Editor’s Note: Morning Money is a free version of POLITICO Pro Financial Services morning newsletter, which is delivered to our s each morning at 5:15 a.m. The POLITICO Pro platform combines the news you need with tools you can use to take action on the day’s biggest stories. Act on the news with POLITICO Pro. The Biden White House released its $5.8 trillion budget plan on Monday, proposing higher funding for the military and domestic programs, including spending to combat climate change, bolster pandemic preparedness and public health and ramp-up antitrust enforcement. Our all-star financial services and tax teams have the key highlights for MM readers: Treasury — Victoria Guida: The budget would aggressively beef up funding to guard the Treasury Department against cyberattacks by setting aside $215 million for that purpose, up from just $80 million enacted earlier this month. It would also boost funding for the Treasury’s new climate hub to $293 million, a 20 percent jump from the current year. And it would raise funding for Treasury’s anti-money laundering unit to $210 million, a gain of $49 million, or 30 percent, “to increase oversight of the financial sector, strengthen corporate accountability, and provide adequate support to law enforcement and investigative entities.” IRS — Brian Faler: Monday’s budget proposal would boost IRS funding 18 percent, or $2.2 billion, bringing total agency funding to $14.1 billion. It also asks for an additional $798 million to improve IRS customer service, and proposes spending $310 million to improve the agency’s technology infrastructure. HUD — Katy O’Donnell: The president requested a major infusion of federal funding for housing construction and supply in a bid to ease the nation's affordable housing shortage. The proposal would provide $50 billion to boost housing supply, including $35 billion in funding for state and local housing finance agencies to provide grants and revolving loans. Under the budget, overall funding for the Department of Housing and Urban Development would rise 34 percent, to $71.9 billion. The plan also includes a bump for Low-Income Housing Tax Credits to increase construction of affordable units. SEC — Sam Sutton: The White House proposal would bump up the Securities and Exchange Commission’s annual appropriation to $2.15 billion, a 7.5 percent boost from the $2 billion appropriated to the markets regulator in omnibus spending legislation signed into law earlier this month. The bulk of the increase would go toward increasing compensation for full-time personnel, according to the president’s budget proposal. The SEC has been ramping up enforcement efforts around digital assets and has recently proposed new rules that would force companies to disclose information about greenhouse gas emissions. The plan would also provide $57 million to support the “move, replication, and related costs” for a replacement lease for the SEC’s Washington headquarters. CRYPTO — Also from Sam: The budget includes a trio of changes that would fold digital assets into the tax code and raise a projected $11 billion over the next decade in the process. The White House would like to give dealers the option of electing to have mark-to-market rules apply to their inventory of actively traded digital assets and derivatives — meaning that crypto assets that appreciate but aren’t sold could be taxed as gains in a manner similar to traditional commodities. Under the proposal, digital assets "would not be treated as a security or commodity for purposes of the mark-to-market rules,” according to Treasury’s Green Book, which also notes that the department would have the authority to determine which crypto assets are deemed “actively traded.” That shift could raise around $4.8 billion in 2023 and around $6.6 billion over the next decade. A second proposal would expand an existing requirement for taxpayers to report foreign assets in excess of $50,000 to include any digital assets held through a foreign exchange or service provider. The change would raise around $50 million next year and $2.2 billion by 2032. Lastly, new rules requiring crypto brokers to report information about transactions to the IRS — a controversial piece of last year’s infrastructure bill — are expected to generate around $48 million for the federal government in the 2023 fiscal year and roughly $2.1 billion by 2032. ECONOMIC PROJECTIONS — When economists at the Council of Economic Advisers locked in their forecasts for the budget in November, they saw gross domestic product growing 3.8 percent this year, consumer prices rising 4.7 percent compared with 2021 and the jobless rate averaging 3.9 percent. Since then, Russia’s invasion of its neighbor has introduced huge new risks to the outlook, including higher energy prices and supply chain disruptions that could push up inflation and weigh on economic growth. Meanwhile, the labor market continues to strengthen rapidly, and the Federal Reserve has signaled it is prepared to cool the economy rapidly to help contain price pressures. IT’S TUESDAY — We sat down with IntraFi’s Banking with Interest podcast to talk about sanctions, Fed nominations, digital assets, newsletter writing, journalism and more. Give it a listen! And let us know what you think: kdavidson@politico.com, aweaver@politico.com, or on Twitter @katedavidson or @aubreeeweaver.
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