On The Money — GOP leaders back away from bill to scrap tax code
We break down why top House Republicans have no interest in passing a controversial tax bill. We’ll also look at how inflation fell in December and yet another big company announcing layoffs.
But first, find out why Elon Musk was at the White House today.
Welcome to On The Money, your guide to everything affecting your bills, bank account and bottom line. For The Hill, we’re Sylvan Lane, Aris Folley and Karl Evers-Hillstrom. Subscribe here.
Key Republicans oppose GOP bill to abolish tax code
Republican supporters of a bill aimed at abolishing the tax code as we know it are running into an early barrier in the House: their own leadership.
The Fair Tax Act was thrust into the spotlight earlier this month as reports emerged that it was part of a deal made by Rep. Kevin McCarthy (R-Calif.) with his GOP detractors during the days-long process to elect him Speaker.
- As the bill becomes fodder for growing Democratic attacks from the White House down, some Republicans are distancing themselves from the legislation.
- House Majority Leader Steve Scalise (R) said Thursday that he didn’t support the bill, instead telling The Hill that he backs making permanent the tax cuts in former President Trump’s signature 2017 tax bill. The comments come shortly after McCarthy made clear his opposition to the bill.
- Some Republicans have expressed interest in the idea of a national sales tax but have yet to back the bill, which, if passed, would constitute the largest change to the U.S. system in decades.
The context: The bill seeks to eliminate all income taxes, payroll taxes, estate taxes and gift taxes in favor of an outsized 30-percent sales tax that would be collected by states and then remitted to the federal Treasury.
The new method of taxation would render the IRS, as it currently exists, all but obsolete
The Hill’s Tobias Burns and Aris have the story here.
💰 LEADING THE DAY
Inflation cools further ahead of key Federal Reserve meeting
Inflation showed more signs of cooling Friday, according to data released by the Commerce Department, keeping the Federal Reserve on track to slow down its interest rate hikes next week.
- The personal consumption expenditures (PCE) price index, the Fed’s preferred gauge of inflation, was up 5 percent annually in December, down from a 5.5 percent annual inflation rate in November and a nearly 7 percent rate in June of last year.
- Taking out the volatile categories of food and energy, core PCE fell to a 4.4 percent annual increase off a recent high of 5.2 percent in September.
The takeaway: The new inflation data comes less than a week before the Fed is expected to issue its smallest interest rate hike since March 2022. The Fed’s monetary policy committee is set to meet from Jan. 31 to Feb. 1 in Washington, D.C., and is all but certain to issue its eighth straight rate hike in consecutive meetings.
“Slowing inflation should minimize the drop in real spending, and income growth seems likely to be consistent with the Fed’s inflation target looking at the monthly change,” UBS economist Paul Donovan wrote in a note to investors on Friday.
The Hill’s Tobias Burns breaks it down here.
🏠 HOUSING BOUNCEBACK
Pending home sales show gains for first time in seven months
The number of pending home sales increased in December for the first time in seven months, a result of falling mortgage rates as inflation continues to subside.
- The National Association of Realtors (NAR) said that its pending home sales index, which measures expected future home sales based on contract signings, increased by 2.5 percent.
- Year-to-year pending transactions still dropped by 33.8 percent, and all four U.S. regions saw year-over-year declines.
“This recent low point in home sales activity is likely over,” NAR Chief Economist Lawrence Yun said. “Mortgage rates are the dominant factor driving home sales, and recent declines in rates are clearly helping to stabilize the market.”
Jared Gans has more here.
🎲 MORE LAYOFFS
Hasbro to cut 15 percent of workforce, about 1,000 jobs
Toy and gaming giant Hasbro will cut 15 percent of its global workforce in an effort to cut costs and shake up its business model.
- The company announced the layoffs after underperforming in the fourth quarter and reporting a 9 percent decline in year-over-year revenue for 2022.
- Hasbro said its Wizards of the Coast division, which publishes the popular Dungeons & Dragons tabletop game, continued to perform well. But its consumer products division struggled over the holidays amid weak demand for toys and apparel.
The layoffs could be a warning sign that consumers are slowing their spending after an extended period of red-hot inflation hit Americans’ wallets.
Karl has more here.
Good to Know
California oil giant Chevron Corp. posted record profits of $35.5 billion last year, according to a 2022 fourth quarter report released on Friday.
Last year’s earnings were more than double those of 2021, when profits reached $15.6 billion. Driving up profits was a record annual cash flow from oil operations of $49.6 billion, according to the report.
Other items we’re keeping an eye on:
- Walmart and CVS are cutting back on their respective pharmacy hours amid a continued nationwide shortage of pharmacists and other pharmacy staff.
- DirecTV’s decision this week to drop Newsmax is the latest blow to a handful of conservative media outlets that have sought to carve out a space for themselves in the wake of former President Trump’s election loss in 2020.
📺 ONE MORE THING
Sylvan spoke on Friday with Heather Boushey, a member of the White House Council of Economic Advisers, about U.S. economic progress on the pandemic and other topics for The Hill’s “On The Record” series. Watch the full interview here.
That’s it for today. Thanks for reading and check out The Hill’s Finance page for the latest news and coverage. We’ll see you next week.
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