Congress' Cup Runneth Over
Last week, we discussed midnight regulations – last-minute rulemakings rushed through federal agencies by departing presidents in the twilights of their terms. And while January 20, inauguration day, represents midnight for this process – the point at which the incumbent Commander in Chief turns into a proverbial pumpkin – there is another significant date in Washington fast approaching: December 31.
That’s because Congress and the White House must beat the New Year’s Eve clock or several major government programs, including several meaningful pandemic response initiatives that have provided a lifeline for American families since earlier this year, simply will disappear.
Let’s take a look at the expiring COVID-19 relief programs first. As CNBC noted in the weeks before the election last month, several provisions that were passed within the Coronavirus Aid, Relief, and Economic Security (CARES) Act enacted in March will sunset at the end of 2020. These include:
A provision that allows unemployed workers to receive jobless aid for 39 weeks instead of the normal 26 weeks allowed by most states.
A federal ban on evictions. Under the CARES Act, mortgages backed by Fannie Mae, Freddie Mac, the Federal Housing Administration, the U.S. Department of Agriculture, and the U.S. Department of Veterans Affairs also are protected from foreclosure under the eviction moratorium.
The ability, if you are age 59.5 or younger, to take up to $100,000 out of your 401(k), 403(b), or individual retirement account without incurring the typical 10 percent early distribution penalty. (Taxes are still owed on these early withdrawals, but those payments can be spread out over three years.)
A provision that allows the self-employed, independent contractors, and gig economy workers to be eligible for state unemployment benefits.
A provision automatically deferring federal student loan payments until January 2021.
That’s a long list – and it is especially daunting since it appears Senate Majority Leader Mitch McConnell (R-Ky.) has rejected the contents of a bipartisan COVID-19 relief bill introduced by a group of Republican and Democratic senators on Tuesday. But even still, it does not come close to reflecting all of the work lawmakers must complete before the new year.
According to the nonprofit, nonpartisan Tax Foundation, 33 temporary federal tax provisions also will expire on December 31, 2020. Many of these policies also were offered as relief from the global pandemic and the resulting recession. COVID-19-related expiring tax provisions include the:
Delay of employers’ portion of Social Security payroll tax payments. Employers will start having to pay these levies again and 50 percent of the yet-uncollected taxes will be owed on December 31, 2021 and the other half will be due on December 31, 2022.
Expansion of the charitable income tax deduction, including a $300 partial above-the-line charitable contribution for filers who normally take the standard deduction.
The Employee Retention Tax Credit, which is a 50 percent refundable payroll tax credit available to certain employers on wages paid up to $10,000 during the crisis.
Loosening of the net interest deduction limitation from 30 percent of earnings before interest, tax, depreciation, and amortization (EBITDA) to 50 percent of EBITDA.
Suspension of alcohol excise taxes on alcohol used to produce hand sanitizer.
Suspension of aviation excise taxes.
Deferral of employee-side payroll taxes.
There also are a handful of tax provisions that were passed as part of the 2017 federal tax reform bill that expires after New Year’s Eve 2020. According to The National Law Review, these include the increased medical expense deduction for individuals; the work opportunity tax credit for employers; and the New Markets Tax Credit, which encourages investment in distressed areas.
The expiring provision that might hurt most, however, as we all struggle to stay entertained at home this winter? That’s the lower taxes on beer, wine and distilled spirits. Extending these tax cuts are very popular. According to The Hill, a bipartisan group of more than 50 senators recently signed a letter to Senate leaders urging them to make these tax cuts permanent. (Maybe that’s because, as ABC News reported in September, their constituents are imbibing more during the pandemic.)
In addition to these key budget, tax, and economic issues, Congress also needs to contend with the annual National Defense Authorization Act (NDAA), which sets spending levels for the military each year. This bill passed with overwhelming bipartisan support last year, as it has each year for the last six decades – and as it should again this year – but Congress is contending with a veto threat from President Donald Trump.
As CBS News explained this morning, in a series of late-night Tweets on Tuesday, the president said “Congress must include a repeal of the law known as Section 230 of the Communications Decency Act” in the NDAA so he can “strip social media companies of the protections they receive under the 24-year-old law” and keep them from “censor[ing] and suppress[ing] conservative speech.”
Sen. Ron Wyden (D-Ore.), who wrote Section 230, dismissed the president’s plea. In response to the President’s position, Wyden told CBS News, “I’d like to start for the Blazers, but it's not going to happen either.”
And still, there’s more.
In just ten days the fiscal year 2021 continuing resolution (CR) expires.
Lawmakers passed, and the president signed, the CR in late September. It keeps federal agencies supplied with discretionary funding until midnight next Friday, December 11. If lawmakers and the White House do not arrive at an agreement before then, the nation will be forced to endure another government shutdown – the third during President Trump’s term – and this one during a global pandemic.
While appropriators continue to hammer out the final draft of the spending bill, according to FedWeek (the magazine for federal employees), another veto could be looming when it comes to this legislation.
As The Washington Post explains, in October President Trump signed an executive order “that invented a new category of government employees, called ‘Schedule F.’” Included in this category are career civil servants whose jobs include “policymaking.” The new Schedule F designation would strip these employees, many of whom have been employed the federal government for decades and through several presidential administrations, “of long-held civil service protections and allow them to be fired with little demonstrated cause or recourse.” As The Post concluded, the order “transforms large chunks of the merit-based, expertise-driven, nonpartisan civil service into political appointees who work at the mercy of the president” and reinstates “the sort of patronage-driven, ‘spoils’ system that Congress abolished in the 1880s.”
Democrats on Capitol Hill were not happy with this policy, of course, and a group of lawmakers recently wrote a letter to leaders of the House and Senate spending committees asking that they include language in the end-of-the-year spending bill that reverses President Trump’s executive order.
Expect a Grinch-like response if that happens.
According to FedWeek, the president “could be expected to threaten to veto any move block the order, which has become one of its major priorities in its waning days.” In fact, as FedWeek noted, “A policy dispute over language related to border wall construction in a similar funding extension measure in late 2018 led to a partial shutdown that lasted into late January 2019.”
In other words: keep an eye on Twitter to see if the commander in chief issues a veto threat on spending legislation. What’s more? To the extent Congress is able to enact any extension of the various COVID-related economic assistance programs before the end of the year, attaching those programs on to this spending bill represents the best chance Congress has to provide some much-needed relief until next year. A presidential veto of the spending bill could very well threaten COVID relief, too.
How much time does Congress have to tackle this large plate of must-pass bills? Not much. Lawmakers were hoping to adjourn for the holidays by next Friday, December 11 to allow for a two-week quarantine before Christmas.
Getting it all done will be a holiday miracle, indeed.