Treasury’s Crackdown on Blue State Tax Workarounds

Plus, what’s in the Senate’s massive $854 spending bill By Yuval Rosenberg Senate Passes $854B Spending Bill in Hopes of Averting Shutdown The Senate has passed nine of the 12 spending bills needed for fiscal 2019 after approving an $854 billion package Thursday to provide funding for most government operations. The latest package, passed by a bipartisan 85-7 vote, includes $675 billion for the Defense Department as well as appropriations for the Departments of Health and Human Services, Education, Labor and other agencies. Republican leaders are hoping the spending package will help convince President Trump to ease off his threats to shut down the government in October if he doesn’t get the money he wants for a border wall with Mexico, [Politico’s Sarah Ferris]( reports. “But the odds remain long that the legislation will even make it to the White House, with just 11 working days left for House and Senate lawmakers to merge opposing versions of the bills — and get Trump’s approval — before funding runs out” at the end of September, Ferris writes. The three appropriations bills yet to pass — including money for the Department of Homeland Security and Trump’s border wall — are expected to be dealt with later in the year, with temporary spending bills extending funding until after the midterm elections. What the spending bill includes: The Senate package would give the Pentagon a $20.4 billion increase and raise military pay by 2.6 percent — the largest boost in nearly a decade. It also provides a $2.3 billion funding boost for Health and Human Services, adds $145 million for programs to fight opioid addiction and increases funding for the National Institutes of Health by 5.4 percent. The Department of Education would see an increase of $541 million. The Labor Department’s budget would remain flat. Why it matters:Besides the spending it includes and its significance in averting a potential shutdown, the Senate package is also the latest sign that the 2019 budget and appropriations process is running much more smoothly than in recent years, when individual spending measures were often scrapped in favor of massive omnibus bills to fund the entire government — the type of bill Trump said in March he would never again sign. The Senate had not passed a labor and health spending bill since 2007. The legislation often proves contentious and gets bogged down in fights over abortion and other politically fraught issues. But Senate Majority Leader Mitch McConnell and Minority Leader Chuck Schumer agreed to avoid attaching so-called poison pill proposals this time in order to pass a package that included some wins for each side. (The Senate voted down an amendment sponsored by Sen. Rand Paul (R-KY) to keep taxpayer money from going to Planned Parenthood and other groups that perform abortions.) “If signed into law, it would be the first time the Pentagon receives its new budget on time in 12 years — a talking point Republican leaders hope Trump will choose over extra funding for a barrier along the U.S.-Mexico border,” Politico’s Ferris writes. [Share this story →]( Number of the Day: $2.3 Billion The spending bill passed by the Senate would increase funding for Alzheimer’s research by $425 million, to more than $2.3 billion total — “essentially quadrupling spending levels from four years ago on a disease that requires hundreds of billions of dollars for dementia-related care,” according to the [Associated Press](. The hope is that increased spending on research now can help prevent a huge rise in the cost of the disease, both in terms of lives and dollars, as the population ages. “Every hour, Alzheimer's disease costs taxpayers at least $21 million. Every single hour,” [said Sen. Roy Blunt (R-MO)]( who chairs the Appropriations subcommittee on labor and health. “We're spending somewhere in the neighborhood of $277 billion tax dollars a year on Alzheimer's and dementia-related care.” Blunt noted that if progress isn’t made on Alzheimer’s, by 2050 the country will be spending $1.1 trillion on Alzheimer’s and dementia care — or about double last year’s defense budget. “If we could delay onset by an average of five years,” he said, “we’d cut that $1.1 trillion by 42 percent, almost in half.” [Share this story →]( Treasury, IRS Issue Rules to Block Blue States’ SALT Deduction Workarounds The Treasury Department on Thursday issued its proposed rules to crackdown on blue state attempts to get around the GOP tax law’s limit on state and local tax deductions. The new tax law introduced a $10,000 limit on the deductibility of state and local taxes — a controversial provision that would see high-tax blue states such as California, Illinois, New York and New Jersey bear the brunt. In response, some states have taken or are mulling legal changes to circumvent the cap, for example, by turning state and local taxes into charitable contributions that would still be deductible from federal income taxes. Four states — New York, New Jersey, Connecticut and Maryland — have also filed a longshot legal suit over the new tax law. “Congress limited the deduction for state and local taxes that predominantly benefited high-income earners to help pay for major tax cuts for American families,” Treasury Secretary Steven Mnuchin [said]( in a statement Thursday. “The proposed rule will uphold that limitation by preventing attempts to convert tax payments into charitable contributions.” The Treasury rule would only allow taxpayers to deduct the portion of their contributions to state charities that exceeds the amount of state tax credits they received, with some exceptions. [The Hill’s Naomi Jagoda]( provided an example: “if a taxpayer donated $1,000 to a state charity and then received a 70-percent state tax credit, the taxpayer would only be able to claim a federal charitable deduction of $300, a senior Treasury official said.” Poll of the Day A [Fox News survey]( released Thursday found that Obamacare is more popular than the Republicans’ new tax law. In the poll of 1,009 registered voters, 51 percent of respondents said they have a favorable opinion of the 2010 health care law, while 40 percent approve of the 2017 tax overhaul. The poll had more bad news for Republicans on health care, as 36 percent said they approve of the way President Trump is handling the issue, while 55 percent disapprove. The poll was conducted August 19–21. Its margin of error is 3 percentage points. Your Prize for Making It Through the Week It’s not as noble as the ice bucket challenge or as idiotic as the Tide pod challenge, but Time reports that there’s a [new challenge going viral]( a hand signal named after professional soccer player Dele Alli. Don’t spend the whole weekend trying to get your fingers to do this. News - [Cigna, Express Scripts Shareholders Approve $52 Billion Deal]( – Reuters - [Trump Has Reportedly Offered US Funds to Buy Italian Debt]( – CNBC - [Powell Sees ‘Further, Gradual’ Rate Hikes as the Economy Hums]( – CNBC - [CEO Looking to Reinvent Doctor Visits Says He Can Cut All US Health Costs by 10 Percent]( – CNBC - [Trump's Plan on Drug-Pricing Transparency Takes Step Forward]( – Bloomberg - [Tuition-Free Med School Touches Off Multimillion-Dollar Debate]( – Kaiser Health News - [Can Lawmakers Convince Hospitals to Support Medicaid Buy-in?]( – Modern Healthcare - [Retailers Study Shows More Trump Tariffs Could Cost Consumers $6 Billion]( – The Hill - [Faced with Opposition, Erik Prince Shops His Plan for Afghanistan]( – The Hill - [Chamber of Commerce Launches Ad Attacking McCaskill for Vote Against GOP Tax Law]( – The Hill - [Medicaid Covers Foster Kids, but Daunting Health Needs Still Slip Through the Cracks]( – Kaiser Health News - [Maine Supreme Court Orders Medicaid Expansion to Go Forward]( – Modern Healthcare Views and Analysis - [America’s Hidden Debt]( – Daniel Blitz and Robert Dugger, Project Syndicate - [End Stock Buybacks, Save the Economy]( – William Lazonick and Ken Jacobson, New York Times - [The Time Bomb Inside Public Pension Plans]( – Knowledge@Wharton - [Arming Teachers with Federal Education Money? Are They Even Thinking?]( – Washington Post Editorial Board - [There’s No Such Thing as a ‘Conservative’ Carbon Tax]( – Oren Cass, E21 - [One-Size-Fits-All Payment Approach Won’t Work for Time Spent with Patients]( – David Daikh and Ann M. Palmer, The Hill - [No Collusion? We’ll See. But What About Tax Fraud?]( – Catherine Rampell, Washington Post Copyright © 2018 The Fiscal Times, All rights reserved. You are receiving this newsletter because you subscribed at our website, thefiscaltimes.com. Our mailing address is: The Fiscal Times 712 Fifth AvenueNew York, NY 10019 [Add us to your address book](//thefiscaltimes.us1.list-manage.com/vcard?u=40d2c5373681f5cd830b6d823&id=714147a9cf) If someone has forwarded this email to you, consider signing up for The Fiscal Times emails on our [website](. Want to change how you receive these emails? You can [update your preferences]( or [unsubscribe from this list](