Tax News & Views House Advances Budget and Valentine's Day Roundup

House Advances Budget

House Moves On Budget, But Senate Wants Permanent TCJA Extension - Renu Zaretsky, Tax Policy Center:

The House Budget Committee approved the GOP’s budget reconciliation legislation last night by a vote of 21-16. The legislation allows for $4.5 trillion in tax cuts and calls for $1.5 trillion in mandatory spending cuts. However, at the request of more conservative members, the ceiling for tax cuts would be lowered to $3.5 trillion if lawmakers don’t find at least $2 trillion in spending cuts. Those figures could make it difficult to make expiring portions of the Tax Cuts and Jobs Act (TCJA) permanent and also address other campaign tax promises made by President Donald Trump.

GOP’s Right Flank Secures Deeper Spending Cuts as House Budget Advances - Richard Rubin, Wall Street Journal:

On tax cuts, $4 trillion or $4.5 trillion might be too small to fit all of Trump’s priorities, forcing trade-offs that will emerge over the coming months. Rep. Jason Smith (R., Mo.),
chairman of the tax-writing Ways and Means Committee, had sought a $5.5 trillion target.

Republicans do have options to squeeze the tax cuts into a smaller target. They could remove tax breaks, such as the clean-energy tax credits created in the 2022 Inflation Reduction Act. They could also reduce spending in the Ways and Means Committee’s jurisdiction.

House Republicans advance their budget after appeasing hard-liners - Jennifer Scholtes, Politico:

The changes to the budget resolution, if adopted by both chambers, would force Republicans to cut more spending in exchange for tax cuts. It could curtail their ability to deliver on Trump’s most prominent campaign-trail promises, like nixing taxes on tips, while also alienating swing-district Republicans uncomfortable with slashing safety net programs like SNAP food assistance to low-income households.

House Republicans Release a Roughly $3 Trillion Budget Outline - Andrew Duehren, New York Times:

The budget blueprint calls for legislation that would add roughly $3 trillion to the deficit over a decade while imposing deep cuts in spending on health care and food programs for low-income people. That would help pay for $4.5 trillion in tax cuts, a huge sum that Republican tax writers have nevertheless said will constrain their and Mr. Trump’s ambitions. It also calls for raising the debt limit, the statutory cap on what the government can borrow to finance its debt, by $4 trillion, a heavy lift among anti-spending conservatives.

House Dems Push Against GOP's Proposed Tax Cuts - Asha Glover, Law 360 Tax Authority ($):

Democrats on Thursday decried the proposal as one that would offer massive tax cuts to the wealthy and betray the middle class. The bill undermines hardworking Americans instead of supporting them, said House Budget Committee ranking Democrat Brendan Boyle of Pennsylvania.

EV Tax Credits

Senators propose killing US EV tax credit, new $1,000 tax for road repairs - David Shepardson, Reuters:

U.S. Senate Republicans on Wednesday proposed a pair of bills to kill the country's $7,500 electric vehicle tax credit and impose a new $1,000 tax on EVs to pay for road repairs. Senator John Barrasso, joined by 14 senators including Senate Majority Leader John Thune introduced legislation to repeal the tax credit for new EVs and kill the $4,000 used EV credit, end the federal investment tax credit for EV charging stations and end credits for leased EVs. The credits would end 30 days after the bill was signed into law.

Republican Senators Float Ending EV Tax Credits - Hailey Konnath, Law 360 Tax Authortiy ($):

Sen. John Barrasso, of Wyoming, introduced the Eliminating Lavish Incentives to Electric Vehicles Act, which would repeal the $7,500 tax credit for new electric vehicles as well as the tax credit for purchasing used EVs and the federal investment tax credit for EV charging stations.

The bill, S.B. 541, would also close a loophole that Barrasso said allowed certain taxpayers and foreign entities, including China, to evade restrictions on EV incentives, according to the senator's announcement.

More Proposed Legislation

Golden Announces Bill to Replace Child Credit - Tax Analysts, Tax Notes ($). "The Family Income Supplemental Credit (FISC) Act would replace the child tax credit with a program to provide families with children monthly payments that would be offset by savings from repealing the credit and imposing a new high-income tax, Rep. Jared F. Golden, D-Maine, said in a February 13 release."

Lawmakers Reintroduce Bill to End Income Tax on Tips - Tax Analysts, Tax Notes ($):

The Tipped Income Protection and Support (TIPS) Act would end the income tax on tips, “a pivotal step in the right direction toward ensuring tipped workers get a fair day’s pay for a hard day’s work,” House Ways and Means Committee member Steven Horsford, D-Nev., and Rep. Donald Norcross, D-N.J., said in a February 13 release.

Feenstra Bill Would Repeal Estate Tax - Tax Analysts, Tax Notes ($). "The Death Tax Repeal Act, introduced by House Ways and Means Committee member Randy Feenstra, R-Iowa, would repeal estate and generation-skipping transfer taxes."

IRS

DOGE Staffer Arrives at Internal Revenue Service Headquarters - Richard Rubin, Ken Thomas, and Brian Schwartz, Wall Street Journal:

Gavin Kliger, an aide to Elon Musk in his effort to overhaul spending across the federal government, visited the District of Columbia offices to examine IRS systems, the people said. Kliger has been working at the Office of Personnel Management, the government human-resources operation that has been heavily involved in Musk’s work to reduce the size of the government.

Musk’s Team Enters IRS; Trump Vows Scrutiny of Improper Payments - Alexander Rifaat, Tax Notes ($):

Speaking to reporters February 13, Trump said DOGE’s continued examination of potential government waste will focus on improper payments. He singled out the EITC, citing a report from the Economic Policy Innovation Center that referenced figures provided by paymentaccuracy.gov, a website run by the Office of Management and Budget, indicating that approximately $15.9 billion worth of EITC payments were improper in fiscal 2024.

Blogs and Bits

Raiding Your Retirement Funds? Here’s How to Avoid Hidden Tax Traps - Laura Saunders, Wall Street Journal:

Most early withdrawals from IRAs and 401(k)s will incur taxes, but not all incur the 10% penalty. Currently both IRAs and 401(k)s offer exemptions for a number of reasons, although limits can apply.

There are full exceptions for death, disability and terminal illness, as well as for medical expenses exceeding 7.5% of savers’ adjusted gross income. Exceptions also apply for birth or adoption expenses ($5,000); qualified disasters ($22,000); and domestic-abuse victims ($10,300).

How Fire Victims Can Rebuild Without Tax On Their Insurance Proceeds - Robert Wood, Forbes:

Fortunately, property owners can usually make an election under Section 1033 of the tax code to defer paying tax on their casualty gain. Making such an election allows you to reinvest the insurance proceeds into the repair, reconstruction, or replacement of your damaged property within a prescribed statutory timeframe. The time to reinvest under Section 1033 is simple in concept, but it depends heavily on your facts.

IRS Updates Discount Factors For Unpaid Insurance Losses - Jack McLoone, Law 360 Tax Authority ($):

Insurance companies can use the discount factors in Revenue Procedure 2025-15 when computing discounted unpaid losses under Internal Revenue Code Section 846 , the IRS said. The procedure also features discounted estimated salvage recoverable values dictated by Section 832 .

Tariffs

Trump Tariffs: Tracking the Economic Impact of the Trump Trade War - Erica York, Tax Foundation:

President Trump signed two proclamations on February 10, 2025, to expand the existing Section 232 tariffs on steel and aluminum. The orders end all existing exemptions for the tariffs, expand the list of derivative articles, and raise the tariff rate on aluminum from 10 percent to 25 percent. The changes are scheduled to take effect March 12, 2025.

...

We estimate the tariffs on Canada and Mexico would reduce long-run GDP by 0.3 percent, the tariffs on China by 0.1 percent, and the expanded steel and aluminum tariffs by less than 0.05 percent, all before foreign retaliation.

Trump’s Reciprocal Tariff Policy ‘a Step in the Wrong Direction,’ EU Says - Edith Hancock, Wall Street Journal:

The commission’s response comes after Trump instructed staff on Thursday night to look at creating tariffs on countries he sees as having unfair trade policies with the U.S. That move could see the U.S. break from the World Trade Organization’s “most favored nation” principle, which requires member countries to give each other equal treatment on tariffs unless they have their own free-trade agreements.

Trump Says He’ll Rework Global Trading Relations With ‘Reciprocal’ Tariffs - Ana Swanson, New York Times:

The president directed his advisers to come up with new tariff levels that take into account a range of trade barriers and other economic approaches adopted by America’s trading partners. That includes not only the tariffs that other countries charge the United States, but also the taxes they charge on foreign products, the subsidies they give their industries, their exchange rates, and other behaviors the president deems unfair.

What day is it?

It's Valentine's Day, of course!