careful and thoughtful way, to get this bill to a place where it can pass both chambers and be signed into law by President Biden.”

One issue the committee avoided:the $10,000 cap on state and local tax deductions, which Democrats from states with pricey property taxes — California and New York come to mind — want to axe. Brian reports that House Speaker Nancy Pelosi is expected to present a plan on what to do with the cap, a product of President Donald Trump’s 2017 tax law, when the legislation heads to the Rules Committee before going to the House floor.

HAPPY THURSDAY — Ben White will be back soon! Send tips to him at bwhite@politico.com or @morningmoneyben and to Aubree Eliza Weaver at aweaver@politico.com or @AubreeEWeaver. And you can always reach me with any housing and consumer-finance tips at kodonnell@politico.com.

A message from The 1031 Impact Coalition:

For 100 years, 1031 like-kind exchanges have helped ordinary Americans grow and expand their businesses. 1031 allows business owners to invest in workers, buildings, and their companies, which provides jobs, boosts local tax revenue, and facilitates economic development. And 1031 provides a pathway to improve all of the above, including underserved communities, when business owners can invest and expand at a lower cost. Altogether, like-kind exchanges support 568,000 jobs and add $55 billion to GDP.

Driving the Day

Weekly jobless claims numbers at 8:30 a.m… August retail sales, 8:30 a.m.

YELLEN’S AGENDA BOGGED DOWN BY VACANCIES – Bloomberg’s Saleha Mohsin: “Treasury Secretary Janet Yellen has one of the biggest to-do lists in Washington: usher in a global tax overhaul, press Wall Street on climate change and distribute billions of dollars in Covid-relief funds. Yet her efforts are hampered by vacancies in the Treasury’s top ranks, where only three officials including herself have been confirmed by the Senate. Of the 17 key remaining jobs that require confirmation, 10 have nominees stuck in the Democratic controlled-Senate, while the rest have not been named.

“Priorities such as a top-to-bottom review of the agency’s financial sanctions and work to bolster resilience of the U.S. Treasuries market — which nearly seized up in March 2020 amid a desperate global rush for cash dollars — have progressed far slower than expected, according to people familiar with the matter.”

FHFA PROPOSES EASING CAPITAL RULES FOR FANNIE, FREDDIE — The housing regulator proposed loosening capital requirements for the mortgage giants on Wednesday, the latest move to undo restrictions imposed on the government-controlled companies during the Trump era. Under the proposed rule, the companies behind about half of the U.S. mortgage market would be required to retain total capital equivalent to about 3 percent of their assets, rather than the 4 percent set by the Trump administration last year. In dollar terms, that means Fannie and Freddie combined would be required to hold $220 billion instead of $294 billion to protect against losses, based on their total assets as of March 31 this year.

FHFA proposed freeing up billions of dollars at Fannie and Freddie a day after suspending other Trump-era restrictions in a move that gave the companies freer rein to purchase riskier mortgage loans. FHFA Acting Director Sandra Thompson — whom Biden appointed in June after firing Trump-era director Mark Calabria — has given priorities to policies to expand affordable housing and address racial gaps in homeownership.

NEAL, BIDEN ADMINISTRATION TALKING ABOUT BANK REPORTING REQUIREMENTS — Our Bernie Becker: “House Ways and Means Chair Richard Neal (D-Mass.) said Wednesday that he was discussing with the Biden administration ways to increase reporting requirements for banks in budget reconciliation.
“Both Treasury Secretary Janet Yellen and IRS Commissioner Chuck Rettig wrote to Neal this week in support of a proposal from President Joe Biden that would require financial institutions to give the IRS more information about inflows and outflows from bank accounts, to help the agency increase enforcement and recover more in uncollected taxes.

"The objective of this reporting regime is to help the IRS pursue high-end noncompliance by providing some information about opaque income streams that disproportionately accrue to the top," Yellen wrote.

JPMORGAN BACKS EMERGING-MARKET STOCKS AFTER POOR RUN — Reuters: “Investment bank JPMorgan has urged investors to stock up on emerging economy equities whenever they dip and said that Japan’s change of prime minister should boost the yen and Nikkei if history is anything to go by.

“Signs the Delta wave of the Covid-19 virus were now receding meant it was staying ‘pro-risk,’ the banks’ analysts said in a global asset allocation report on Wednesday. ‘We increase our overweights (buy recommendations) in EM and Japan this month given their recent underperformance and an anticipated boost in Japan from a political regime change.’”

SUBSCRIBE TO "THE RECAST" TODAY: Power is shifting in Washington and in communities across the country. More people are demanding a seat at the table, insisting that politics is personal and not all policy is equitable. The Recast is a twice-weekly newsletter that explores the changing power dynamics in Washington and breaks down how race and identity are recasting politics and policy in America. Get fresh insights, scoops and dispatches on this crucial intersection from across the country and hear critical new voices that challenge business as usual. Don't miss out, SUBSCRIBE . Thank you to our sponsor, Intel.

A message from The 1031 Impact Coalition:

The 1031 impact goes well beyond enabling entrepreneurs to build their businesses. Like-kind exchanges are an overwhelming positive for the economy, including jobs, investment, and economic growth. They also promote land conservation, create public spaces, and preserve family farms. An estimated 15% of commercial real estate transactions from 2010 through mid-2020 involved a 1031 exchange.

Importantly, 1031 helps house our communities. Multifamily housing transactions represent 40% of like-kind exchanges, more than any other building type . Limiting 1031 exchanges would increase the cost of rental housing and significantly raise rents at a time when America is facing a housing affordability crisis.

Businesses and workers who welcome us into their buildings have been hard hit by the pandemic, but they are resilient in reopening. As America works to emerge, like-kind exchanges will help a new generation of entrepreneurs create jobs and opportunities, and generate new tax revenue, for our communities.

Fly Around

IP: HOW THE U.S. NAILED THE ECONOMIC RESPONSE TO COVID — WSJ’s Greg Ip: “Countless things have gone wrong since Covid-19 arrived on American shores, yet this week we got proof of something that really went right: the economic policy response. The pandemic-induced shutdown was initially the worst hit to the U.S. economy since the Great Depression. Employment and output both fell more last year than in 2008 during the financial crisis.

“And yet poverty, by its broadest measure, went down. The figures reported by the Census Bureau this week reveal why: Based on cash income such as wages and social security, the share of households in poverty rose to 11.4 percent last year from 10.5 percent in 2019. But after taking account of government benefits such as stimulus checks, food stamps and tax credits, the share dropped to 9.1 percent from 11.8 percent.

SEC GIVES WHISTLEBLOWER $110M IN SECOND-BIGGEST PAYOUT — Bloomberg’s Matt Robinson: “The U.S. Securities and Exchange Commission awarded $110 million to a tipster whose information resulted in enforcement actions, bringing total payments under the agency’s whistle-blower program to more than $1 billion. The tipster’s award, the second-largest ever, includes $40 million from the SEC and $70 million from a related action brought by another agency, according to a statement Wednesday. Under the SEC’s whistle-blower program, tipsters can be paid for information that prompts sanctions by another agency.”

TECH, ENERGY COMPANIES LEAD STOCKS HIGHER — AP’s Damian J. Troise and Alex Veiga: “Technology and energy companies helped lead stocks higher in afternoon trading Wednesday, lifting the benchmark S&P 500 to a gain for the week. The S&P 500 index was up 0.8 percent as of 2:41 p.m. Eastern. The Dow Jones Industrial Average was up 245 points, or 0.7 percent, to 34,821 and the Nasdaq composite rose 0.7 percent. The gains were broad, with more than 80 percent of stocks in the benchmark S&P 500 rising. Health care and financial stocks also made solid gains. Only utilities companies lagged.”

FED MANDATES COVID SHOTS FOR ALL EMPLOYEES —Reuters’ Ann Saphir: “The U.S. Federal Reserve in Washington and the regional Fed banks will now require all of their nearly 23,000 employees be vaccinated against Covid-19. The Philadelphia Fed informed its staff of the new mandate in a memo on Wednesday, making it the last of the 12 regional Fed banks to make vaccination a requirement of employment. The Fed Board in Washington will also require its employees to be fully vaccinated by Nov. 30, a spokesperson for the U.S. central bank told Reuters on Wednesday.”

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