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The biggest sticking points between US Senate and House tax Bills
WASHINGTON (BLOOMBERG) – Expiring tax cuts, business perks and healthcare politics loom over House and Senate Republicans as they face the daunting task of hammering out the differences between their competing Bills to rewrite the US tax code.
Different versions of the Bill passed the Senate and House with only Republicans’ votes, and the GOP can’t afford to lose too many supporters in the negotiations as they seek a compromise. The party can spare only 22 votes in the House and two in the Senate.
There’s a lot they agree on. For example, they both would cut the corporate tax rate to 20 per cent from 35 per cent – though the Senate version would make that change in 2019, a year later than the House Bill would
But there are some major differences that won’t be easy to resolve, and any changes could increase the Bill’s cost or force painful trade-offs.
Here are the biggest sticking points – and how they may be resolved.
TEMPORARY TAX CUTS
– House: A US$300 (S$403.74) per person family credit sunsets after 2022
Senate: All individual tax breaks – including rate cuts and the doubling of the standard deduction – expire after 2025. A planned repeal of state and local deductions for income and sales taxes would also end then, and personal exemptions automatically return after 2025.
Why it matters: The sunsets in the Senate version largely exist to comply with the chamber’s strict rules that forbid legislation from adding to the long-term deficit under the fast-track voting procedure Senate leaders used.
The politics of permanent corporate tax cuts combined with temporary individual tax cuts could be tricky.
– How to resolve it: The Byrd Rule leaves no easy way around a host of sunsets to prevent long-term deficits. In the first decade, a limit of US$1.5 trillion in new deficits has also forced sunsets.
The most they can do is monkey around with the expiration dates and perhaps sunset some provisions rather than others. Many Republicans have taken to arguing future congresses won’t let the tax breaks expire.
PASS-THROUGH TAX BREAKS
– House: Pass-through business income is taxed at 25 per cent, with some limits. A lower rate of 9 per cent is also available for some lesser-earning businesses.
– Senate: Pass-through income gets a 23 per cent deduction, subject to limitations, including the same expiration date – end of 2025 – as the individual tax provisions.
– Why it matters: Pass-through businesses, including partnerships, limited liability companies and S corporations, don’t pay taxes themselves but pass their earnings to their owners, who then pay at their individual tax rate.
Many House Republicans have insisted the pass-through rate mustn’t be higher than 25 per cent. The initial Senate approach would have pushed it north of 30 per cent for many of the highest-earning pass throughs.
The Senate Bill has since been amended to provide a more generous break, but it remains to be seen which will carry the day.
– How to resolve it: Like much else in the Bill, this is a math problem. A deeper break for pass-throughs means raising revenue elsewhere to keep it within the parameters.
The price tag of the overall legislation must stay within the US$1.5 trillion allowance for the first decade and red ink must be wiped out in each year after that.
ALTERNATIVE MINIMUM TAX
– House: Repeals it entirely for both individuals and corporations.
– Senate: Maintains it, but raises the individual exemptions until 2026. Corporate AMT would remain in full.
– Why it matters: The AMT was established as a way to make sure taxpayers didn’t leverage enough tax breaks to avoid any meaningful tax payment.
Wiping it out is a high priority for conservatives, and the Senate’s last-minute decision to partially preserve it – albeit in amended form for individuals – may not sit well with many House Republicans.
Maintaining an AMT in the Senate bill was crucial to paying for changes aimed at winning holdouts, such as the enhanced higher pass-through break and a state and local tax deduction for property taxes.
– How to resolve it: Partially restore the AMT in the House Bill, or find money elsewhere.
OBAMACARE INDIVIDUAL MANDATE
– House: No action on the mandate.
– Senate: Effectively repeals the mandate by zeroing out the tax penalty for individuals who don’t purchase health insurance.
Why it matters: This is seen as a win-win for most Republicans – smashing the Affordable Care Act, as they’ve promised to do for years, while raising some US$300 billion to pay for tax cuts.
The Congressional Budget Office has said the savings would result because the federal government would no longer have to provide subsidies for roughly 13 million people who would no longer be insured.
– How to resolve it: House Republicans mostly support repealing the mandate – suggesting that this won’t be a sticking point.
It could get tricky, however, if the votes of moderates are needed. House Speaker Paul Ryan on Thursday (Nov 30) declined to comment on whether such measures would be adopted.
BUSINESS EXPENSING
– House: Full and immediate expensing on equipment purchases that expires in five years.
Senate: A “step-down” approach that phases out the expensing benefit after five years rather than an immediate cliff.
– Why it matters: Senator Jeff Flake secured the phase-out change as crucial to his decision to support the Bill, calling the House version a huge “gimmick” in that Congress wouldn’t allow a hard cliff.
“We were able to take that and ratchet it down after five years in a way that we can hold,” he said.
– How to resolve it: Either pass the Bill without Mr Flake’s vote, or persuade House Republicans to go along with a phase-out.
MORTGAGE INTEREST DEDUCTION
– House: Cuts the deduction cap for new purchases of homes in half – to loans of US$500,000.
– Senate: No change to the current US$1 million limit.
– Why it matters: This is a cherished tax break in the code that affects many upper-middle-income and wealthy families.
Senate Republicans don’t want to limit it. If they refuse to give in, then House Republicans will need to swallow other revenue offsets to cover the cost of leaving the deduction as is.
– How to resolve it: Find revenue elsewhere.
INDIVIDUAL STATE AND LOCAL TAX DEDUCTIONS
– House: Repealed, with a property tax exemption up to US$10,000.
– Senate: Same.
– Why it matters: A last-minute add-on to the Senate Bill – which initially sought to kill SALT entirely – mirrors the House exemption.
That’s key to winning over Senator Susan Collins of Maine and holding on to a few-dozen House Republicans in high-tax states like New York and New Jersey that rely on the deduction.
– How to resolve it: Don’t mess with the exemption, or crucial votes could disappear.
It’s an expensive tax break and last-minute searches for revenue in conference committee could tempt negotiators to look at it.
ESTATE TAX
– House: Limits the number of multi-million dollar estates that would pay the tax by doubling the threshold at which it applies, then fully repeals the levy in 2025.
– Senate: Doubles the exemption amount until 2026, then reverts to lower thresholds.
– Why it matters: Eliminating the current 40 per cent levy applied to estates worth more than US$5.49 million for individuals has been a long-sought Republican goal.
Conservatives detest the estate tax, and have said it hurts small businesses and farmers. Data from 2013 shows that just 3 per cent of estates subject to the tax were businesses and farms, according to the Tax Policy Centre, a Washington research group.
How to resolve it: Persuade House Republicans to accept that the tax isn’t going away, or be forced to find revenue elsewhere – the levy brought in US$18 billion last year. Repealing it also won’t sit well with Ms Collins.
US Senate approves Republicans’ tax overhaul
WASHINGTON (REUTERS) – The US Senate on Saturday (Dec 2) approved a sweeping tax overhaul, moving Republicans and President Donald Trump a major step closer to their goal of slashing taxes for businesses and the rich while offering everyday Americans a mixed bag of changes.
In what would be the largest US tax overhaul since the 1980s, Republicans want to add US$1.4 trillion (S$1.88 trillion) over 10 years to the US$20 trillion national debt to finance changes that they say would further boost an already growing economy.
US stock markets have rallied for months in hopes Washington would provide significant tax cuts for corporations.
Following the 51-49 vote, talks will begin, likely next week, between the Senate and the House of Representatives, which has already approved its own tax Bill. The two chambers must craft a single Bill to send to Mr Trump to sign into law.
The President wants that to happen before the end of the year, allowing him and his Republicans to score their first major legislative achievement of 2017, despite controlling the White House, the Senate and the House since he took office in January.
A tax overhaul is seen by Republicans as crucial to their prospects in the November 2018 mid-term election campaigns, when they will have to defend their majorities in Congress.
In a legislative battle that moved so fast a final draft of the Bill was unavailable to the public until just hours before the vote, Democrats slammed the measure as a give-away to businesses and the rich financed with billions in taxpayer debt.
The framework for both the Senate and House Bills was developed in secret over a few months by a half-dozen Republican congressional leaders and Trump advisers, with little input from the party’s rank-and-file and none from Democrats.
The Senate approved their Bill in the wee hours, with Democrats complaining that last-minute amendments circulated among senators were poorly drafted and vulnerable to being gamed later by lawyers and accountants in the tax avoidance industry.
“The Republicans have managed to take a bad Bill and make it worse,” said Senate Democratic leader Chuck Schumer. “Under the cover of darkness and with the aid of haste, a flurry of last-minute changes will stuff even more money into the pockets of the wealthy and the biggest corporations.”
No Democrats voted for the Bill, but they lacked the votes to block it because Republicans hold a 52-48 Senate majority.
Republican Senator Bill Cassidy praised the Bill and said,”Working families and middle-income families across the nation will be better off. Families who over the last eight years have not done well will begin to do better.”
Cyclone batters Indian coast killing 14 DECEMBER 2, 2
Cyclone batters Indian coast killing 14
Cyclone Ockhi has barrelled into the Lakshwadeep islands in southwestern India after drenching the neighbouring states of Kerala and Tamil Nadu, claiming 14 lives with many fishermen still feared trapped at sea.
Authorities including the National Disaster Management Authority (NDMA), India’s Coast Guard and Navy have rescued about 223 fishermen and evacuated thousands of people from cyclone hit areas, officials said, as they continued their operations on Saturday.
Prime Minister Narendra Modi has spoken to the chief minister of Tamil Nadu, assuring him of support operations including necessary funds, according to local media.
Ockhi is expected to travel north towards Mumbai and Gujarat in the next 48 hours, according to Indian Meteorological Department director S. Sudevan in Trivandrum, though it is likely to lose intensity.
“The intensity of the wind may come down and the cyclone could change into depression,” Sudevan said adding fishermen have been warned not go to the sea for the next few days as waves are likely to be 3-5 metres high.
Missing Florida girl found in New York with soccer coach
LAKE CITY, Fla. – Authorities say a missing Florida teenage girl and a 27-year-old soccer coach have been found in New York.
The Gainesville Sun reports that the 17-year-old and Rian Rodriguez were stopped by a New York State Police officer Friday afternoon in Syracuse. The Columbia County Sheriff’s Office in Florida says the girl, who had been missing since Saturday, was detained, and Rodriguez was taken into custody.
Law enforcement officials had been tracking Rodriguez through an ATM withdrawal in St. Mary’s, Georgia, and by surveillance cameras at convenience stores in South Carolina and North Carolina.
Officials at Fort White High School have suspended Rodriguez, who coached the boys soccer team at the north Florida school. It wasn’t immediately clear what criminal charges he would face.
War criminal Slobodan Praljak died of cyanide poisoning
A war criminal who swallowed a liquid during a dramatic court appearance died of cyanide poisoning, Dutch prosecutors say.
Slobodan Praljak took the poison while appearing before UN judges in The Hague after his conviction and 20-year sentence were upheld.
The former Croatian army chief drank from a small bottle and yelled: “I am not a war criminal. I oppose this conviction.”
His actions, which were broadcast on a video feed, forced the judges to temporarily suspend the hearing. Paramedics were seen entering the courtroom.
The hearing resumed a few hours later, with presiding judge Carmel Aguis saying: “Courtroom one is now a crime scene.”
The 72-year-old was convicted in 2013 of crimes including murder, persecution and deportation for his role in the attempt to create a Bosnian Croat mini-state in Bosnia in the early 1990s during the break-up of Yugoslavia.
Prosecutors said in a statement that Praljak had a “concentration of potassium cyanide in his blood”.
That “resulted in a failure of the heart, which is indicated as the suspected cause of death”.
Pleas to flee, a desperate video: Inside Venezuela’s oil industry purge
CARACAS (Reuters) – Days before masked agents arrested him, family and friends pleaded with Eulogio Del Pino to flee, warning that he could be next among executives detained or pursued, one after another, in a mounting purge of Venezuela’s faltering oil industry.
CARACAS (Reuters) – Days before masked agents arrested him, family and friends pleaded with Eulogio Del Pino to flee, warning that he could be next among executives detained or pursued, one after another, in a mounting purge of Venezuela’s faltering oil industry.
But the former oil minister, detained by police before dawn on Nov 30, was reluctant to believe he could soon be among those targeted in what President Nicolas Maduro has characterized as a cleanup of the all-important sector.
“I told him: ‘Go!’,” said one of three people who described the leadup to the former minister’s detention. “But he told me ‘I haven’t done anything wrong. I trust that they’re not going to do anything bad to me.’”
That trust, the product of three years in which Del Pino held the top two jobs in Venezuela’s oil ministry, now appears alarmingly misplaced. Maduro is charging Del Pino and many other former industry executives with corruption and blaming them for economic woes now crippling the Andean nation.
“I‘m not going to shield anyone,” Maduro said in a speech on Nov 28, as he swore in a general who replaced Del Pino as oil minister. “If you’re corrupt, you have to pay with jail and return what you’ve stolen.”
The crackdown has led to uncertainty, panic and paranoia across the sector, with as many as 65 former executives arrested over the past four months. Prosecutors, critics say, have provided scant evidence for the charges.
CARACAS (Reuters) – Days before masked agents arrested him, family and friends pleaded with Eulogio Del Pino to flee, warning that he could be next among executives detained or pursued, one after another, in a mounting purge of Venezuela’s faltering oil industry.
But the former oil minister, detained by police before dawn on Nov 30, was reluctant to believe he could soon be among those targeted in what President Nicolas Maduro has characterized as a cleanup of the all-important sector.
“I told him: ‘Go!’,” said one of three people who described the leadup to the former minister’s detention. “But he told me ‘I haven’t done anything wrong. I trust that they’re not going to do anything bad to me.’”
That trust, the product of three years in which Del Pino held the top two jobs in Venezuela’s oil ministry, now appears alarmingly misplaced. Maduro is charging Del Pino and many other former industry executives with corruption and blaming them for economic woes now crippling the Andean nation.
“I‘m not going to shield anyone,” Maduro said in a speech on Nov 28, as he swore in a general who replaced Del Pino as oil minister. “If you’re corrupt, you have to pay with jail and return what you’ve stolen.”
The crackdown has led to uncertainty, panic and paranoia across the sector, with as many as 65 former executives arrested over the past four months. Prosecutors, critics say, have provided scant evidence for the charges.
Corruption has long plagued the OPEC member’s oil industry and much of the broader Maduro government, a leftist administration struggling with an imploding economy, soaring crime and debilitated public services.
But critics of Maduro’s beleaguered administration, and many within the oil industry itself, see the purge as nothing more than an effort to eliminate rivals within the sector and consolidate control ahead of presidential elections next year.
“Maduro wants control of PDVSA and control of its cash flow,” said opposition legislator and economist Angel Alvarado, using the initials for state-controlled oil company Petroleos de Venezuela SA.
Venezuela’s Information Ministry did not respond to a request for comment. PDVSA and the oil ministry did not respond to requests for comment either.
“I NEED A REST”
It is not clear whether any of the charges against Del Pino are substantiated. Prosecutors, without presenting any evidence, accused him of belonging to a “cartel” that operated a roughly $500 million corruption scheme in the western state of Zulia.
But the Stanford-educated engineer, who led the ministry until Nov. 26 and PDVSA for three years before that, was previously known as a government loyalist, committed to Maduro’s vision for “21st century socialism.”
Only after he was ousted from the ministry, the three people familiar with his arrest said, did Del Pino finally begin to believe that his time was probably up. His final days as a free man illustrate how swiftly fortunes can shift for even senior officials in Maduro’s government.
Just after his firing, Del Pino told Reuters in a WhatsApp message: “I need a rest.”
On Nov. 29, three days after his ouster, an exhausted Del Pino went to Avila, a verdant mountain that towers over Caracas, the capital, where he liked to hike, one of the people said.
Del Pino found a quiet spot under a tree and recorded a video on his cell phone. He said he believed he was about to become a “victim” of an “unjustified attack.”
Before sunlight the following morning, hooded and armed military intelligence agents burst into his home and arrested him. Footage of the detention showed Del Pino wearing the burgundy-colored soccer shirt of Venezuela’s national team.
Later that day, the video Del Pino recorded appeared on his Twitter account. “I hope the revolution will give me the right to a legitimate defense,” he said, referring to the government in the militant terms embraced by Maduro.
Del Pino did not respond to requests for comment on WhatsApp, where he had recently changed his profile picture from one of him in a PDVSA hat to one of his children.
After Del Pino’s detention, stunned workers at PDVSA’s Caracas headquarters, where he was generally well-liked, watched the state TV footage on screens in company elevators.
Fear has gripped employees at both institutions, according to a half-dozen current and former PDVSA insiders as well as foreign oil executives. Managers are scared to sign routine documents in case it could be used against them.
FALL FROM GRACE
Maduro promoted Del Pino, who was born in the Canary Islands and holds a Spanish passport, from PDVSA’s exploration and production division to the company’s top job in 2014.
At the time, foreign oil executives and analysts largely welcomed the arrival of the genial and low-profile technocrat. He replaced Rafael Ramirez, a once-powerful loyalist of the late Hugo Chavez, Maduro’s predecessor.
Ramirez, who dominated Venezuela’s oil industry for a decade, sought to make PDVSA “redder than red.” He urged workers to wear red shirts in support of Chavez’s socialist movement and to attend pro-government rallies.
Del Pino, by contrast, eased up on revolutionary garb and attendance at militant gatherings. He also sought closer relationships with foreign partners frustrated by currency controls and a lack of professionalism at PDVSA.
Still, many PDVSA insiders and oil executives were ultimately disappointed with Del Pino’s management. Instead of improvements, he presided over a major production fall that brought Venezuela’s oil output to near 30 year-lows.
Trump considers plan to replace Tillerson with CIA chief: U.S. officials
WASHINGTON (Reuters) – President Donald Trump is considering a plan to oust Secretary of State Rex Tillerson, whose relationship has been strained by the top U.S. diplomat’s softer line on North Korea and other differences, senior administration officials said on Thursday.
Tillerson would be replaced within weeks by CIA Director Mike Pompeo, a Trump loyalist and foreign policy hardliner, under a White House plan to carry out the most significant staff shake-up so far of the Trump administration.
Republican Senator Tom Cotton, one of Trump’s staunchest defenders in Congress, would be tapped to replace Pompeo at the Central Intelligence Agency, the officials told Reuters, speaking on condition of anonymity.
It was not immediately clear whether Trump had given final approval to the reshuffle, but one of the officials said the president asked for the plan to be put together.
Tillerson’s long-rumoured departure would end a troubled tenure for the former Exxon Mobil Corp chief executive, who has been increasingly at odds with Trump over issues such as North Korea and under fire for planned cuts at the State Department.
Tillerson was reported in October to have privately called Trump a “moron,” something the secretary of state sought to dismiss.
That followed a tweet by Trump that Tillerson should not waste his time by seeking negotiations with North Korea over its nuclear and missile programme, widely seen as a sign of the secretary of state being marginalized.
Trump has soured on Tillerson mostly because of the “moron” report, his less confrontational approach on North Korea and differences over the Qatar crisis, one senior U.S. official said.
His slow approach to filling diplomatic openings at the State Department is also a factor, another official said.
Trump asked John Kelly, the White House chief of staff, to develop the transition strategy, and it has been discussed with other officials, one administration source said.
Under the plan, which has been in the works for weeks and was first reported by the New York Times, the reshuffle would happen around the end of the year or shortly afterward, the official said.
Asked whether he wanted Tillerson to remain in his job, Trump sidestepped the question, telling reporters at the White House: “He’s here. Rex is here.”
State Department spokeswoman Heather Nauert said Kelly told Tillerson’s chief of staff on Thursday the reports on Tillerson being replaced were not true. Nauert added that Tillerson “serves at the pleasure of the president.”
Asked about Tillerson, White House spokeswoman Sarah Sanders said the secretary of state remained in his post. “When the president loses confidence in someone, they will no longer serve here,” she said.
Pompeo, a former congressman, has moved to the forefront as he has gained Trump’s trust on national security matters.
Tillerson, 65, has spent much of his tenure trying to smooth the rough edges of Trump’s unilateralist “America First” foreign policy, with limited success. On several occasions, the president publicly undercut his diplomatic initiatives.
A source familiar with Tillerson’s thinking said the secretary of state’s original plan when he took the job was to leave in February.
If carried out, the staff changes would be the latest in a string of firings or resignations in the Trump administration including the departures of the chief of staff, national security adviser and FBI director.
Germany removes Tesla from subsidies list as too pricey
BERLIN (Reuters) – A German government agency has removed Tesla from the list of electric cars eligible for subsidies, sparking a row with the U.S. company over whether its Model S is too expensive to qualify for the scheme.
BERLIN (Reuters) – A German government agency has removed Tesla from the list of electric cars eligible for subsidies, sparking a row with the U.S. company over whether its Model S is too expensive to qualify for the scheme.
SPONSORED
Tesla customers cannot order the Model S base version without extra features that pushed the car above the 60,000 euro ($71,500) price limit, a spokesman for the German Federal Office for Economic Affairs and Export Controls (BAFA) said on Friday.
Germany last year launched the incentive scheme worth about 1 billion euros, partly financed by the German car industry, to boost electric car usage. A price cap was included to exempt premium models.
“This is a completely false accusation. Anyone in Germany can order a Tesla Model S base version without the comfort package, and we have delivered such cars to customers,” Tesla said in a statement.
The carmaker said the upper price limit was initially set by the German government to exclude Tesla, but later a compromise was reached “that allows Tesla to sell a low option vehicle that qualifies for the incentive and customers can subsequently upgrade if they wish.”
It said, however, it would investigate whether any car buyers were denied the no-frills version.
”If a sales person told a customer they could not buy the Model S base version without the comfort package, this is not accurate and clearly outside our policies and procedures and we will investigate and take appropriate action as necessary.”
Under the subsidy scheme, buyers get 4,000 euros off their all-electric vehicle purchase and 3,000 euros off plug-in hybrids.
German magazine Auto Bild had reported that BAFA was looking into the Tesla issue and could take the company’s cars off the eligibility list.
Syrian negotiator threatens to pull out of Geneva talks
GENEVA (Reuters) – Syria government negotiator Bashar al-Ja‘afari said on Friday his team was pulling out of U.N.-led talks in Geneva and might not return next week, citing a statement by the opposition at their “Riyadh 2” conference last month that President President Bashar al-Assad could play no role in an transition period.
“As long as the other side sticks to the language of Riyadh 2, there will be no progress,” Ja‘afari told reporters after a morning of talks, adding that the government in Damascus would decide if his delegation would return next week.
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