Bramwell's Lunch Beat: Tax Deal Reached, Cadillac Tax, Dow-DuPont Mergerby
Congressional leaders reach sweeping deal on tax and spending legislation
Congressional leaders early Wednesday unveiled a sweeping deal on spending and tax legislation that would avoid a government shutdown and make major changes to energy policy and the Affordable Care Act, wrote Kristina Peterson and Richard Rubin of the Wall Street Journal. The agreement would make permanent tax breaks backed by each party and is expected to suspend for two years a tax on medical devices and delay for two years the scheduled 2018 start of the âCadillac taxâ on high-cost employer health plans. The tax measure, poised to pass the House and Senate later this week, would break Congress' habit of extending lapsed tax breaks retroactively and then setting the next expiration date just weeks or months ahead. To become law, the package will have to withstand opposition from Democrats concerned that it provides too little for families. Lawmakers plan to combine the tax bill with the spending bill.
Obama chief economist defends âCadillac tax'
President Obama's chief economist delivered a strong defense of the âCadillac taxâ on Tuesday morning, before Congress unveiled a budget deal that would delay the measure for two years, wrote Sarah Ferris of The Hill. âIt's really important to us that we don't see that measure repealed, and we will work hard to prevent that from happening,â Jason Furman, chairman of the Council of Economic Advisers, said at a Politico Morning Money event. The Obama administration has repeatedly said it wants to keep in place the Cadillac tax â as well as the medical device tax â but has come short of issuing a veto threat on the tax package. Economists, particularly within the White House, have argued that the Cadillac tax has a larger role than simply collecting revenue for the healthcare law. They argue it puts pressure on healthcare consumers to limit unnecessary spending. As a result, it ultimately keeps prices low.
Budget deal gives health insurers respite from âpremium tax'
Sarah Ferris also wrote for The Hill that health insurers nabbed a victory in the $1 trillion spending bill unveiled late Tuesday night, earning a one-year freeze on the so-called âpremium tax.â The health insurance tax has been strongly opposed by insurance companies and business groups, which argue that the cost of the tax is passed on to workers in the form of higher premiums. The tax has also been opposed by groups representing Medicaid health plans, which have argued that the government is essentially âtaxing itselfâ with the provision. It was expected to cost state Medicaid programs $14 billion over 10 years. âIncluding a one-year delay of the annual excise tax on health insurers for calendar year 2017 in this bipartisan legislation shows the widespread opposition to this nonsensical policy,â Jeff Myers, president and CEO of Medicaid Health Plans of America, wrote in a statement on Wednesday.
Dow, DuPont eye big tax savings in rare merger of equals
Greg Roumeliotis and Mike Stone of Reuters wrote that the tax-free treatment of the spinoffs Dow Chemical Co. and DuPont plan to carry out after they merge their businesses is a prime driver of the deal, potentially saving tens of billions of dollars. The $120 billion merger, announced last week, comes less than a month after drugmaker Pfizer Inc. said it would use its $160 billion acquisition of Allergan PLC as a way to cut its taxes. It underscores the growing use of mergers and acquisitions as a way to slash corporate America's tax bill. Unlike the Pfizer-Allergan deal, where the savings are the result of Pfizer redomiciling to Ireland where Allergan is based in a so-called inversion, the Dow-DuPont tax savings hinge on their transaction being structured as a merger of equals, a rare event that requires companies of the same size and scope willing to negotiate it. âIt is fairly rare,â said Robert Willens, a corporate tax consultant.
- Pelosi raising last-minute objections to budget-tax package (Politico)
- Would emerging tax bill help a code overhaul later? Maybe (Wall Street Journal)
- Valeant: An accounting pioneer, too (Wall Street Journal)
- The tax acrobatics in the Dow-DuPont deal (Reuters Breakingviews)
- Clinton to propose further tax increases on wealthy Americans at Buffett event (CNBC)
- Ted Cruz's slippery sales pitch for a tax overhaul (Los Angeles Times)
- Why you should pay attention to the presidential candidates' tax proposals (TaxVox)
- Tax reform isn't the magic formula politicians say it is (Yahoo Finance)
- Swiss bank hid assets for Jews in wartime, then tax evaders (Bloomberg)
- It's common sense for Seattle to tax gun sales to study violence (Seattle Times)
- Some things worth pursuing in 2016 (Tax Analysts)
- Corporate net operating loss carryforward and carryback provisions by state (Tax Foundation)