Tax Notes Talk

Breaking Down the American Rescue Plan Act

March 19, 2021
Tax Notes Talk
Breaking Down the American Rescue Plan Act
Show Notes Transcript

 Martin A. Sullivan of Tax Notes and Tynisa Gaines, an enrolled agent, discuss the tax provisions of the new coronavirus relief package and its impact on the economy and the tax community. 

For additional coverage, read these articles in Tax Notes:

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This episode is sponsored by Avalara. For more information, visit avalara.com/taxnotes.

This episode is sponsored by University of California, Irvine Law School’s Graduate Tax Program. For more information, visit law.uci.edu/gradtax.

This episode is sponsored by Graduate Tax Program at LMU Loyola Law School. For more information, visit lls.edu/taxnotes

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Credits
Host: David D. Stewart
Executive Producers: Jasper B. Smith, Janelle Julien
Showrunner: Paige Jones
Audio Engineer: Jordan Parrish
Guest Relations: Christa Goad

David Stewart:

Welcome to the podcast. I'm David Stewart, editor in chief of Tax Notes Today International. This week: tax tapas. On March 11, President Biden signed into law the American Rescue Plan Act of 2021, a$1.9 trillion coronavirus relief package designed to help boost the economy and combat the effects of the virus. But sprinkled throughout the new law is a wide variety of tax changes ranging from a third round of economic impact payments to the expansion of the employee retention credit. Here to break down what's in the act and what it means for the tax community is Tax Analysts chief economist Martin Sullivan and Richmond-based enrolled agent Tynisa Gaines. Marty, Ty, welcome to the podcast.

Martin Sullivan:

Thanks for having me, Dave.

Tynisa Gaines:

Glad to be here during this stressful tax season.

David Stewart:

Why don't we first start off with some overall reactions to the recent act. First of all, Marty, to you, what is your overall reaction to this legislation as something to support the economy through this time?

Martin Sullivan:

Well, as you know, it's an economic stimulus. It's what we call a demand-side stimulus. They're trying to increase spending in the economy and get the unemployment rate down. My impression is that it is what we need to do. The question is: is it too large or not large enough? And there's been a lot of debate just currently about it being too large and perhaps overheating the economy. So we do need relief in the form of a macroeconomic stimulus and this bill does provide it. The question is whether it's too much. The other very outstanding feature of this bill is its tremendous concentration to the low end of the income spectrum. It's very targeted. It's sort of the opposite of the TCJA where most of the benefits went to the upper-income folks. This bill is very tightly targeted to low-income folks. And just to give you an idea of the order of magnitude in this bill— this bill, as you pointed out was$1.9 trillion, which is about 8.5 Percent of GDP. And you go,"Well, what does that mean?" Well, the way you can relate to this is if every man, woman, and child in the U.S. got a check from the U.S. government, that check could be$5,500;$5,500 for every American. Now not every American is getting that, and so a lot of that's going to lower end of the income spectrum. So you can see how large an effect this is having on lower-income families.

David Stewart:

Ty, let's turn to you. What is your overall reaction to this bill as something to support individuals and businesses?

Tynisa Gaines:

It's actually a great bill for businesses if we take away some of the fraud. It looks like a lot of people apply for things they shouldn't have gotten like the PPP loans and the EIDL loans. There were a lot of people that started a business to get this, or basically exaggerated the business they had, or didn't have one at all. And they received some of these benefits so that's part of the problem when you roll these things out so quickly that people that should get them may not. But overall, the intent is great for businesses. I think for individuals, the unemployment was probably the only major thing that it did. It looks like they are going to make some adjustments to something like the premium tax credit, which is also for lower-income. So I second Marty on that, that most of the benefits for individuals would be to benefit the lower-income brackets at this time, which is who we need to support in times like this. Because they were the ones that were probably hit the hardest overall because they worked in the industries that were affected the most with the shutdowns and things like that.

Martin Sullivan:

Even the business provisions are targeted toward the workers, so everything is really looking at workers and people in need. So the ERTC, the employment retention credit, that's to help the workers. The family leave and sick leave is to help workers. So those are business provisions, but they're really targeted not to helping the businesses. They're just transmitting benefits to their employees.

David Stewart:

On this issue of targeting, we had these very large, relatively, payments that are going out, the$1,400 baseline payment to individuals. There was some argument over how it was targeted and the eligibility was narrowed a little bit. Can you tell us a bit about how that's structured and whether that sort of eligibility rule makes sense?

Tynisa Gaines:

So I would say that yes, the first two payments were set to go to people who married filing jointly made under$200,000, and it basically started a phaseout from$150,000 to$200,000 so those people did not get the full amount. And then for singles, it was$75,000 to$100,000. If they were under$75,000, they got the full amount, and between$75,000 and$100,000 that would phase out, meaning they would get a smaller amount as they went over that amount. The new bill, or I should say the recent one that just passed, limited that to where now only people under$75,000 will get the full amount and it phased it out at$80,000 for singles. For married filing jointly, it's$150,000 and phases out completely at$160,000. So basically anybody who makes between$160,000 and$200,000 is cut out. And anyone who made between$80,000 and$100,000 is cut out of this. So in theory, I would say that they were saying,"Let's again target low-income." I will say that the area I'm in,$150,000 is not high income. So then that means that$150,000 is kind of regular and those people probably should get in these high-income areas. When you're looking at northern Virginia, Washington, D.C., Maryland, New Jersey, and New York,$150,000 is not a lot and those people did get cut out. So we did hit some people that were probably lower-middle class with that amount, even though it may seem high to probably most of America. So, you know, you try to be fair and I get the target, but it did cut a few people probably off at the knees this year. And tax professionals are scrambling at this point actually to try to see if we can get our clients below that level this tax season because there are a few benefits we can probably use and strategies we could probably implement to help some people that might go over, stay under.

David Stewart:

Now, Marty, with all this targeting toward the lower end and this massive amount of money involved, what sort of economic effects can we expect from a bill of this size?

Martin Sullivan:

The more the benefits are targeted to low-income folks, the greater stimulus effect you can expect. So, you know, all other things equal, we'd rather have$200 of benefits to a low-income family than$100 and$100 to a low- and middle-income family. That's just in terms of pure macroeconomic stimulus. Well, by the way, the bill is$1.9 trillion, but only about$600 billion is tax. And about the other— let me do the math here— the other$1.3 billion is spending. And most of that is the economic impact payments. That's the major chunk; that's$410 billion. Right now, the GDP of the economy is about$22 trillion. We are about$1 trillion short of what we would call full employment, where inflation would start to kick in at higher levels. So we expect this stimulus to be greater than the amount needed to get us to full capacity, and therefore might spark inflation. Now that's sort of the economics 101 answer to looking at this bill. There's a lot more subtlety that you have to take into account right now. But we can expect a lot of stimulus from this. But at some point the economy may get jammed up on capacity and the stimulus stops taking effect and the inflation takes over. So that's what people are concerned about. The other thing I think that most people don't notice, but it's very interesting and startling to me when I looked at the data, is that people have cut their spending this last year by$1.5 trillion. So folks who weren't living paycheck to paycheck just weren't spending as much. They were just staying at home and not dining out and not traveling and doing all those things we do socially. And so folks have an extra$1.5 trillion in their pockets. And as soon as— whenever all the vaccines start working well— perhaps that money will be unleashed as well. So we have this$1.5 trillion of cash sitting on the sidelines, and we also have the$1.9 trillion in stimulus. And since we only need$1 trillion to get to what many economists think is full capacity, it's a very stimulating, very big bill given where we are in the business cycle.

David Stewart:

Turning to some of the tax provisions that we're looking at, I'm curious what both your takes are on what you see as the tax provisions of this bill that will have the most immediate impact and which ones might end up making the most important lasting changes.

Tynisa Gaines:

So the child tax credit, let's talk about that for a minute. So just to clarify a few points, it is$3,600 for ages zero to five. Ages six to 17 is actually$3,000. And there is actually a phaseout with that, too. There's a base$1,000 that everyone gets, but it phases out at the$75,000 for singles and$ 150,000 for joint filers. So the people over those amounts will not get that additional amount. They will get the original$2,000. So it's a little bit more complicated than it's projected out to be. It's still going to limit that income. We've got that income limitation still set in place even for this credit. And then the portal was supposed to be set up this summer with the IRS. And that is going to be a logistical nightmare in my opinion. The IRS is going to administer this portal that they have not yet created. And people actually will have to opt out of it, meaning they're somehow calculating how much child tax credit people should get. So I guess they're looking at date of births because if the child goes between five and six, that credit's different. They're giving them 50 percent of that over the six months. People who alternate claiming children on opposite years like divorced parents and people who,"I claim one year, the dad claims the next year. Who claims the advanced credit? Do we both opt out? Does one opt in?" The practical logistics of it are a nightmare up front for the actual taxpayer and a nightmare for the tax preparer because we can barely get people to remember how much their stimulus check was for the first two stimulus. So now we have to say,"Well, how much advanced child tax credit did you get?" And if their income is below that this year and they calculate for it next year, it's higher, now we have an issue where they've may have received too much credit. This is a systematic issue. It sounds all great and fun. And I hear people are already trying to figure out what to do with their extra money, but it's just going to add to the confusion.

Martin Sullivan:

Let me add on to that, Ty. Because as I look at these provisions, I've looked down the list— the employee retention credit, the PPP, which is not taxed but it's all involved with tax, the expanded child credit. They're all sort of the same, but they're a little different, which makes it nightmarish for practitioners. Because when you look at it from 10,000 feet, you go,"Oh, they're just continuing the programs." But for practitioners, there are so many details and they're so similar. It's so easy to get confused.

Tynisa Gaines:

The dependent care credit is also going to be expanded, which I think is well overdue. That one basically maxed out at$3,000 and most people only got a max credit of$600, whereas now it can go up to$4,000 per child, up to$8,000. So it does stop at$2,000, but now that credit expenses up to$8,000 per child. It does change with an AGI over$125,000 again, so here we go with some AGI limitations. But it's still a much better credit and it is fully refundable, which is awesome. Because it was limited to tax liability before. So refundable means you can get a credit more than your tax liability. And the dependent care credit is allowing that as well as the child tax credit.

David Stewart:

With all these various credits and with all of the phaseouts, the way that they're structured, Ty, are you expecting to hear from people talking about,"Well, you know, both parents work, but maybe it doesn't make sense for one of them to work this year because of these phaseouts and how much that marginal rate is going to be on us for working?"

Tynisa Gaines:

I haven't heard the not-work thing, but we are planning the married, filing separate thing. It's a thing now in the tax community that we are now saying,"Hey, guys. Let's see if married, filing separate makes sense for you, especially if you can get a stimulus check for one of you, if one of you can get dependent care." Also earned income credit has changed to next year where it will allow married, filing separate to get the earned income credit. And in the past you could not use that filing status and receive the earned income credit. So there are a few changes in planning that we have in place, but I haven't heard that,"I'm not going to work," which you can't get the dependent care credit, unless both people work for that one.

David Stewart:

Marty, is there a possible sort of macroeconomic, you know, people dropping out of the workforce as it doesn't make sense to work if you're going to hit the phaseouts?

Martin Sullivan:

Yeah, for sure. We economists call it high marginal tax rates. And that phaseout from$75,000 to$80,000 on the economic impact payments, if you happen to be$75,000, you're going to think long and hard about working the overtime. But the phaseouts are something that when you look across, not just this bill, but the entire tax code and there's phaseouts, everywhere. The Joint Committee on Tax did a study of this one in 2017 or 2018 or 2019. And you have to have a IBM supercomputer to figure out how much less you should work. So I think there's so much confusion that nobody can actually figure out whether they should work more or less.

Tynisa Gaines:

It'll be the tax preparers giving them the bad news next year.

David Stewart:

Well OK, speaking of bad news from tax preparers, how a bad news for tax preparers? In this bill, we have retroactive changes to last year's tax rules. Specifically that I'm thinking about the exemption for$10,200 of unemployment insurance payments. And I know someone already who will be affected by this has already filed their taxes for this year. So Ty, what does this mean for you?

Tynisa Gaines:

I mean, the IRS is telling us to hold right now as if to say they're going to fix it on their own for those that have already been filed, but I'm not so sure that's a good idea. I think they just want us to hold because they don't want us pushing a whole bunch of amended returns in right now. But the problem is the states. Some states tax unemployment, some do not. My state of Virginia does not. The state of California does not. The state of New Jersey does not. So we have a couple of states that already don't tax it. And so when you subtract it off the federal, if any of those states use the federal AGI to calculate the state, you're going to have to add it back. So we're having to wait on software and we know that if the IRS adjusts it, it doesn't mean the states will. So that's kind of a hold. The other hold is those that haven't filed yet. We know they have it. We have basically, in the terms of old school people who didn't do virtual taxes, a drawer full of returns that are being held with unemployment on them because we're waiting for the software to update to make sure that we do the adjustments. So what's going to happen for the instructions we've been given is that we still report the income as normal because some states still tax that unemployment. It's just the federal that has exempted the$10,200. And then we take an adjustment on the 1040 for the$10,200, so they're only going to report the amount over that essentially. But again, with the states, some tax it, some don't, we have to take into consideration this adjustment. Apparently some software has already updated theirs. And so some people are working this adjustment and clients are getting more money back. So it's a good thing. It's just that systematically having this happen in the middle of the tax season is a problem because clients want to file. They want to get this done. The other thing is it's only for people under$150,000. So we have to look at that cliff again, where if they made f$150,000, and this is per taxpayer, single and married filing, if their amount is over$150,000 with the unemployment included, they cannot take the subtraction. So it's only for those who are way under. So again, listening to the media, listening to the news, saying you get to take$10,200, it doesn't apply to everyone. So we have some taxpayers who are at that limit and can't take it. And then we have some with no tax liability that may have already filed. And whether we put it there or not, they wouldn't get any additional back. So we just have to look at each person individually.

Martin Sullivan:

Let me just throw in a real life story. A friend of mine applied for unemployment in March 2020 in Virginia. Eleven months later in February of this year, she received a lump sum payment over the limit. I read the bill. It says all payments received in 2020 get this exemption. So this individual, who had to wait 11 months, now she's going to not receive the benefit that most folks were getting because she received her payment in 2021.

Tynisa Gaines:

I say it's possible. They still have time to make it effective for 2021.

Martin Sullivan:

Yeah, no, I think they should. But it's just as you say— what looks so simple, once you have to do it, it's very complicated.

David Stewart:

Just dropping into note that within hours of recording this interview, the IRS formally announced that the tax filing deadline would be pushed back to May 17. So we'll skip over Ty talking about her expectations for the announcement and straight to how she feels about another extended filing season.

Tynisa Gaines:

So how do I feel about this? I do not want it extended. I do not see the purpose of an extension of filing because clients like to procrastinate. And if you move the date, they just move when they give you their paperwork. I believe that any client who has issues should go on extension just like any other tax season. However, I do feel that if they were going to extend anything, a payment date would be nice. Meaning we could have extended the payment due to June 15 for people, or something like that just to kind of ease it to let the stimulus come in so people have money to pay the tax bill or something. I just think that if you're going to extend anything, extend the payment but not necessarily the filing date. We shall see. As long as they don't go to July again, I'll be OK. I'm stopping April 15. I want my life back.

David Stewart:

So I guess again, another thing that comes from this area of complexity, the IRS is being asked to do a lot and this bill did include some money to help them do their work. So first off, Ty, have you noticed in your dealings with the IRS and the sort of constraints that they're under, does that affect your day-to-day work?

Tynisa Gaines:

We cannot get through the phone lines. We cannot talk to a person. Our Centralized Authorization File(CAF) unit, which is the unit that processes power of attorneys, has been backed up at least six weeks. And so you can't even get your power of attorney on file to talk to a person. And then when you finally do get to talk to a person, if you fax it in, then there's all these other complications with it. And just trying to get something done with the IRS has been nearly impossible besides the fact that they're sending letters because they haven't even opened all of their mail yet. We have returns that haven't been processed from last year. It's been a complete issue. And I know that the IRS is underfunded. And I honestly believe that based on the funding that they have and those constraints that they have, that they're actually doing a pretty decent job because it's hard. I mean it's hard to work with no resources. If anyone has ever worked for a company and the company didn't provide what you needed to do the job, and yet you still managed to do it, kudos to you. And I feel like that's basically what the IRS is doing. They have an antiquated computer system. They're just not upgraded. They're not up to date. I mean, a lot of things practitioners are asking for, they're starting to roll out like us being able to send power of attorneys electronically. I mean, we're still mailing and faxing to the IRS. Come on. That's my two cents.

David Stewart:

Marty, what do you think of additional funding for the IRS?

Martin Sullivan:

For the last 20 years, we've been saying,"Why are we raising taxes on people who are paying taxes while we're allowing this enormous tax gap just to sit out there?" Hundreds of billions of dollars are not being collected, and study after study proves that if you increase IRS funding, it will more than pay for itself. And now with the incredible increase in the deficit this last year, people are saying,"Well, you know, it's moving onto the front burner again that we should increase IRS funding because it will help reduce the deficit." And I would just add one other thing is I think what economists call taxpayer morale. People had been dumping on the IRS because it's the agency that's so easy to hate because they're taking your money and making you do math on top of it all. You know, it's been politically very easy to just beat on the IRS. And I think they do an incredible job, but you know, it's not just the computers, but the workforce needs a little upgrading, too. And it's just because we're all getting older. I'm not saying anything personal. The aging, the retirement is going to be incredible. So we need to boost taxpayer morale. We need to boost employee morale at the IRS, and that's infrastructure. That's our national infrastructure. If that doesn't work,— you know I don't know how they do it. Ty, you talk about they do such a good job with so little. But how do they? I mean, I am amazed. Look how much they get right. It's just incredible.

David Stewart:

Let's move on to another of the sort of bigger questions that I have about this. So this is the third round of funding and support for taxpayers. We've been through a rather unique stretch in our country's history. Are there ideas that are going to get reused the next time the economy declines?

Martin Sullivan:

Well, just as with the rollout of the vaccines, I'm certainly no expert on anything like that. But I think we've learned a few lessons about how to do it better. Epidemiologists say there will be a next time unfortunately. But the CARES Act was legislated in literally in a matter of days. They put together the ERTC, the employee retention tax credit, which is a complicated piece of legislation, and the PPP program—$600 billion. It's a popular program. If you spend$600 billion, you better be popular. But the hoops they made people to jump through, the frustrations, the complexity for the practitioners, for the business people, for the employees was just, I think, unforgivable. So I think we need to have what we call automatic stabilizers. Stuff on the shelf that's been thawed out that has been tested and people have kicked the tires, instead of just making it up on the day before they're going to vote, I think would be a much welcome. I think we've learned lessons. I hope we will put something on the shelf in advance for the next time when it happens instead of having couple of people in the room on Capitol Hill, making it up, and not even showing anybody the details until they have to vote. So I'll get off my soap box now, but I really feel for the practitioner community,

Tynisa Gaines:

I was going to say I'll just jump right on your soap box because we're the ones that are really feeling this last-minute decision-making. And honestly, in all fairness, it's been last-minute decisions for the past couple of years. I mean, TCJA was like around Christmas. I mean, a lot of these things roll out at the end of the year and we're all like,"Ah! We have to adjust tax season." But this— the PPP specifically— the rules changing every day, it was like your head was spinning as a practitioner. And even now I'm kicking back books. Because the bookkeepers clearly were not keeping up with the rules and they've sent the books over and I'm like sending back books and telling people this is how we reported. The EIDL advance is no longer taxable. The PPP is a loan until forgiven. And then it adjusts bases and S-corps. Like people just have no clue of how all of this really is supposed to work and it was not helpful with instructions. So PPP is just now getting to where we kind of understand how it works. And guess what? The states haven't gotten on board. A lot of the states are saying,"Well we're still going to tax it. We're still not going to let people deduct it. But we're still not sure what we're going to do yet." So even though the federal makes these decisions, if they don't do it in advance, they're not giving the states enough time to, whenever their legislative meetings are, things like that, make a decision on how they're going to handle it as a state. So again, as practitioners we're dealing with the IRS says this and the state says this. So we have to make a modification on state returns for certain things, PPP being one of them. So it's still kind of a struggling season overall when it's last minute and rolled out late. Because it's not just the IRS and people say the IRS and they act like that's the only place people pay taxes to, but it's not,

David Stewart:

You know, I want to keep the fun rolling. And so what I want to talk about is the deficit. So Marty, we've been doing stimulus. And this is not— the pandemic is not a time to be stingy, but there's a deficit. So when is it time to talk about sustainability and switch tracks? And what do those discussions look like?

Martin Sullivan:

Well, you know, back in my youth, we used to worry about a debt-to-GDP ratio approaching 40 percent. Now our debt-to-GDP ratio is at 100 percent. Absolutely inconceivable a dozen years ago. We just assumed that everything would blow up. But guess what? It didn't. And guess what? Everybody said,"Well, that's going to cause interest rates to skyrocket." Well, the 10-year Treasury rate is now 1.6 percent, which is extremely low by historical standards. So we really don't know when we should start really getting serious about the debt. But I know that in the past our fears were overblown. Let me just say a couple of things. One is the stimulus almost by definition is deficit spending. So if we have a recession, we have to have a deficit. That makes sense. And I would even say when we're funding infrastructure as President Biden's proposing for his next round of fiscal legislation, if you're going to really invest in capital, I don't mind deficit spending in that case. If you're using the deficit to invest that's OK. But the real problem is because of the aging of society, because of Social Security and Medicare expanding at an incredibly rapid rate, the debt is going to increase, not for stimulus and not for infrastructure, but for consumption. And that is a path to fiscal purgatory or even beyond. So that's where we really have to concentrate our efforts. It is getting Social Security and Medicare under control or increasing taxes to pay for it. So I'm not so worried about these current bills, but I'm worried more about the long-term effect that is clearly there. And let me just say one last thing. Everybody thinks,"Oh, it's so great. I'm a fiscal conservative. I don't like risk, so we're not going to do any deficits." Well, there's a risk in not. There's a risk of not doing anything as well. And let me just say that risk is called Japan. Japan was the world's second largest economy, now the world's third largest economy and it's shrinking because they did not take sufficient action. And we have a possibility of falling into a state like them if we don't maintain stimulus. So there's risk from higher debt, but there's also a risk from being afraid of debt.

David Stewart:

Even though we've learned over the course of the last year that predictions are a terrible thing to make, I'm going to put you both on the spot. And I'm going to ask: what do you think that people will be talking about in the tax world this time next year? Ty, why don't you start off?

Tynisa Gaines:

Bitcoin. I know you weren't expecting that one.

David Stewart:

Nobody expects Bitcoin.

Tynisa Gaines:

Well, cryptocurrency is a big thing now. Honestly, everyone became a day trader in 2020. So it's funny because Marty said people didn't spend money and I agree they didn't spend it on eating out and things like that, but they definitely became investment people. Everyone has a Robinhood account or something and started trading something whether it was stocks or cryptocurrency or GameStop. We have had that happen for just this tax season and I don't think that we expected that. So the funny thing is that we see all of these new cuts and things and we're saying,"Oh, this is probably what we'll be talking about" like the child tax credit or the dependent care credit. Even the EITC has some changes and you can get it at age 19 and there's no limit, where it used to be you can only get it from 25 to 65. So I think we will talk a lot about credits next year that before, because they were so small or not refundable, they didn't make an impact. I think that'll be a big discussion. I think we'll also be talking about a lot more planning. Like you asked, will people not work? And I said will they do married, filing separate? So I think taxes will evolve to where it's not just prepping the return, but actually discussing with clients what to anticipate for next year. And I think that the stimulus should be done. I'm with Marty, like this should do it. We shouldn't have that again. So hopefully other than asking the question,"How much did you receive for your third stimulus payment?" That's not much of a conversation, but I'd like to see, like I said— I was surprised that 2020 was like the year of the investor. So it'd be funny to see next year what is everybody going to do in 2021 that's going to affect their tax return next year? It's almost hard to predict other than what you know has changed in the law. Those are the obvious things, but I think it will be something different that will pop up. That will be like,"Oh, we didn't see this one coming."

David Stewart:

All right. So Marty, what are you looking forward to talking about next year?

Martin Sullivan:

Ty's giving you the view from outside the Beltway. Inside the Beltway, we got this tidal wave piece of legislation coming through. President Biden's going to propose a$3 trillion infrastructure program if he holds to his campaign platform. And then he's going to have accompanying tax increases to go along with that targeted at large corporations and the wealthy. If you thought this bill was complicated, if this next bill comes through, you're going to see some major mega tax changes. But again, it's going to be a different in it's character because while most of these benefits were targeted towards lower-income individuals, these tax increases would be on higher-income individuals. So we're talking about capital gains taxation. We're talking about estate and gift taxation. And for corporations, we're talking about minimum taxes and increasing the international. So it might not affect Ty's work too much. For example, changing the GILTI rules, the minimum tax on foreign profits. But these would be mega changes. Now the big question: Well, would that be done for reconciliation? Biden has a dream of actually getting 10 Republicans to go along with him in the Senate. You know, it's just very hard to say what's going on. Secretary Janet Yellen said during her confirmation hearing that as long as we have unemployment— and by the way we're 8.6 million jobs short of where we were last year— it's going to be very hard to pass a tax increase. So I think the process is going to start for some sort of major tax increases. Certainly you're going to see them proposed by the Democrats and will there be enough political momentum and enough economic growth that people feel comfortable doing something like that. And so it's really hard to see past where this goes. Now it may all fizzle and disappear, or it may be the biggest thing that happened in a long time. I can't say about 12 months from now because I can't even see six months from now where we're going to be.

David Stewart:

Well as somebody who covers tax news for a living, I hope for something big. Ty and Marty, this has been fantastic. Thank you both for being here.

Tynisa Gaines:

Thank you for having me. I appreciate it.

Martin Sullivan:

David, Ty, thanks very much. Been a pleasure.

David Stewart:

And now coming attractions each week, we highlight new and interesting commentary in our magazines. Joining me now from her home is Acquisitions and Engagement Editor in Chief Janelle Julien. Janelle, what will you have for us?

Janelle Julien:

Thanks, Dave. In Tax Notes Federal, Laura Snyder, Karen Alpert, and John Richardson argue that the IRS has failed to fulfill its mandate under the Taxpayer First Act for Americans living abroad. David Bernstein explains how the tax and budget reconciliation process could be used to expand health insurance coverage. In Tax Notes State, three Morgan, Lewis& Bockius practitioners analyze determination of nexus for remote workers during the COVID-19 pandemic. Mark Berg describes and quantifies the effect on taxpayers of the 2017 limitation on the deductibility of state and local taxes for federal income tax purposes. In Tax Notes International, J. Howard Stecker and Michael Beaty examine the challenges of the OECD’s pillar 2 approach for insurance companies. Two practitioners with Atlas Tax Lawyers examine the U.S. Tax Court’s recent judgment in Coca-Cola and consider the consequences of the decision from an international transfer pricing perspective. And finally, on the Opinions page, Nana Ama Sarfo looks at recent developments in the EU's proposed public country-by-country reporting scheme. Benjamin Willis examines how“America first” policies have severely compromised international tax collaboration. Martin Sullivan discusses how South Korea annually enlists the support of its nation’s popular celebrities to promote tax compliance and what that says about taxpayer morale as an intangible asset.

David Stewart:

You can read all that and a lot more in the pages of Tax Notes Federal, State, and International. That's it for this week. You can follow me online@TaxStew, that's S-T-E-W. And be sure to follow@TaxNotes for all things tax. If you have any comments, questions, or suggestions for a future episode, you can email us at podcast@taxanalysts.org. And as always, if you like what we're doing here, please leave a rating or review wherever you download this podcast. We'll be back next week with another episode of Tax Notes Talk.

Speaker 4:

l accounting or tax advice. A full disclaimer is included in the transcript.