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Forbes
32 minutes ago
- Forbes
The Senate Budget Bill Is Growing More Regressive
WASHINGTON, DC - JUNE 23: Senate Majority Leader John Thune (R-SD) speaks to reporters after leaving ... More the Senate Chambers. (Photo by) The tax provisions of the budget bill being debated on the Senate floor would be even more regressive than the version drafted by the Senate Finance Committee, according to a new Tax Policy Center analysis. On average, the Senate measure released on June 28 would cut 2026 taxes by about $2,900, up about $250 from the Finance Committee's version. But the current Senate version of the One Big Beautiful Bill Act (OBBBA ) would distribute most of those additional tax cuts to the highest-income households. The main reason: the way it treats the state and local tax (SALT) deduction. Comparing The Plans The Senate bill would cut taxes by an average of $12,500, or 3.4 percent of after-tax income, for those making $217,000 or more, the highest-income 20 percent of households. That's about $1,500, or 0.4 percent of after-tax income, more than they'd get under the Finance panel's plan. Those making between $460,000 and $1.1 million (the 95th-99th income percentile) would get an average tax cut of $21,000, raising their after-tax incomes by 4.4 percent. That would be roughly identical to the House version but nearly $3,000, or 0.6 percent of after-tax income, more generous than the Finance measure. Similarly, the bill on the Senate floor would cut taxes by an additional $8,000 on average for those who make $1.1 million or more, the top 1 percent of households—and an extra $40,000 for those who make $5 million or more, the top 0.1 percent—compared to the Finance bill. Even with those added tax cuts, the current Senate bill remains slightly less generous than the House measure for the highest-income households. While those high-earners get much more than in the Finance panel's measure, the same can't be said for low- and middle-income households. For example, the lowest-income households, those making about $35,000 or less, would get an average tax cut of $150 under either the Finance Committee's or the Senate's bill and $160 under the House bill, less than 1 percent of their after-tax income. Middle-income households would get an average tax cut of roughly $1,800 under all three measures: a bit more in the House bill and slightly less in the two Senate three versions of the big budget bill Differing Details The House and Senate bills are broadly similar. Both would extend the individual provisions of the 2017 Tax Cut and Jobs Act (TCJA); continue and enhance some corporate tax provisions; and adopt scaled-back versions of President Trump's tax-related campaign promises, such as tax-free tips and overtime. But they differ in scores of details, some minor and some significant. And the tax cuts in the Senate bill are substantially more expensive. The congressional Joint Committee on Taxation estimates the pending Senate bill would slash federal revenues by more than $4.4 trillion over the next decade. The House-passed OBBBA would reduce federal revenue by $3.9 trillion, according to JCT. Both bills would allow costly provisions to expire on paper within the 10-year budget window. But because future Congresses are likely to extend those provisions once again, the true cost is likely to be substantially more. To satisfy many factions of Republicans, Senate GOP leaders made several revisions to the Finance draft. They made even deeper cuts to Medicaid and the Affordable Care Act and, at the same time, proposed even more generous tax cuts for high-income households. Including spending reductions and other offsets, the Senate bill would increase the federal debt by $3.3 trillion over the next decade, according to CBO. Additional interest would boost the debt by an additional $700 billion, according to the Committee for a Responsible Federal Budget. All About SALT Why are the tax cuts in the latest Senate bill so much more generous than the Finance panel's plan? The primary reason is the state and local tax deduction, including the way it treats owners of pass-through businesses such as partnerships and sole proprietorships. The Finance panel did not address the controversial SALT issue. The Senate bill adopts the House plan to boost the maximum SALT deduction from $10,000 to $40,000, though only through 2029. Crucially, it also allows owners of pass-through businesses to avoid the SALT deduction cap entirely by continuing to take advantage of state-enacted loopholes. That workaround allows these business owners to fully deduct their state and local taxes by paying the levies through their firms. About 36 states allow this. The House and Finance panel bills would have somewhat limited that exemption. But the pending Senate bill keeps the door wide open, effectively freeing very wealthy business owners from any cap on their SALT deductions. Both the House and Senate bills would phase out the more generous deduction for many households starting at $500,000. But since wealthy business owners could continue to fully deduct their state and local taxes if the state workarounds are allowed, the income limit on the cap is meaningless to them. The Finance panel plan faced substantial criticism for its regressivity and cost. But GOP leaders have nonetheless doubled down and written a Senate bill that benefits top earners even more.
CNN
33 minutes ago
- CNN
Republicans introduce last-minute industry ‘killer' tax on solar and wind in spending bill
Source: CNN Business groups and clean-energy developers are apoplectic over a last-minute provision tucked into President Donald Trump's spending bill that will tax the solar and wind industry, making it much harder to get new, cheap electricity onto the grid. Senate Republicans revealed an entirely new tax for renewable energy this weekend, in the latest version of a bill that could be passed as early as Monday afternoon. The bill already stripped tax incentives for renewables by 2027 and gave developers stringent requirements to claim them. The new tax would come at the worst possible time for the American power grid, experts and trade groups say, as demand for more electricity spikes due to new data centers for artificial intelligence coming online. 'This new tax is just a killer to the wind and solar industry,' said Ed Mills, a Washington policy analyst at Raymond James. 'You went from taking away a positive for the industry to implementing a negative.' The tax could change, as the Senate embarks on a marathon day of amendment votes on Monday. As it's currently written, the Senate bill will threaten to upend a huge amount of power that was set to come online in the next decade. Wind, solar and long-term storage batteries make up the vast majority of new electricity added to the grid over the past three years. It also encompasses about 85% of what's currently in the development pipeline, according to Ben King, an analyst at the non-partisan think tank Rhodium Group. Keeping Biden-era tax credits for wind and solar would have led to between 400 and 1,100 gigawatts of new, clean power being added to the grid by 2035, Rhodium modeling shows. In comparison, the capacity of the largest fossil fuel power plant in the country is close to 4 gigawatts. 'Increasing the price of this stuff that's actually getting built right now — and just making it harder to build — results in higher prices,' King told CNN. 'And (there's) a greater amount of concern whether the grid can respond.' That hole in energy capacity these taxes will create will be filled by new natural gas power plants and leaving aging coal plants online longer, and both solutions are more expensive than building wind and solar. Those costs will all but assuredly be passed on to the people who pay electric bills. The new obstacles for clean energy come as the AI boom is already consuming vast amounts of energy. By 2030, data centers that power AI are projected to consume a whopping 612 terawatt-hours of energy per year – equivalent to what Canada consumes annually, according to research from Accenture. The new tax, along with killing the tax credits, could raise taxes on utility-scale solar projects by 18%, according to Princeton University professor Jesse Jenkins. Jenkins wrote on X that raising taxes on America's 'most important new sources of electricity supply' is 'utter insanity.' Responding to a post about the new taxes on wind and solar, billionaire Elon Musk warned over the weekend the 'latest Senate draft bill will destroy millions of jobs in America and cause immense strategic harm to our country!' Pointing to the cost of the legislation, Musk added in a separate post that polls suggest the legislation will be 'political suicide for the Republican Party.' Even the US Chamber of Commerce, which is broadly supportive of the legislation, came out against the new renewable energy levies. 'Taxing energy production is never good policy, whether oil & gas or, in this case, renewables,' US Chamber of Commerce executive vice president Neil Bradley said in a post on X. 'Electricity demand is set to see enormous growth & this tax will increase prices. It should be removed.' The weekend changes to the bill were blasted by renewables trade groups, who had been pushing lawmakers for a more generous tax credit phaseout timeline for wind and solar projects. 'It is astounding that the Senate would intentionally raise prices on consumers rather than encouraging economic growth and addressing the affordability crisis facing American households,' American Clean Power Association CEO Jason Grumet said in a statement. Solar Energy Industries Association president Abigail Ross Hopper called the tax an 'unprecedented and punitive measure that would raise costs for American consumers' and a 'blanket penalty on solar,' in a statement. The renewable energy tax is part of a broader effort to wean critical US industry off components from China. 'The Trump administration and Congressional Republicans really dislike wind and solar, but apparently they hate China even more,' said Mills, the Raymond James analyst. 'We're trying to get China out of our supply chains.' However, the tax and restrictions will make the US far less competitive with China on AI and clean energy manufacturing, said Robbie Orvis, Energy Innovation's senior director of modeling and analysis Energy Innovation. 'This is just a gift to China; they must just be salivating over what's in this bill,' Orvis said. 'They would be very happy to have US energy costs go up so they can take on more of those data centers that might otherwise be located here.' While being tough on China has bipartisan appeal, many clean energy projects are major employers in purple and red districts. For instance, Texas is not just the leading state for oil and natural gas production, it's also No. 1 for wind-powered electricity generation. 'Republicans have long supported an all-of-the-above energy policy. With this tax provision, the all-of-the-above policy has an asterisk where wind and solar are no longer included,' Mills said. Still, Mills added it's not entirely clear the wind and solar taxes will survive the political sausage-making process. 'Does this ever get implemented? Does it get softened? Does it get repealed? All of those are in the realm of possibility,' he said. Kevin Hassett, director of the White House's National Economic Council, told CNBC on Monday that the Trump administration remains focused using 'all-of-the-above approaches to get energy production to go through the roof.' 'That means using coal, natural gas, oil, nuclear and, to the extent it passes a market test; these other solar and wind type things can be part of the picture too,' Hassett said. For context, solar, wind and batteries are far cheaper than fossil fuels and nuclear power, because they have no fuel costs and currently cost less to build. Hassett disagreed with the characterization that lawmakers are not just taking away tax breaks for clean energy, they are also penalizing the industry with new taxes. 'I don't think that's the way to think about it. In the end, solar is going to be in people's grids,' Hassett said. Even without the new tax, the Republican spending bill will cause household energy bills to rise over the next decade, CNN previously reported. When combined with the electric vehicle consumer tax credit likely being cut, annual electricity and transportation costs in every state in the continental United States will be higher than they would have if the tax credits stayed intact, analysis from think tank Energy Innovation found. Red states including Oklahoma, South Carolina and Texas could see up to 18% higher energy costs by 2035 if Trump's bill passes, compared with a scenario where the bill didn't pass. See Full Web Article
Bloomberg
40 minutes ago
- Bloomberg
Enbridge Dispute With Michigan Over Oil Pipeline Goes to US Supreme Court
Enbridge Inc. 's long-simmering dispute with the state of Michigan over an oil pipeline that runs under the Straits of Mackinac is headed for the US Supreme Court after years of legal battles and the intervention of Canada's government. The highest US court agreed to hear a case concerning whether Michigan's efforts to shut down the so-called Line 5 oil pipeline belong in federal or state court. Enbridge wants the case heard by the federal court, arguing that the dispute deals with the foreign relations between Canada and the US. Canada has invoked a 1977 treaty to try and prevent Michigan from shutting the line, which supplies oil to refineries in Ontario and Quebec.
