House Plans A Debt Limit Vote This Week
But will there be tweaks first? Speaker Kevin McCarthy appears reluctant to entertain changes to a leadership-assembled debt limit bill. He says Republicans are in “very good shape” to pass the bill. But House Freedom Caucus members want to toughen the bill’s work requirements for food stamps, and other Republicans want to revisit repealing energy tax credits. The bill would raise the current $31.4 trillion borrowing limit by $1.5 trillion or suspend it through March 31, 2024, whichever comes first.
Tax refunds may reach filers on time this year. “Tax filing season this year has gone much more smoothly than 2020 and 2021,” TPC’s Howard Gleckman told CBS MoneyWatch. “They did get extra money and were able to hire more people to answer the phone. They dug through a pile of paper returns, which was an unimaginable mess. So even with a small amount of money thus far, things are better.”
As for the rest of IRS funding… IRS Commissioner Daniel Werfel told the Senate Finance Committee last week that redistributing some of the agency’s $80 billion in Inflation Reduction Act funding to customer service could damage IRS efforts to close the tax gap. “I worry that if we were to redirect funds out of one basket into another, we would lose important ground that we need to cover in one particular area,” said Werfel, who added the agency currently has 2,600 staff to cover hundreds of thousands of complex, high-income filers and corporations.
Study: Passthrough deductions promote tax planning, not growth. TaxNotes Martin Sullivan reviews a new study (paywall) by Lucas Goodman, Katherine Lim, Bruce Sacerdote, and Andrew Whitten. Their research shows that the section 199A deduction for qualified business income increases artificial maneuvers in business accounts solely for the purposes of reducing tax and does not increase capital formation or job creation. Sullivan concludes, “This study need not be the final word, but it is light years better than anything else we have, and Congress would do well to consider these findings.”
Monthly payments could provide low-income families with more transparency than unpredictable tax refunds. The Urban Institute’s Amelia Coffey and Hannah Daly and TPC’s Elaine Maag explore the tradeoffs in delivering benefits via tax refunds versus monthly payments throughout the year. “On the one hand, receiving the full credit a person qualifies for at tax time helps them cover larger expenses. But if tax credits were delivered as smaller, monthly payments instead, families can rely on them to meet ongoing expenses.”
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