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OVERNIGHT MONEY: Capital gains front and center in tax reform
THURSDAY'S BIG STORY:
Gains, capital gains: Congressional tax-writers are set on Thursday to confront one of the flash points in the presidential election and the debate over revamping the tax code — how to deal with capital gains.
The Senate Finance and House Ways and Means committees are scheduled to come together for a rare joint hearing on capital gains, which are currently taxed at a top rate of 15 percent — less than half the highest rate of 35 percent for regular income.
The hearing, which will feature five separate academics and experts, comes as Democrats and Republicans continue their months-long argument over whether to raise the top capital gains rate.
Senate Democrats passed a plan in July that would’ve raised the top rate to 20 percent, where it stood before the second round of Bush tax cuts in 2003. Congressional Republicans, for the most part, want to keep all current tax rates where they are for another year.
More broadly, capital gains loom as a knotty debate for the top Democrats and Republicans who want tax reform. A much deeper discussion, and possibly even some action, on overhauling the tax code appears lined up for next year.
Conservatives generally want to limit capital gains taxes, saying those levies are a double tax on income already earned and that lower rates on investment help spur economic growth.
But some on the left have also pointed to Mitt Romney’s own tax records — a 13.9 percent rate on more than $20 million, largely from capital gains — as a sign that the tax code is out-of-whack.
Some have also noted that the last broad revamp of the tax code — in 1986, signed into law by President Reagan — taxed capital gains and regular income at the same top rate of 28 percent.
WHAT ELSE TO WATCH FOR
Staring over the cliff: That’s not all the fun for Ways and Means members on Thursday — Democrats and Republicans also are scheduled to sit down in private to discuss potential ways to avoid the fiscal cliff, just a day before the House is set to head home until after November’s elections.
Bernanke, as usual, was tight-lipped coming out of his meeting with Finance members. But senators from both parties said the meeting was long on substance and short on politics. At the same time, Bernanke appears to have echoed much of what he has said publicly in recent months, and did give specific policy prescriptions.
Cordray returns: Richard Cordray, director of the Consumer Financial Protection Bureau, will deliver his agency's semiannual report to Congress on Thursday. The visit to Capitol Hill is an encore performance of his stop in the Senate last week. But expect him, as usual, to get some heat from GOP lawmakers who are not crazy about the watchdog's structure or the way Cordray got the job, as a recess appointment by President Obama.
Speed demons: A Senate Banking subcommittee on Thursday will debate the merits and pitfalls of computerized, high-speed stock trading. Rapid-fire trading by computers was blamed for the "flash crash" of May 2010, when the stock market lost nearly a thousand points in a matter of minutes, only to regain it all minutes later. Since then, several safety mechanisms have been put into place to stop trading in case the market makes quick, large shifts.
The continuing, continuing resolution: The Senate is lined up to pass a six-month stopgap measure on Thursday after easily voting to move forward on Wednesday.
Senate Majority Leader Harry Reid (D-Nev.) told reporters on Wednesday that he is prepared to finish up the bill on Thursday. The $1.047 trillion bill would fund the government through March.
House and Senate leaders reached an agreement on the measure before the August recess, ensuring that there would be no threat of a government shutdown.
Still, Sen. Rand Paul (R-Ky.) is filibustering, which means that all 30 hours of debate for the spending measure may have to expire before a vote on passage is held. Paul wants the Senate to vote on his bill to end all foreign aid to Pakistan and other Middle Eastern countries. So far, Reid has denied a vote.
Services-sector growth: A House subcommittee will hold a hearing on Thursday on expanding the U.S. service sector abroad as part of an international services trade agreement.
"Expanding services trade means creating good U.S. jobs," Rep. Kevin Brady (R-Texas) said.
Brady said he is "optimistic that a successful agreement will help reinforce the important role of the [World Trade Organization].”
A services agreement would reduce barriers abroad for U.S. services providers and produce major benefits and job growth in the United States.
Lawmakers will chat with Michael Punke, deputy U.S. Trade Representative and permanent representative to the World Trade Organization, along with academics and business leaders.
Sequester effects: The House Small Business Committee will discuss how looming spending cuts might hurt small-business contractors and the industrial base. Specifically, the panel will hear from government officials, academics and business representatives as to how small businesses will be affected by cuts to the federal workforce, prime contracts and subcontracts, if those cuts are not properly targeted.
The hearing will also examine how these losses will affect employment and the health of the industrial base.
Regulations debate: The House Judiciary Committee will hold a hearing regulations put into place by the Obama administration and how they are affecting the economy recovery and the labor market. Lawmakers will chat with academics and business folks about their experiences.
ECONOMIC INDICATORS
Initial Claims: The Labor Department releases its weekly filings for first-time jobless benefits. The numbers have fluctuated through the summer, most recently going back up to level that reflect a struggling labor market.
Mortgage Rates: Freddie Mac is releasing weekly data on fixed-rate mortgages, which are locked in at historic lows.
Leading indicators: The Conference Board will release its August batch of previously announced economic indicators for April: new orders, jobless claims, money supply, average workweek, building permits and stock prices.
WHAT YOU MIGHT HAVE MISSED
— Geithner pays visit to Boehner in Capitol
— Democrats take last-minute stab at tax extenders
— CBO: 6M people will pay penalty under health law's mandate
— Tax Foundation: Most think people should pay something in taxes
— Housing market showing broader signs of improvement
— Report: Number of foreign travelers to US up, visa wait times fall
— GOP blocks veterans jobs bill with budget vote
— House approves GOP's 'Buffett Rule' bill
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