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Tax deal could get new life under top-line spending agreement on January 11, 2024 at 11:00 am Business News | The Hill
Senate and House tax experts met Wednesday as they pushed to strike a tax deal that could reinstate business deductions in exchange for an enlargement of the child tax credit (CTC).
After failing to emerge from the yearly tax extenders debate at the ends of 2023 and 2022, the potential deal is getting new life as Congress attempts to pass a bipartisan spending bill ahead of a Jan. 19 deadline to avoid a partial shutdown.
Experts say the tax deal is closer to happening now in the wake of a $1.66 trillion top-line spending agreement announced over the weekend and a flurry of House and Senate meetings.
IRS Commissioner Danny Werfel was on Capitol Hill on Wednesday to brief the Senate Finance Committee on the employee retention tax credit (ERC). The ERC has been a locus of bogus business activity, and experts have considered changes as a way to pay for the CTC and business credit trade-off.
Werfel told Senate Finance about the effect of pausing ERC claims processing following concerns about fraud, which resulted in a 40-percent decline in average weekly claims, according to a readout provided to The Hill.
“This month, the IRS will be sending more than 3,000 new compliance-related letters to companies with both processed and unprocessed claims. At the same time, we are working to put in place protections against fraud that will eventually allow us to process additional legitimate ERC claims,” Werfel told the committee.
Tax experts say they think a deal could be just around the corner and that the ERC could factor into it.
“We feel closer to a bipartisan agreement on the CTC and these big three business provisions than at any point in the last two and a half years, going back to late 2021,” Andrew Lautz, a fiscal policy analyst with the Bipartisan Policy Center, a Washington think tank, told The Hill.
Lautz said he thought lawmakers were considering making changes to the ERC to help pay for the tax cuts coming out of the potential deal.
“The trend with the ERC is that it started as a pandemic-era tax break targeted at employers to make sure they kept workers on payroll during that really challenging time, and now it’s morphed into something different for the claimants, given the aggressive marketing and promotion around the credit,” he said.
However, political and practical obstacles to a deal remain, including potential resistance from state and local tax advocates as well as pushback on changing the tax code right before tax filing season opens on Jan. 29. What exactly the legislative vehicle would be is another open question, as House conservatives revolt against the agreement struck by Speaker Mike Johnson (R-La.) and Senate Majority Leader Chuck Schumer (D-N.Y.)
Despite the House tension, staffers on Capitol Hill tell The Hill that the broad contours of the tax deal are still in place.
“Senator Wyden is focused on getting the biggest possible cut to child poverty through the CTC in exchange for a handful of business provisions,” a Democratic aide on the Senate Finance Committee told The Hill on Wednesday morning ahead of a meeting of the committee’s Democrats, led by Sen. Ron Wyden (D-Ore.)
The CTC was expanded during the pandemic shutdown and raised millions of children above the poverty line, motivating many economic progressives, as well as some Republicans, to argue for a more permanent expansion.
The credit was made fully refundable under the 2021 American Rescue Plan and was boosted from $2,000 to $3,600 for children younger than 6 years old and to $3,000 for children under the age of 18.
“One year on, the Census Bureau confirmed child poverty in 2021 was cut almost in half (a 46 percent reduction) from 2020 levels, down to the lowest levels on record. Census notes that approximately 90 percent of this historic reduction can be attributed to the expanded credit,” researchers from Columbia University wrote in a 2022 study of the CTC.
Child poverty rose fast in that year after the expiration of the expanded credit, with 3.7 million more American children below the poverty line in January 2022 than in December 2021, the researchers noted.
Of the 2.9 million additional children kept above the poverty line by the CTC in 2021, about two-thirds were Black or Hispanic, with 716,000 Black children and 1.2 million Hispanic children lifted from poverty, according to a census study.
The Joint Committee on Taxation (JCT) found that after accounting for macroeconomic effects, the expanded CTC would reduce federal revenues by $1.4 trillion between 2022 and 2032.
The JCT analysis admits that it ignores “potential human capital losses from parents leaving the workforce” as well as “any potential long-run benefits from a reduction in child poverty.”
“Policymakers should prioritize the 19 million children who currently get only a partial Child Tax Credit or none at all because their families earn too little,” Chuck Marr, a vice president for tax policy at the Center for Budget and Policy Priorities, a left-leaning nonprofit, wrote in a Wednesday policy note.
The business deductions up for discussion in the deal are for research and experimentation costs, interest payments, and sped-up depreciation scheduling. While they apply to businesses across the economy, each provision has advantages for particular sectors.
Research and experimentation write-offs are favored by companies with intensive research and development, such those in the pharmaceutical and technology industries.
The interest deduction can boost profits for companies that use a lot of debt to transact their business, such as the leveraged buyouts undertaken by private equity firms.
Deducting depreciation costs more quickly helps companies with a lot of fixed capital investment, like those in manufacturing and real estate.
All three deductions were taken away in the 2017 Tax Cut and Jobs Act (TCJA) — the Republican tax cut bill enacted by former President Trump — to help pay for the large reduction to the U.S. corporate tax rate, which was slashed to 21 percent from 35 percent.
All told, the TCJA will have added $1.46 trillion to the national deficit between 2018 and 2027, with $653 billion of that due to business tax reforms, according to the JCT.
Taking away the research write-offs gave the government $119.7 billion in revenue through 2027, while limiting interest deductions produced $253.4 billion, according to the JCT, though these numbers are likely to change substantially in the current deal-making process, especially if the timing of it is limited to 2025 when the larger provisions in the TCJA are set to expire.
“The research credit … is by far the biggest,” Howard Gleckman, a tax analyst with the Urban-Brookings Tax Policy Center, told The Hill in an interview. “JCT estimates it’s around $140 billion between 2023 and 2025. The bonus depreciation is about half that, about $65 to $70 billion between ‘23 and ‘25. Business interest deduction is about $14 billion.”
Beyond speculation about the ERC, it’s not clear how the resumed business deductions or the CTC expansion would be paid for, or whether the tax cuts will simply be added to the deficit.
“I would be shocked if they paid for it,” Gleckman said. “This is why the budget deficit keeps going up. Instead of paying for new tax cuts, the deal that they make is, ‘You get yours and we get ours.’”
Business, Domestic Taxes, News, business taxes, Child Tax Credit, Danny Werfel, IRS, Senate Finance Committee, Ways and Means Committee Senate and House tax experts met Wednesday as they pushed to strike a tax deal that could reinstate business deductions in exchange for an enlargement of the child tax credit (CTC). After failing to emerge from the yearly tax extenders debate at the ends of 2023 and 2022, the potential deal is getting new life…
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The Cities Bracing for Trump’s Immigration Crackdown
In the wake of Donald Trump’s recent election victory and his promise of “the largest deportation operation in American history,” several major U.S. cities are bracing for potentially seismic shifts in their economic and social landscapes. As the nation grapples with the implications of this proposed policy, urban centers that have long been havens for immigrant communities find themselves at the epicenter of a looming storm.
Los Angeles, often dubbed the “City of Angels,” stands to lose more than its celestial nickname suggests. As a primary gateway for immigrants, the city’s vibrant tapestry of cultures and its economic engine could face significant disruption. From the bustling streets of Koreatown to the sun-drenched orchards of the Central Valley, the absence of undocumented workers could leave gaping holes in the city’s workforce and cultural identity.
Across the country, New York City, with its iconic skyline and melting pot reputation, faces its own reckoning. The Big Apple’s 5.9 million immigrants, many of whom are undocumented, form the backbone of industries ranging from construction to healthcare. The potential exodus could transform neighborhoods like Jackson Heights and Flushing, altering the very essence of what makes New York a global city.In the Sunshine State, Miami’s tropical allure belies the turbulent times ahead. Home to 2.5 million immigrants, the city’s economy relies heavily on sectors like tourism and hospitality – industries where undocumented workers often fill crucial roles. The potential deportation of these workers could send shockwaves through Miami’s economic ecosystem, from South Beach’s glitzy hotels to the agricultural heartlands of South Florida.
Chicago, the “City of Big Shoulders,” may find those shoulders significantly weakened. With 1.7 million immigrants in its metropolitan area, the Windy City’s diverse neighborhoods and industries face an uncertain future. From the meatpacking plants to the tech startups, Chicago’s economic resilience could be tested like never before.
In the Lone Star State, Houston and Dallas stand as twin testaments to the complexities of immigration policy. These Texas titans, each home to large immigrant populations, could see their booming economies stumble. The construction sites that dot their ever-expanding skylines and the service industries that keep these cities humming could face unprecedented labor shortages.
Out West, the San Francisco Bay Area’s reputation as a bastion of innovation and progress could be challenged. The region’s tech industry, often reliant on immigrant talent, might find itself grappling with a new reality. From Silicon Valley’s coding campuses to the agricultural expanses of the Central Valley, California’s economic powerhouse could face a reckoning. Phoenix, rising from the Sonoran Desert, could see its growth trajectory altered. As Arizona’s urban center, it stands at the forefront of the immigration debate, potentially facing not just economic impacts but social and political upheaval as well.
These cities, along with others like San Diego and Las Vegas, are not just facing potential economic disruptions. They are staring down the barrel of profound social change. Family separations, community fragmentation, and the erosion of cultural enclaves built over generations are all possible consequences of mass deportations. Moreover, the fiscal implications are staggering. Undocumented immigrants contribute billions in taxes annually, often without receiving the full benefits of their contributions. Their sudden absence could leave gaping holes in city budgets, potentially affecting public services and infrastructure projects.
As these urban centers brace for impact, the debate rages on. Supporters of stricter immigration policies argue for the need to enforce laws and protect American jobs. Critics warn of economic devastation and the unraveling of America’s urban fabric. What’s clear is that America’s cities stand at a crossroads. The coming months and years will likely reshape urban landscapes in ways both visible and invisible. From the foods we eat to the services we rely on, from the neighborhoods we call home to the very character of our cities, the impacts of this proposed immigration crackdown could be far-reaching and long-lasting. As the nation watches and waits, these cities – vibrant, diverse, and economically vital – find themselves on the front lines of a policy that could redefine what it means to be an American city in the 21st century.
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How Trump’s Deportation Plans Could Reshape Major Cities
In the wake of Donald Trump’s recent election victory, his ambitious plans for mass deportations have thrust America’s urban centers into the spotlight. As the nation grapples with the potential implications of what Trump calls “the largest deportation operation in American history,” cities across the country are bracing for significant changes that could reshape their economic, social, and cultural landscapes.
The stakes are particularly high for metropolitan areas like New York, Los Angeles, Houston, Dallas, and Miami, which host the largest populations of unauthorized immigrants. These cities, along with other major urban hubs such as Chicago, Washington D.C., and San Francisco, stand at the forefront of a looming transformation that could reverberate throughout the nation.
Economic Tremors
Economists warn that the proposed deportations could send shockwaves through urban economies. Mark Zandi, chief economist at Moody’s, cautions that businesses would face “significant challenges” if a substantial number of immigrants were removed. Industries such as construction, hospitality, and healthcare—pillars of urban economies—could face severe labor shortages.
Joe Brusuelas, chief economist at RSM, emphasizes the potential ripple effects: “The native-born workforce cannot meet current labor demands.” This labor gap could lead to increased wages, potentially rekindling inflation—a concern that looms large over city planners and policymakers alike.
Community Fabric Under Strain
Beyond economic considerations, the social fabric of cities hangs in the balance. Elena, a Nicaraguan immigrant in Houston, voices a fear echoed in immigrant communities across the nation: “I’m scared… This is my home.” The threat of family separations, particularly in mixed-status households, casts a long shadow over urban neighborhoods.
Immigrant advocacy groups like FIEL are mobilizing, advising clients to prepare for “anything that can happen.” This atmosphere of uncertainty could lead to decreased community engagement and cooperation with local authorities, potentially impacting public safety and community cohesion.
Cities at a Crossroads
As the debate intensifies, cities find themselves at a crossroads. Some, like New York and Los Angeles, have historically positioned themselves as “sanctuary cities,” often at odds with federal immigration enforcement. The impending clash between federal policy and local governance promises to be a defining feature of this new political landscape.
Meanwhile, the logistical challenges of implementing such a massive deportation operation remain daunting. Questions abound regarding detention facilities, transportation networks, and the sheer manpower required to carry out Trump’s vision.
Looking Ahead
As America’s urban centers brace for potential change, the full impact of Trump’s deportation plans remains to be seen. Legal challenges are all but certain, and the resilience of America’s cities will be put to the test.
What is clear is that the coming months and years will be pivotal for urban America. As Jason Miller, a senior Trump adviser, puts it, the plan is to “immediately reinstate” immigration policies from Trump’s first term. For America’s cities, this could mean a period of unprecedented change, challenge, and, potentially, transformation.
As the nation watches and waits, the story of America’s cities in the face of this ambitious deportation plan is just beginning to unfold. The outcome will undoubtedly shape the future of urban life in America for years to come.
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Donald Trump Wins 2024 USA Election
Based on the election results, Donald Trump has indeed won the 2024 U.S. presidential election, defeating Vice President Kamala Harris. Here’s an analysis of the key statistics and implications:
Electoral College Victory
Donald Trump has secured the presidency by winning crucial battleground states and flipping some key states that were previously held by Democrats. The final Electoral College tally is still being determined, but Trump has surpassed the 270 electoral votes needed to win.
Battleground State Performance
Trump’s victory was largely secured by winning several critical swing states:
- Wisconsin: Trump’s win here was pivotal in securing his path to victory.
- Pennsylvania: This state flipped back to Republican control.
- Georgia: Another key state that Trump managed to win back.
- Michigan: Trump successfully flipped this traditionally Democratic stronghold.
Popular Vote and Voter Priorities
While the final popular vote tally is still being calculated, exit polls provide insight into voter priorities:
- Economy and democracy were top concerns for voters.
- Abortion and immigration also played significant roles in voter decision-making.
Congressional Control
The election results extend beyond the presidency:
- Republicans are set to take back the Senate majority, securing at least 51 seats.
- Control of the House of Representatives remains undetermined.
Media Implications
The outcome of this election could be seen as a challenge to mainstream media narratives for several reasons:
- Polling Discrepancies: Many pre-election polls suggested a tight race or even a slight Harris advantage in key states. Trump’s victory, particularly in battleground states, may indicate that polls underestimated his support.
- Narrative Shifts: Throughout the campaign, much of the mainstream media focused on Trump’s legal challenges and controversies. His victory suggests that these issues may not have resonated with voters as much as economic and policy concerns.
- Voter Priorities: The emphasis on issues like the economy and immigration in voter decision-making may indicate a disconnect between media focus and voter concerns.
- Electoral Predictions: Many mainstream outlets were cautious about predicting a Trump victory, even as results began to favor him. This hesitancy could be seen as a reflection of broader media skepticism about Trump’s chances.
- Underestimation of Trump’s Base: The results suggest that Trump’s core support remained strong and potentially grew, despite negative coverage in much of the mainstream media.
It’s important to note that while the election outcome may challenge some media narratives, it doesn’t necessarily invalidate all mainstream reporting. The complex factors influencing voter behavior and the challenges of accurate political forecasting remain subjects of ongoing analysis and debate.
As the dust settles on this historic election, both the media and political analysts will likely engage in extensive reflection on the factors that led to Trump’s victory and the implications for future political coverage and analysis.
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