Washington Insider -- Thursday

Proposed Tax Plan Appears, Sort of

Here’s a quick monitor of Washington farm and trade policy issues from DTN’s well-placed observer.

Cotton Ginning Cost-Share Payment Being Reviewed At OMB

The Office of Management and Budget (OMB) is contemplating another cotton industry payout. The Obama administration made a similar payment for 2015 when then-Agriculture Secretary Tom Vilsack concluded that he did not have the legal authority to make cottonseed eligible for the Price Loss Coverage program.

The Trump administration has made a similar determination on cottonseed, hence the push for the ginning assistance payment.

EPA Seeks Comments on Reducing 2018, 2019 RFS Biodiesel Levels

Public comments are being sought on the potential reduction in 2018 biomass-based diesel, advanced biofuel, and total renewable fuel volumes, and/or the 2019 biomass-based diesel volume under the Renewable Fuel Standard (RFS) program, according to a Notice of Data Availability (NODA) released by the Environmental protection Agency (EPA).

On July 21, EPA proposed reducing the advanced biofuel and total renewable fuel levels for 2018 using the cellulosic waiver authority provided in the Clean Air Act (CAA), proposing to reduce the 2018 target for advanced biofuel to 4.24 billion gallons and the total renewable fuel target to 19.24 billion gallons. EPA cited cost considerations in proposing that level, seeking comment on potential additional reductions in advanced biofuel and the total renewable fuel total. Further, EPA sought comments on reducing the 2019 biomass-based biodiesel (BBD) volume requirement to a level below the 2.1 billion gallon level proposed.

While not requesting comment on the potential reduction in the 2018 BBD volume requirement, EPA sought comment on using its general waiver authority or other authorities to "reduce the advanced biofuel requirement for 2018, and BBD is not only nested within advanced biofuel but is also the predominant source of advanced biofuel," EPA noted. "Therefore, considerations leading to a reduction of the advanced biofuel volume may also be relevant in reducing the 2018 BBD volume requirement."

Washington Insider: Proposed Tax Plan Appears, Sort of

Much of the media attention this week is focused on the next bitter political battle, the administration’s new tax proposal. Bloomberg says the framework now being released proposes cutting the top individual rate modestly to 35%, but leaves it up to Congress to decide whether to create a higher bracket for those at the top of the income scale.

The rate on corporations would be set at 20%, down from the current 35%, and businesses would be allowed to immediately write off their capital spending for at least five years, Bloomberg said. Pass-through businesses would have their tax rate capped at 25%.

The plan is expected to contain three tax brackets for individuals, 12%, 25% and 35%, down from the existing seven rates, which top out at 39.6%. The unusual feature of this outline is that the administration understands from the outset that the details are not firmly set and congressional tax-writing committees are specifically given flexibility to add a fourth rate for the highest earners in an effort to prevent the overhaul from providing too much of a benefit for the wealthy.

Congress members haven’t signaled that they’ll take that option, Bloomberg says. Key Republicans on the tax-writing Ways and Means Committee, including Chairman Kevin Brady, R-Texas, say they’re committed to offering across-the-board tax relief. By contrast, the President has repeatedly said he’s focusing on middle-class individuals.

At the same time, the plan calls for repealing the alternative minimum tax and the estate tax, both of which would be a boon for higher earners and the wealthy.

On the international side, the plan would move toward ending the unique worldwide approach the U.S. uses to tax corporate profits regardless of where they are earned and would focus primarily on multinationals’ domestic earnings.

Companies with accumulated offshore profits would be subject to a one-time tax on those earnings, clearing the way for that income to return to the U.S., Bloomberg says. The rate that would be applied is unclear, but it would vary depending on whether the income was held in cash or less liquid investments. Firms would be able to pay the new tax over several years.

In terms of middle-class benefits, the framework outlines a near doubling of the standard deduction to $12,000 for individuals and $24,000 for married couples, and calls for “significantly increasing” the child tax credit from the current $1,000 per child under 17.

There is obviously a great deal of detail still to be revealed regarding the plan, Bloomberg says. For example, it still lacks extensive details about ways to offset its rate cuts with additional revenue. It says most itemized deductions for individuals should be eliminated, without providing specifics, at the same time it calls for mortgage interest and charitable giving deductions to be preserved.

Bloomberg also pointed out that the plan is meeting with some of the same concerns from Sen. John McCain, R-Ariz., and others who are “laying down the same marker on tax legislation as was done on health care,” that is demands for the regular order and support from both parties.

“We need to do it in a bipartisan fashion,” McCain said Tuesday of the planned tax legislation, arguing that the major congressional reforms that have stood the test of time since the 20th century have included buy-in from both parties.

However, McCain’s tax concerns seem to cut against GOP leaders’ plans to use the same fast-track procedure on taxes as they tried to use on health care, an approach that requires 50 Senate votes and allows for bypassing a potential Democratic filibuster. Senate Majority Leader Mitch McConnell, R-Ky., said he doesn’t expect Democratic support for a tax overhaul since they have disagreed publicly with some the GOP’s proposals to rewrite the tax code.

In the House, the chairman of the conservative Freedom Caucus said he isn’t afraid to vote against tax reform if it violates what he sees as “red line” issues. “A red line for me, why I’d vote against tax reform? If the corporate rate is above 20%, if the small business rate is above 25%, I’d vote against it,” Rep. Mark Meadows, R-N.C., told Bloomberg on Tuesday. Other non-starters: a territorial system that imposes a minimum tax on multinational corporations and a failure to double the standard deduction, he said.

So, the new tax reform proposal still leaves most of the important detail to later discussions, which promise to be as controversial and extended as the health care fight was. Previous tax reform efforts have been slow moving and detailed, and many observers expect this one to be tougher and more extended than some advocates expect, as well. Clearly, the issues involved are important to ag producers and deserve to be considered carefully and this coming debate deserves careful scrutiny as it emerges, Washington Insider believes.

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