Rates, Replacements, Reclassification, And Revenue Shortfalls
Federal Reserve holds interest rates steady. The Fed did not change interest rates and signaled concern about the “lack of further progress” on curbing inflation. Borrowing costs may remain high for a longer period of time, until there is “greater confidence” that inflation is coming down. Officials have held interest rates at 5.33 percent since July 2023.
Would President Biden really scrap the TCJA and raise all of our taxes? TPC’s Howard Gleckman explores the question, calling on an ancient, ongoing philosophical debate. If, over time, people replace each individual piece of a ship—like the Tax Cuts and Jobs Act enacted under former President, and current presidential candidate, Donald Trump—will the ship remain the same or become something new? Gleckman explains that Biden could revise the TCJA and not raise all of our taxes, cutting taxes for some and raising them for others. Or he could let the law expire and immediately replace it with a package that has many TCJA provisions but under a new name. But does it matter? He concludes, “Instead of thinking about whether Biden replaces enough of the TCJA to justify renaming the vessel, we’d all be better off if lawmakers spend 2025 focusing on how to keep the seaworthy timbers and how best to replace the worm-eaten ones.”
What’s next for legal pot businesses? The Biden administration announced plans to reclassify marijuana under the Controlled Substances Act. Instead of being classified as a Schedule I drug like heroin, it would be classified as a Schedule III drug like acetaminophen with codeine. In states where marijuana is legal, businesses would no longer need to follow the Internal Revenue Code’s Section 280E, which applies to Schedule I and Schedule II substances. The provision bars companies selling these controlled substances from deducting ordinary business expenses. The administration plans to release an interim rule soon. Reclassification remains months away.
Meanwhile, Senators reintroduce the Cannabis Administration and Opportunity Act. The bill, introduced yesterday by Democratic Sens. Chuck Schumer (NY), Ron Wyden (OR), and Cory Booker (NJ), would end the federal prohibition of cannabis and remove cannabis from the list of federally controlled substances. The legislation would also allow states to create their own cannabis laws. The Alcohol and Tobacco Tax and Trade Bureau would have federal jurisdiction over the substance. The bill would eliminate the tax code’s restriction on cannabis businesses claiming deductions for business expenses and levy an excise tax on cannabis products.
How can local governments chart their futures with falling commercial property tax revenues? TPC’s Richard Auxier and Thomas Brosy share key findings and important questions for policymakers to ask about their fiscal futures. A new TPC analysis by Auxier, Brosy, Nikhita Airi, Gabriella Garriga, and Muskan Jha, shows how dependent 47 major cities are on commercial property tax revenue. Combining those data with an estimate of future office values, they present two forecasts of revenue shortfalls by 2031 in 13 cities for which complete data were available. The report serves as a framework for understanding the mechanics of commercial property tax collection and why different cities could face very different fiscal horizons.
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