Tax Reform 2.0 Is Done

Plus, $2.4 trillion more debt By Yuval Rosenberg and Michael Rainey Tax Reform 2.0 Is Done: Passed by House, Likely Going Nowhere in Senate The House on Friday passed a bill to make permanent the individual and small business tax cuts that had been set to expire after 2025 as part of the overhaul enacted late last year. The bill, passed by a 220-191 vote, was the final piece of a three-bill package the Republicans labeled Tax Reform 2.0. The first two pieces, providing additional incentives for Americans to boost retirement savings and more tax breaks for startup businesses, [were passed]( on Thursday. The bill approved on Friday would extend the lower individual tax rates enacted last year as well as the larger standard deduction and child tax credit, a 20 percent deduction for pass-through income and a doubling of the estate-tax exemption. It also would lock in limits on the deductibility of state and local taxes. Unlike last year’s tax law, some Democrats supported the two bills passed on Thursday, and three — Reps. Conor Lamb of Pennsylvania, Jacky Rosen of Nevada and Kyrsten Sinema of Arizona — joined nearly all Republicans on Friday in voting for the extension of the cuts. Sinema and Rosen are both running for Senate. Other Democrats, opposed to the legislation, warned that Republicans would use the deficit-increasing effects of their tax law as an excuse to cut Medicare and Social Security benefits in the future. Ten Republicans from high-tax states voted against the extension because of the cap on state-and-local deductions. The second round of tax cuts would cost $631 billion through 2028, according to Congress’ nonpartisan Joint Committee on Taxation, or $545 billion once economic feedback effects are factored in — and [trillions more]( after that. The JCT analysis also found that, while making the tax cuts permanent would provide a modest boost to the economy after 2025, it would [slow economic growth]( over the longer term. Why it matters: The Senate has [no plans]( to vote on the Tax Reform 2.0 package, meaning that the House votes are mostly about pre-election messaging — and after the tax bill was passed Friday, House Republicans canceled October votes and [went into recess until November 13]( allowing candidates more time to campaign. Election season is in full swing now. Still, Democratic support for the retirement savings and startup bills suggest that there’s room for lawmakers to advance those pieces of legislation in the future. “We’ve always looked at it as part of a longer game,” Brad Close, senior vice president of public policy and advocacy for the National Federation of Independent Business, told [Politico](. “Let’s see where the lame duck goes. I think a lot of it depends on how the election goes.” [Share this story →]( Trump Signs Spending Bill to Avert Pre-Election Shutdown President Trump on Friday [signed]( the $854 billion spending package that had been passed by the House and Senate. The signing, announced by Senate Republicans, averts a partial government shutdown after the fiscal year ends on September 30. The legislation provides full funding through fiscal 2019 for broad swaths of the federal government, including defense programs and the departments of Labor, Education and Health and Human Services. Between this package and an earlier one that provided funding for the legislative branch, energy and water, military construction and veterans affairs, some 75 percent of 2019 discretionary funding has now been passed. But the latest package provides only funds some parts of the government — including the Department of Homeland Security — through December 7, setting up a late-year showdown over funding for Trump’s proposed border wall with Mexico. The signing marks the first time since 1996 that the government has gotten five of the 12 annual spending bills signed into law before the start of the new fiscal year, according to [The Hill](. [Share this story →]( Chart of the Day We hear a lot about government debt, but what about government assets? Jill Mislinski of Advisor Perspectives [looked]( at the Federal Reserve's financial accounts data and found that student loans make up the largest financial asset held by the federal government — by a huge margin. The value of federally backed student loans held by the government has risen by more than 1,000 percent since the last recession, Mislinski says, and now tops $1.1 trillion. Number of the Year: $2.4 Trillion Fiscal 2018 ends on Monday, and the Committee for a Responsible Federal Budget [calculates]( that lawmakers added $2.423 trillion to the national debt through 2027 through legislation enacted over the past 12 months. Legislation enacted this year will add $445 billion to next year’s budget deficit, or 46 percent of the projected total. There’s No Such Thing as a Free Lunch, but Half Off Isn’t Bad Taking clients out for a meal has long been a foundational perk in the business world, and the Internal Revenue Service blessed the practice with a 50 percent deduction of qualified expenses. But the GOP tax bill that took effect this year eliminated the deduction for client entertainment — think of box seats at a ballgame — and there was some uncertainty about whether the new rule applied to business meals as well. According to The Wall Street Journal ([paywall]( the IRS is expected to issue new guidance soon that clarifies the distinction between entertainment and meals, preserving the 50 percent deduction for the latter. Here’s the Journal’s sketch of how the rule will be applied: “[I]f a business owner takes a client to a ballgame, the cost of the tickets isn’t deductible because the expense is for entertainment. If the owner buys hot dogs and drinks for himself and the client at the game, this expense could still be 50% deductible.” The Journal says that the old limits on the use of the deduction will still apply. Client meals cannot be “lavish or extravagant” and business issues must be discussed at some point before, during or after the event. And receipts will have to be break out costs in a clear — and believable — way. That means that while a $100 client lunch will probably pass the IRS smell test, a $10 round of golf followed by a $400 meal in the clubhouse probably won’t. Your Prize for Making It Through the Week After this week, we could all use some amazing animal videos. If you haven’t seen them yet, check out this viral clip of an seal slapping a man across the face [with an octopus tentacle]( and this stunning video of a lucky daredevil raccoon [defying death]( after climbing up nine stories of an apartment building. News - [Senate Republicans Agree to One Week Delay in Final Kavanaugh Vote]( – New York Times - [HHS Head: Trump Saved Obamacare]( – Washington Post - [Mnuchin Says Economic Growth Likely for Several Few Years, Credits GOP Tax Law]( – The Hill - [Vulture Funds Stand to Make Millions in Wake of Hurricane Maria]( – Kate Aronoff, The Intercept - [Medicare Advantage Premiums to Decrease by 6% in 2019]( – Health Payer Intelligence - [Trump's Tax Cuts Are Not a 'Sugar High': CIO]( – CNBC - [How the Trump Tax Law Passed: GOP Adds Sweeteners]( – The Hill - [Key HHS Leaders Tee Up Priorities for Q4]( – Politico - [45 Percent of Americans Think Trump Is a Good Manager, Poll Finds]( – The Hill - [Trump Administration Sees a 7-Degree Rise in Global Temperatures by 2100]( – Washington Post Views and Analysis - [It’s Not Absurd to Think Debt and Deficits Are Hurting Wage Growth]( – James Pethokoukis, AEI - [Is Your State Wasting Taxpayer Money? Why It Can Be So Hard to Find Out]( – Sheila Weinberg, TFT - [The Enduring Scam of Corporate Tax Breaks]( – Bryce Covert, New Republic - [Trump’s Latest Immigration Proposal Is a Looming Public Health Crisis]( – Goleen Samari, Washington Post - [Tax Cuts: The Gift That Keeps Not Giving]( – Vanessa Williamson and Jackson Gode, Brookings - [Who Benefits From the Tax Cut 10 Months Later]( – Teresa Ghilarducci, Forbes - [So-Called “Universal Savings Accounts” in Tax Cuts 2.0 Are a Giveaway to the Most Affluent Taxpayers]( – Steve Wamhoff, ITEP - [Coming Economic Data Is Some of the Strongest We've Seen]( – Byron Wien, RealClear Markets - [Workers Are Ready for Their Cut of This Booming Economy]( – Thomas A. Kochan, The Hill - [Another Recession Is Looming]( – Martin Feldstein, Wall Street Journal (paywall) - [Who's Really to Thank for Booming Economy: Donald Trump or Barack Obama?]( – Michael D. Tanner, USA Today - [America First Is America Last in Shaping Our Foreign Assistance]( – Dan Glickman, The Hill Copyright © 2018 The Fiscal Times, All rights reserved. You are receiving this newsletter because you subscribed at our website, thefiscaltimes.com, or through Facebook. 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](