Trying times for expats Presented by the Land Trust Alliance

Editor’s Note: This edition of Morning Tax is published weekdays at 10 a.m. POLITICO Pro Tax subscribers hold exclusive early access to the newsletter each morning at 6 a.m. Learn more about POLITICO Pro’s comprehensive policy intelligence coverage, policy tools and services, at politicopro.com.

Quick Fix

— Expats are looking to Congress for tax relief, but it’s not clear that they’ll get very much.

— Where have matters landed on year-end tax negotiations? A big question now is: Just how skinny can you make a skinny tax bill?

— Wealth tax debate, continued: The Penn Wharton Budget Model projects that the newest version of Sen. Elizabeth Warren’s wealth tax wouldn’t raise quite as much as her campaign has estimated.

A message from the Land Trust Alliance: Congress: Support conservation; enact S. 170/H.R.1992. The Land Trust Alliance and our 1,000 member land trusts welcome the Senate Finance Committee’s report on abuse of the federal conservation tax incentive. The bipartisan study concluded the egregious, ongoing abuse must end – and makes it clear why Congress must take action now. [Learn More]

THURSDAY’S HERE, and third baseman Anthony Rendon apparently isn’t scared of California’s top individual tax rate of 13.3 percent.

Maybe they were trying to spell “short-line rail?” Today marks 118 years since the Italian inventor and engineer Guglielmo Marconi received the first ever transatlantic radio signal — Morse code for “S” — while in Newfoundland.

We’ll take your tips and feedback by just about any available avenue.

Email: [email protected], [email protected], [email protected] and [email protected].

You can also reach us on Twitter at @berniebecker3, @tobyeckert, @brianfaler, @aaronelorenzo, @POLITICOPro and @Morning_Tax.

Driving the Day

IT’S NOT ALL GLAMOUR: The U.S. is a huge outlier because it taxes its citizens' entire worldwide income. (The only other country with that policy: Eritrea.)

But the expat community has had little success over the years in trying to get Congress to tax them only on their income from U.S. sources. And they've just suffered another setback, as Pro Tax’s Aaron Lorenzo noted — likely their strongest champion on the Hill, Rep. George Holding (R-N.C.), just announced he wouldn’t seek reelection. Not only that, the Tax Cuts and Jobs Act, H.R. 1 (115), has also made life more difficult for expats through policies like the levy on global intangible low-tax income, or GILTI.

Holding has written legislation to switch the U.S. over to residence-based taxation, which would essentially keep the income that citizens make from foreign sources out of reach for the IRS. But for now at least, expatriates are far more likely to get relief from paperwork requirements on their U.S. taxes. A proposal from Rep. Carolyn Maloney (D-N.Y.) would make it easier for Americans living abroad to access foreign banks. They've been more hesitant to work with U.S. citizens because of reporting requirements in measures aimed at cracking down on offshore tax evasion, like the Foreign Account Tax Compliance Act.

One more note: Proponents of the wealth tax pushed by Sen. Bernie Sanders (I-Vt.) and Warren (D-Mass.) have pointed to some of these policies that bother expats — like citizenship-based taxation and FATCA — as reasons why it could be more difficult to avoid a tax in the U.S. on accumulated assets.

In other expat news: A top official in Brussels asked the U.S. to make it cheaper for Americans to renounce their citizenship, Aaron also reported.

HEAD, MEET WALL: House Ways and Means Chairman Richard Neal (D-Mass.) acknowledged on Wednesday that a skinny tax deal was on the table, though he offered basically no other information about what might be in such a package and how likely it is to materialize, as Pro Tax’s Brian Faler reported.

But it’s also not clear how attractive that is to the House Democrats: A Wednesday morning caucus meeting on the matter didn’t seem to cause a groundswell of support for a slimmed-down year-end tax bill. By the end of the day, the talk around the Capitol was that a skinny tax deal might not include any of the expired or expiring preferences known as tax extenders, and instead might merely consist of the retirement legislation, H.R. 1994 (116), that already passed the House, and disaster relief measures, as Bloomberg Tax’s Colin Wilhelm and Kaustuv Basu reported (and which Morning Tax heard as well).

But with the caveat that everything can come together in a snap, that lack of enthusiasm doesn’t capture how much of a mess everything seems to be right now. Top Democrats are still pushing to expand refundable tax credits as part of an agreement, causing Republicans to respond that they must not really want a deal. At the same time, Senate Majority Whip John Thune said Wednesday that his GOP colleagues wanted a smaller package that would restore and/or extend temporary tax breaks. And a couple hours later, Rep. Kevin Brady of Texas, the top Republican on Ways and Means, said he didn’t “anticipate a simple date change” on extenders. So let’s see what today brings.

SPEAKING OF THE WEALTH TAX: The Penn Wharton Budget Model found that Warren’s most updated wealth tax proposal would raise as much as $2.7 trillion over a decade, or at least $1 trillion less than Warren’s camp has estimated. The wealth tax would also shrink the economy between 0.9 percent and 2.1 percent in 2050, though that’s largely dependent on how the newly generated revenue is utilized.

Richard Prisinzano, the director of policy analysis for the Penn Wharton Budget Model, told Morning Tax that the newest projection assumed that the wealthiest Americans would take more steps to avoid Warren’s expanded wealth tax — perhaps not surprising, given that the top rate would jump from 3 percent for wealth over $1 billion to 6 percent.

A preliminary Penn Wharton estimate last month of Warren’s wealth tax drew some criticism for assuming that the revenue raised would go toward deficit reduction, while Warren has proposed spending the proceeds on a range of education initiatives on top of her "Medicare for All" proposal. Prisinzano made it clear that, to the PWBM, revenue for deficit reduction was money well spent. “If you reduce debt, that’s good for the economy, because it’s getting rid of crowd-out and it makes people invest in productive capital,” he said.

He added that improvements to early childhood education would certainly be a long-term boost for the economy, but that it would also take longer to reap the overall economic benefits if wealth tax revenue was used toward that end.

More presidential stuff: Mike Bloomberg, a recent entrant to the Democratic race, announced Wednesday that he supported an expansion of the Earned Income Tax Credit and the Child Tax Credit. In his new plan, Bloomberg largely echoed existing Democratic plans for boosting the refundable tax credits — proposing to make childless workers eligible for the EITC and to make the child credit fully refundable.





Around the World

TOURIST TAX TREND: The Japanese island of Miyajima has become the latest tourist destination to slap a tax on visitors, CNN reports. The new mayor overseeing the island made a tourist tax a key part of his platform, and he hopes that Miyajima will begin to charge 100 yen (or about a dollar) for admission by the spring of 2021. More than four million people in 2018 visited the island, which is perhaps best known for its orange torii gate (which is partially submerged underwater at high tide). But the population of Miyajima was under 1,700 in 2015, about 1,000 fewer than a decade earlier, causing revenue issues. Bali and Venice are among the other locales that have either approved or are considering tourist taxes.

A message from the Land Trust Alliance: Congress: Support conservation; enact S. 170/H.R.1992. The bipartisan Charitable Conservation Easement Program Integrity Act (S. 170 / H.R. 1992) will stop bad actors from their profiteering while allowing conservation donations motivated by charity to continue unimpeded. This legislation is concise, sensible and ready for passage in the House and Senate. [Learn More]





Around the Nation

YOU SURE ABOUT THIS? Republicans running for governor in Utah aren’t sure about a proposed tax overhaul that would raise the sales tax on groceries, The Salt Lake Tribune reported. Aimee Winder Newton, a Salt Lake County councilwoman, said that the legislature would be jumping the gun by passing the tax revamp in the current special session. “Winder Newton’s concerns, in general, were shared by the other Republican candidates running for Utah governor next year. In interviews or public comments on the topic of tax reform, the declared GOP candidates urged lawmakers to pump the brakes on reform and expressed reservations about levying higher taxes on grocery sales,” Benjamin Wood wrote.

Quick Links

House Ways and Means clears measure to suspend tax law’s SALT cap for two years.

HSBC to pay $192 million to resolve tax evasion probe.

Boston presses ahead with real estate tax.

Did You Know?

The singer-songwriter Aimee Mann was nominated for an Oscar for the song “Save Me” from 1999’s “Magnolia.”



Follow us on Twitter Toby Eckert @tobyeckert



Bernie Becker @berniebecker3



Brian Faler @brian_faler



Aaron Lorenzo @aaronelorenzo