Roundtable Weekly -  July 27, 2018

Tax Policy

House GOP Unveils “Tax Reform 2.0” Outline; Capital Gains Indexing Bill Introduced

House Ways and Means Committee Chairman Kevin Brady (R-TX) on July 24 outlined a proposed second round of tax cuts to House Republicans, who hope to vote on “Tax Reform 2.0” before the midterm elections..

In an interview with CNBC, Brady expanded on the three core components of the Tax Reform 2.0 proposal.

  • Chairman Brady stated. "With this framework, we are taking the first step to change the culture in Washington D.C. where tax reform only happens once a generation. We plan to work off this framework to build on the growing successes of the Tax Cuts and Jobs Act and ensure this energized economy continues moving forward."  (House Ways and Means Statement, July 24)
  • In an interview with CNBC, Brady expanded on the three core components of the 2.0 proposal
    • making the individual and small business tax cuts enacted by the 2017 Tax Cuts and Jobs Act permanent'
    • promoting family savings through retirement accounts, a new universal savings account, and
    • expanded 529 education savings accounts; and spurring business innovation by allowing new businesses to write off more of their initial start-up costs, and removing barriers to growth.
  • The central feature of the proposal – a permanent extension of tax cuts for individuals – is unlikely to pass the Senate, where it would need Democratic support.  (The Hill, July 24) 

    Senior Ways and Means Committee Member Devin Nunes (R-CA) has introduced legislation (H.R. 6444) to index capital gains to inflation – a proposal that would reduce the tax burden on long-lived assets, including real estate.

  • Although House Republicans aim to vote on "Tax Reform 2.0" legislation in September, a tax technical corrections bill may not be voted on until after the November elections. (Roundtable Weekly, July 20)
  • Meanwhile, senior Ways and Means Committee Member Devin Nunes (R-CA) has introduced legislation (H.R. 6444) to index capital gains to inflation – a proposal that would reduce the tax burden on long-lived assets, including real estate.  An inflation adjustment for capital gains previously passed the House in the 1990s but died in the Senate.  House tax-writers may consider indexing capital gains as part of Tax Reform 2.0.  (The Hill, July 20)
  • Separately, attention this week was focused on a mistake affecting qualified improvement property cost-recovery tax rules. An amendment (# 3597) introduced yesterday by Sen. Pat Toomey (R-PA) to an appropriations bill (H.R. 6147) would correct a drafting error in the Tax Cuts and Jobs Act that unintentionally pushed the recovery period for property improvements from 15 to 39 years.  As a result of the mistake, businesses across the country are delaying, or significantly reducing, capital expenditures for building improvements, undermining job creation and economic activity. (BGov, July 26)
  • Additionally, the Treasury Department has sent draft regulations regarding the new deduction for pass-through business income to the White House Office of Management and Budget (OMB) for formal review.  Under a recent agreement between the two agencies, OMB has 10 days to review the regulations before they are issued, unless the parties mutually agree to extend the review period.  (TaxNotes, July 25)

In January, The Roundtable wrote to Treasury Secretary Mnuchin  offering several suggestions designed to maximize the economic impact of the pass-through deduction and avoid unnecessary disruptions to business activity.  [Roundtable Letter, Jan. 18].

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Infrastructure

House Proposal Suggests Gas Tax Increase, Public-Private Partnerships to Fund Infrastructure Improvements

Rep. Bill Shuster (R-PA), the outgoing chairman of the House Transportation and Infrastructure Committee, released "discussion draft" language on July 23 aimed at improving and sustainably financing U.S. transportation and other infrastructure systems.  (Section-by-Section analysis of the proposal)

Roundtable President and CEO Jeffrey D. DeBoer appeared last summer on CNBC’s Squawk Box, emphasizing the importance of P3s as a platform to finance the design, building, operation and long-term maintenance of projects across all infrastructure asset classes(CNBC, June 7, 2017).

  • Shuster, who is retiring after the upcoming midterm elections, provided a "vision statement" explaining that the draft "is intended to further the national conversation about the current state of America's infrastructure and highlight some of the major roadblocks to funding and improving our transportation network."  He stated his proposal reflects "input from Members of Congress from both sides of the aisle" in an effort to build bipartisan support.
  • The wide-ranging draft proposes to phase-in increases to the "pay at the pump" gas tax and then eliminate it after 10 years; pilot a per-mile travelled "user fee"; shore-up the federal loan and guarantee program for mass transit; establish a public-private partnership (P3) program to construct and rehabilitate federal buildings; and establish a one-stop federal permitting shop to expedite project approvals.  (Eno Transportation Weekly, July 23) 
  • Any broad infrastructure policy conversation would likely address federal-state cost sharing arrangements for mass transit projects - such as the Gateway program to improve bridge and tunnel crossings between New York and New Jersey.  For example, a  June 29 letter from Trump Administration transit officials indicated a change in agency policy - that loans by the U.S. Transportation Department, repaid by state and local governments,  should factor into grant decisions.  The effect would be to reduce the amount of federal grants for mass transit and increase the state/local share. (B-Gov, July 3
  • Anticipating infrastructure as an issue for possible compromise after the upcoming elections, The Roundtable has offered a number of comments to the Administration and Congressional committees on real estate's role in creating public-private partnerships to help repair roads, transit, broadband, power grid and other systems that are needed to make communities safe, productive and competitive.  (Roundtable Weekly, January 26) 

Roundtable President and CEO Jeffrey D. DeBoer appeared last summer on CNBC's Squawk Box, emphasizing the importance of P3s as a platform to finance the design, building, operation and long-term maintenance of projects across all infrastructure asset classes.  Policies starting with streamlined permitting and a range of financing platforms should all be considered by lawmakers as layers in the "capital stack" for infrastructure," DeBoer told Squawk Box. (CNBC, June 7, 2017)

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Economic Growth - Travel & Tourism - Tourism

Jobs Originating through Launching Travel (JOLT) Act Introduced to Spur International Tourism and Job Creation Issues

In a bipartisan effort to spur tourism to the U.S., create jobs, reform outdated visa laws and increase national security, Reps. Mike Quigley (D-IL) and Tom Rice (R-SC) yesterday introduced the Jobs Originating through Launching Travel (JOLT) Act of 2018.

"By improving the visa process, strengthening national security, and welcoming vetted travelers, the U.S. will be able to realize economic benefits at hotels, restaurants, retail store, and attractions around the country," said VisitU.S. Coalition spokesman Amos Snead.  (VisitU.S. News Release, July 26)

  • Rep. Quigley said, "By updating outdated visa laws, we can drive tourism and job growth in our cities and assist the U.S. intelligence community with their mission to spot and stop terrorist threats. The JOLT Act accomplishes both of those objectives by stimulating economic activity and improving national security."
  • Rep. Rice added, "The JOLT Act will enhance our economic competitiveness and strengthen national security by modernizing the Visa Waiver Program (VWP), which facilitates streamlined travel into the United States for pre-approved travelers from member countries."
  • In 2016, 22 million people traveled to the U.S. from VWP countries, accounting for 59% of overseas arrivals to the U.S.  Travelers from these countries generated more than $90 billion for the U.S. economy.  (Rep. Quigley News Release, July 26)
  • The VisitU.S. Coalition applauded introduction of the Act. Coalition spokesman Amos Snead commented, "By improving the visa process, strengthening national security, and welcoming vetted travelers, the U.S. will be able to realize economic benefits at hotels, restaurants, retail store, and attractions around the country," said VisitU.S. Coalition spokesman Amos Snead.  (VisitU.S. News Release, July 26)
  • Led by the U.S. Travel Association and the American Hotel and Lodging Association, the VisitU.S. coalition  also includes The Real Estate Roundtable, U.S. Chamber of Commerce and the American Resort Development Association. 
  • The coalition is also urging Congress to reauthorize the Brand USA program, which is funded through fees on foreign visitors who do not require a visa when entering the U.S.  Legislation is needed to authorize the program beyond 2020 – and ensure that visitor fees authorized for collection from 2021 to 2027 will not be diverted to the Treasury Department, as currently scheduled. (Roundtable Weekly, June 29)

A panel discussion at The Roundtable's June 14 Annual Meeting focused on travel and tourism, economic growth and CRE.  Participants included Roger Dow, President and CEO, U.S. Travel Association; Katherine Lugar, President and CEO, American Hotel & Lodging Association; Senator Amy Klobuchar (D-MN) and Anthony E. Malkin  (Chairman and CEO, Empire State Realty Trust).  (Roundtable Weekly, June 15, 2018.)

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