On The Money: Treasury rules target blue-state workarounds to tax law | Senate approves sweeping defense, domestic spending bill | US imposes $16B in tariffs on Chinese goods | Panel narrowly approves consumer bureau pick

On The Money: Treasury rules target blue-state workarounds to tax law | Senate approves sweeping defense, domestic spending bill | US imposes $16B in tariffs on Chinese goods | Panel narrowly approves consumer bureau pick
© Greg Nash

Happy Thursday and welcome back to On The Money. I'm Sylvan Lane, and here's your nightly guide to everything affecting your bills, bank account and bottom line.

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THE BIG DEAL--Treasury pours SALT in blue states' wounds: The Treasury Department on Thursday released proposed rules to crack down on some blue-state efforts to circumvent a provision in the 2017 GOP tax law.

The guidance is designed to curb taxpayers' ability to use charitable donations to get around the law's $10,000 cap on the state and local tax (SALT) deduction.

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The SALT deduction cap is one of the most controversial provisions in the tax measure that Trump signed into law in December.

The White House and top congressional Republicans supported capping the SALT deduction, arguing that it subsidizes higher state taxes. But the deduction has been popular in high-tax, Democratic-leaning states like New York, New Jersey and California.

"Congress limited the deduction for state and local taxes that predominantly benefited high-income earners to help pay for major tax cuts for American families," Treasury Secretary Steven MnuchinSteven Terner MnuchinWhite House confirms new trade talks with China Hillicon Valley: Facebook weighs crackdown on anti-vaccine content | Lyft challenges Trump fuel standards rollback | Illinois tries to woo Amazon | New round of China trade talks next week On The Money: Trump declares emergency at border | Braces for legal fight | Move divides GOP | Trump signs border deal to avoid shutdown | Winners, losers from spending fight | US, China trade talks to resume next week MORE said in a statement Thursday. "The proposed rule will uphold that limitation by preventing attempts to convert tax payments into charitable contributions."

The Hill's Naomi Jagoda breaks it down here.

 

How it works:

  • Some blue states have taken or are considering taking steps to try to circumvent the $10,000 cap. One way they have done this is by enacting legislation designed to convert state and local taxes to charitable contributions.
  • But the Treasury Department said that under the proposed rules, taxpayers will be able to claim the federal charitable deduction only for the amount of their donations that exceeds the amount they received in credits -- applying a longstanding "quid pro quo" principle to state and local tax credit programs.
  • For example, if a taxpayer donated $1,000 to a state charity and then received a 70-percent state tax credit, the taxpayer would only be able to claim a federal charitable deduction of $300, a senior Treasury official said.

 

ON TAP TOMORROW

  • Federal Reserve Board Chairman Jerome Powell gives a speech on "Monetary Policy in a Changing Economy" at the Kansas City Fed symposium in Jackson Hole, Wyo. 10 a.m.

 

LEADING THE DAY

Senate approves sweeping bill on defense, domestic spending:

The Senate on Thursday approved a massive spending bill funding the Pentagon and critical domestic agencies in a significant victory for appropriators and Senate GOP Leader Mitch McConnellAddison (Mitch) Mitchell McConnellDemocrats brush off GOP 'trolling' over Green New Deal Trump should beware the 'clawback' Congress Juan Williams: America needs radical solutions MORE (R-Ky.) that could lower the chances of a government shutdown.

In an 85-7 vote, the Senate approved its third "minibus" package of spending bills.

Why it matters: This one was particularly important because it included funding for the Departments of Health and Human Services, Labor and Education, which is often a difficult package because of fights over abortion and other issues. Senators were able to avoid those fights in this case.

The vote marked a big win for Senate leadership, which has not been able to pass funding for the Departments of Labor, Education or HHS, outside of an omnibus, since 2007.

"I am proud of what these bills contain and how the Senate has crafted them. I want to particularly thank Chairman [Richard] Shelby and Senator [Patrick] Leahy," McConnell said ahead of the vote, referring to the top two members of the Senate Appropriations Committee.

Sens. Mike CrapoMichael (Mike) Dean CrapoPrivate insurance plays a critical part in home mortgage ecosystem On The Money: Lawmakers race to pass border deal | Trump rips 'stingy' Democrats, but says shutdown would be 'terrible' | Battle over contractor back pay | Banking panel kicks off data security talks Hillicon Valley: Lawmakers press officials on 2020 election security | T-Mobile, Sprint execs defend merger before Congress | Officials charge alleged Iranian spy | Senate panel kicks off talks on data security bill MORE (R-Idaho), Jeff FlakeJeffrey (Jeff) Lane FlakeTrump suggests Heller lost reelection bid because he was 'hostile' during 2016 presidential campaign Live coverage: Trump delivers State of the Union Sasse’s jabs at Trump spark talk of primary challenger MORE (R-Ariz.), Mike LeeMichael (Mike) Shumway LeeCongress closer to forcing Trump’s hand on Saudi support Senate approves border bill that prevents shutdown Push for paid family leave heats up ahead of 2020 MORE (R-Utah), Rand PaulRandal (Rand) Howard PaulOn unilateral executive action, Mitch McConnell was right — in 2014 Congress must step up to protect Medicare home health care Business, conservative groups slam Trump’s national emergency declaration MORE (R-Ky.), Jim RischJames (Jim) Elroy RischCongress closer to forcing Trump’s hand on Saudi support Overnight Defense: Trump to sign funding deal, declare national emergency | Shanahan says allies will be consulted on Afghanistan | Dem demands Khashoggi documents Senate approves Syria, anti-BDS bill MORE (R-Idaho), Bernie SandersBernard (Bernie) SandersCongress closer to forcing Trump’s hand on Saudi support Booker seeks dialogue about race as he kicks off 2020 campaign Capitalism: The known ideal MORE (I-Vt.) and Pat ToomeyPatrick (Pat) Joseph ToomeyOvernight Defense: Pick for South Korean envoy splits with Trump on nuclear threat | McCain blasts move to suspend Korean military exercises | White House defends Trump salute of North Korean general WH backpedals on Trump's 'due process' remark on guns Top GOP candidate drops out of Ohio Senate race MORE (R-Pa.) opposed the bill.

The Hill's Jordain Carney breaks it down here.

Also ahead of the vote... the Senate rejected an effort by GOP Sen. Rand Paul (Ky.) to attach a provision blocking federal funding for Planned Parenthood to the bill.

 

US implements $16B in tariffs on Chinese goods: The U.S. on Thursday started collecting steep tariffs on $16 billion worth of Chinese goods, further escalating the trade battle between the world's two largest economies.

The 25 percent tariff is hitting a broad range of products from chemicals to semiconductors, and the $16 billion completes President TrumpDonald John TrumpRosenstein expected to leave DOJ next month: reports Allies wary of Shanahan's assurances with looming presence of Trump States file lawsuit seeking to block Trump's national emergency declaration MORE's promise to impose $50 billion in duties on Chinese products.

U.S. and Chinese trade officials -- China's Commerce Minister Wang Shouwen and David Malpass, Treasury undersecretary for international affairs -- are in Washington this week trying to broker a deal on trade. 

On Monday, Trump told Reuters in a interview that he did not "anticipate much" from the U.S.-China talks.

White House spokeswoman Sarah Huckabee Sanders said Wednesday that what the administration would "like to see is better trade deals for the United States," as a result of the talks.

The Hill's Vicki Needham fills us in here.

 

Senate panel narrowly approves Trump consumer bureau pick: A Senate panel on Thursday voted along party lines to approve Kathy Kraninger, President Trump's nominee to lead the Consumer Financial Protection Bureau (CFPB).

All 13 Republicans on the Senate Banking Committee voted to recommend the confirmation of Kraninger to lead the polarizing financial regulator for a five-year term, while all 12 Democrats opposed her.

Kraninger, an associate director at the Office of Management and Budget, is expected to be confirmed by the full Senate's slim Republican majority before the end of 2018. Democrats have fiercely opposed her nomination and Sen. Elizabeth WarrenElizabeth Ann WarrenWarren set to announce plan for universal child care: reports Barack, Michelle Obama expected to refrain from endorsing in 2020 Dem primary: report Booker seeks dialogue about race as he kicks off 2020 campaign MORE (D-Mass.) has pledged to block it.

Democrats have blasted Kraninger over her lack of direct experience with financial regulation and her connections to the Trump administration's controversial family separation border policy.

Republicans, the White House and financial sector advocates have touted Kraninger as a skilled manager with ample experience to right the path of what they consider a rogue and wasteful agency.

"The BCFP has morphed into an unaccountable regulatory agency run by unelected bureaucrats who have very little oversight from Congress," said Sen. Mike RoundsMarion (Mike) Michael RoundsGOP senator: Trump thinks funding deal is 'thin gruel' Lawmakers put Pentagon's cyber in their sights Endorsing Trump isn’t the easiest decision for some Republicans MORE (R-S.D.), using an acronym preferred by Acting CFPB Director Mick MulvaneyJohn (Mick) Michael MulvaneyTrump’s state of emergency declaration imperils defense budget Mulvaney told Trump officials their 'highest priority' will be deregulation: Axios High stakes as Trump, Dems open drug price talks MORE.

"I'm confident that she will help us make progress in reforming this agency."

What comes next: Kraninger will likely be confirmed by the end of the year by another partisan vote. It's unlikely that any Democrat will vote for her on the Senate floor, but it's always worth keeping an eye on Sen. Joe ManchinJoseph (Joe) ManchinDemocrats brush off GOP 'trolling' over Green New Deal Senate confirms Trump pick William Barr as new attorney general GOP wants to pit Ocasio-Cortez against Democrats in the Senate MORE (D-W.Va.).

 

Banking committee clears five another nominees: The committee also approved the nomination of Kimberly Reed to be president of the Export-Import Bank by a 25-0 vote, and the nominations of Elad Roisman to be a member of the Securities and Exchange Commission, Michael Bright to be president of the Government National Mortgage Association, Rae Oliver to be inspector general at the Department of Housing and Urban Development, and Dino Falaschetti to be director of the Office of Financial Research by voice votes.

Reed, a former Treasury Department adviser, is likely to be confirmed soon to lead the bank but it still lacks the quorum necessary to approve major contracts. Reed was supported by Ex-Im critics GOP Sens. Pat Toomey (Pa.) and Richard ShelbyRichard Craig ShelbyHow the border deal came together Winners and losers in the border security deal GOP braces for Trump's emergency declaration MORE (Ala.), but Toomey maintained his hold on other Ex-Im nominees, hampering the bank until a deal is reached.

 

GOOD TO KNOW

  • U.S. banks shattered earnings records in the second quarter of 2018, reeling in $60.2 billion in revenue with the help of the corporate tax cuts passed last year, according to federal data released Thursday.
  • Michael Cohen's guilty plea this week raised questions about President Trump's involvement in an illegal campaign-finance scheme. Here is what we know about the situation.
  • Japan's trade minister said Tokyo might retaliate if President Trump decides to follow through with threats to impose hefty tariffs on imports of foreign cars.
  • The S&P 500 set a record Wednesday for the longest bull market in history, an upswing that began in March 9, 2009 -- 3,453 days ago. It's a mark that the Trump administration is touting as part of its midterm election pitch, but one liberals say should be credited more to President Obama, who they argue rescued the economy from the Great Recession.
  • Dallas Fed President Robert Kaplan tells CNBC that the central bank won't make decisions with political interference.
  • A small group of hedge funds decided that Toys 'R' Us was worth more dead than alive, a sign of debtholders' increasing power in bankruptcy court, according to The Wall Street Journal.
  • The leaders of some of America's biggest companies are warning the Trump administration that changes in immigration policy could harm the economy and "disrupt company operations," according to CNN.
  • Bloomberg reports that ignoring the low unemployment rate and paying more attention to what happens with inflation may not be a wise strategy for Fed officials, according to a new paper by researchers at the central bank.
  • Sales of new homes in the U.S. fell for the second straight month in July after a stark drop in June.

 

ODDS AND ENDS