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 MnuchinConservatives are outraged that Sarah Bloom Raskin actually believes in capitalism Suspect in Khashoggi murder arrested The Hill's Morning Report - Presented by Facebook - Biden to tackle omicron risks with new travel rules 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 McConnellSchumer vows to vote on Biden Supreme Court pick with 'all deliberate speed' It's time for 'Uncle Joe' to take off the gloves against Manchin and Sinema Democrats should ignore Senators Manchin and Sinema 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 CrapoThese Senate seats are up for election in 2022 Alabama GOP gears up for fierce Senate primary clash Senate Republicans call on Biden to lift vaccine mandate for truckers crossing Canadian border MORE (R-Idaho), Jeff FlakeJeffrey (Jeff) Lane FlakeFlake meets with Erdoğan in first official duties as US ambassador Poll: Sinema approval higher among Arizona Republicans than Democrats Cruz to get Nord Stream 2 vote as part of deal on Biden nominees MORE (R-Ariz.), Mike LeeMichael (Mike) Shumway LeeSenate Republicans press federal authorities for information on Texas synagogue hostage-taker Put partisan politics aside — The Child Tax Credit must be renewed immediately These Senate seats are up for election in 2022 MORE (R-Utah), Rand PaulRandal (Rand) Howard PaulRand Paul praises removal of Neil Young songs from Spotify: 'Seeya' YouTube permanently bans Dan Bongino Conservative pundit says YouTube blocked interview with Rand Paul MORE (R-Ky.), Jim RischJames Elroy RischSenators huddle on Russia sanctions as tensions escalate Democrats face scaled-back agenda after setbacks Biden huddles with group of senators on Ukraine-Russia tensions MORE (R-Idaho), Bernie SandersBernie SandersOn The Money — No SALT, and maybe no deal Menendez goes after Sanders over SALT comments It's time for the Senate to vote: Americans have a right to know where their senators stand MORE (I-Vt.) and Pat ToomeyPatrick (Pat) Joseph ToomeyConservatives are outraged that Sarah Bloom Raskin actually believes in capitalism Meet Washington's most ineffective senator: Joe Manchin Black women look to build upon gains in coming elections 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 TrumpNorth Korea conducts potential 6th missile test in a month Kemp leading Perdue in Georgia gubernatorial primary: poll US ranked 27th least corrupt country in the world 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 WarrenOver 80 lawmakers urge Biden to release memo outlining his authority on student debt cancellation Kelly pushes back on Arizona Democrats' move to censure Sinema Fiscal conservatives should support postal reform  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 RoundsMike RoundsBudowsky: President Biden leads NATO against Russian aggression Small ranchers say Biden letting them get squeezed Lawmakers press Biden admin to send more military aid to Ukraine MORE (R-S.D.), using an acronym preferred by Acting CFPB Director Mick MulvaneyMick MulvaneyLobbying world Trump's relocation of the Bureau of Land Management was part of a familiar Republican playbook Jan. 6 committee issues latest round of subpoenas for rally organizers 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 ManchinJoe ManchinOn The Money — No SALT, and maybe no deal The names to know as Biden mulls Breyer's replacement Poll: Sinema approval higher among Arizona Republicans than Democrats 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 ShelbyOn The Money — No SALT, and maybe no deal Fiscal spending deadline nears while lawmakers face pressure to strike deal These Senate seats are up for election in 2022 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