Congress Pessimistic on Passing Tax Extenders by End of 2019
Senate Finance Committee Chairman Chuck Grassley (R-IA) recently told reporters he is pessimistic that Congress will be able to pass tax extenders legislation by the end of the year, and blamed congressional Democrats for a lack of urgency on the issue. Senate Finance Committee Ranking Member Ron Wyden (D-OR) says that he and Chairman Grassley, along with Democrats and Republicans on the House Ways and Means Committee, continue to negotiate a comprehensive tax package, but there remains major disagreements between the two sides.
House Democrats favor extending all of the tax incentives that expired in 2017 while also expanding both the Earned Income Tax Credit (EITC) and the Child and Dependent Care Tax Credit (CDCTC) and rolling back the increased estate tax exemption by three years from 2025 to 2022. Republicans say the Democrats’ demands are too costly and any efforts to roll back the estate tax exemption are a nonstarter.
Meanwhile, congressional Republicans are hoping to include a series of technical corrections to the 2017 Tax Cuts and Jobs Act (TCJA) in any potential end of the year tax package. This includes fixing the drafting error in the TCJA which made qualified improvement property (QIP) ineligible for bonus depreciation. However, Democrats on the Senate Finance Committee and House Ways and Means Committee say Republicans will have to give up something in return for any fixes to the TCJA.
House to Vote on Short-term Legislation to Fund Government
House Majority Leader Steny Hoyer (D-MD) announced that the House would be voting on a short-term Continuing Resolution (CR) during the week of Nov. 18 to ensure the government is funded by the Nov. 21 deadline. The White House has indicated that President Trump would sign a CR as long as it doesn’t include restrictions to impede the administration’s priorities, such as the border wall.
Leader Hoyer did not say how long the CR would last, but reports indicate that the White House and Congress are working on a deal that extends funding through mid to late December. Speaker Nancy Pelosi (D-CA) and Senate Majority Leader Mitch McConnell (R-KY) have stated that their goal is to pass all 12 FY 2020 appropriations bills by the end of this year.
Outcome of China Trade Negotiations Remains Uncertain
Officials from the United States and China say they are still negotiating over the final details of a “phase one” trade deal that was tentatively agreed to by both countries in October. President Trump and Chinese President Xi Jinping were expected to sign the phase one trade agreement at the Asia-Pacific Economic Cooperation summit in Chile later this month, but widespread public protests forced the Chilean government to cancel the event. Sources close to the negotiations say a potential signing ceremony could be pushed back to December or early next year.
As part of the proposed deal, the Trump administration announced they were calling off the proposed 5% tariff rate increase on $250 billion worth of Chinese goods that was scheduled for Oct. 15. As a result, the 25% tariff rate on these imports remains in effect.
China tentatively agreed to remove limits it has placed on foreign ownership in its financial services sector, enhance certain intellectual property protections and make $40 to $50 billion in new agricultural purchases from U.S. farmers.
The United States is still planning to implement a 15% tariff on “List 4B” Chinese imports, scheduled for Dec. 15. However, this remains a point of contention with China as President Xi would like to see these and other tariffs rolled back before signing any phase one trade agreement. President Trump has stated he is hesitant to rescind any further tariffs at this time.
Officials involved with the negotiations from both countries say they are still far apart on a comprehensive trade deal, but hope a smaller agreement will help re-establish trust between the United States and China.