While the House and Senate were back home for the week, a controversial agency’s leadership emerged as a boiling point. The Consumer Financial Protection Bureau (CFPB), created in the wake of the 2008 financial crisis in the Dodd-Frank law, was intended to intervene between lenders and consumers specifically dealing with lending products, such as mortgages, student loans, and payday lenders. With his Friday departure, outgoing director, Richard Cordray named his Chief of Staff as Deputy Director (both holdovers from the Obama Administration), thereby elevating her to Acting Director. The president sought a different approach to the agency’s leadership and named Office of Management and Budget Director Mick Mulvaney as the interim director. This morning, there appear to be a pair of acting directors, causing confusion, and now in the courts for them to decide, as Cordray-appointed director Leandra English filed suit last evening to seek a ruling in her favor and blocking Mulvaney from serving.
Item Of Interest
With tax reform meandering through the Senate, concerns remain over the treatment of Pass-Through businesses. The small business community, including ASA will be sending letter up at the end of the day highlighting some of our concerns. “Specifically, the bill’s 17.4 percent deduction is a welcome effort to lower rates on all pass-through businesses, but the provision is both temporary and too small. The deduction’s 50-percent payroll limitation would leave behind pass-through businesses who do not add direct payroll at a one-to-one ratio as they grow, while the portion of pass-through businesses that do get the full deduction would be subject to a 32 percent effective marginal rate. This rate falls well short of the 25 percent rate forecast in the Framework and it is significantly higher than the bill’s 20 percent rate applying to C corporations. The disallowance of the State and Local income tax deduction would increase this gap further, raising effective tax rates on pass-through businesses operating in States with income taxes. Meanwhile, the proposed limitation on a businesses’ ability to deduct active pass-through losses would discourage entrepreneurial activity, business formation and investment, as would the exclusion of pass-through businesses from the new, territorial regime on international income.
As a result of these provisions and others, we are concerned that the Senate bill would increase the tax burden on many pass-through businesses relative to current law, while the bill’s rate disparity with C corporations creates a significant competitive disadvantage for many more.