Want to receive this newsletter every weekday? Subscribe to POLITICO Pro. You’ll also receive daily policy news and other intelligence you need to act on the day’s biggest stories. To tax tips or not to tax tips: Experts from across the ideological spectrum generally still don’t think that excusing tips from taxes is a good idea, noting that it gives one bucket of income such a large tax advantage over others for no real economic reason. Research also suggests that more modestly-paid tipped workers wouldn’t be the big beneficiaries of a tax exemption, though there would also be plenty of questions about how to transform Trump’s one-sentence proposal into more fleshed out policy. And yet: There are initial signs that at least some Democrats believe that Trump might be on to something with his tip tax idea. Sens. Catherine Cortez Masto and Jacky Rosen, both Nevada Democrats, announced on Friday that they had signed on to a Senate GOP proposal to implement an income tax exemption for tips. Reports of out of the state also say that Rep. Steven Horsford (D-Nev.), the chair of the Congressional Black Caucus, also backs a tip exemption. Maybe no surprise there: Rosen, who’s facing a potentially tough reelection campaign this fall, noted that Nevada has more tipped workers per capita than any other state. Cortez Masto, a member of the Senate Finance Committee, also stressed that this bill was “just one part of comprehensive efforts” that she supported to help tipped employees and working-class people in general. Also worth noting: Ted Pappageorge, the secretary-treasurer for the Culinary Union, was initially suspicious of Trump’s idea, calling it a “wild” campaign promise. Now, Pappageorge is quoted in the release from Cortez Masto and Rosen praising the two senators and Horsford for supporting it. THE CONGRESSIONAL TAX AGENDA: The Senate is scheduled to delve into tax matters when it returns to Washington on July 23, after this week’s GOP convention. But that doesn’t mean that the chamber will be considering the long-stalled bipartisan tax deal, which now passed the House going on half a year ago. Instead, Senate Majority Leader Chuck Schumer has started the floor process for confirming a pair of nominees for the Tax Court, Kashi Way and Adam Landy — a move that suggests that filling the part of the judiciary devoted to income tax disputes is at least something of a priority for Democrats, at a time when the IRS is trying to ramp up its enforcement efforts after receiving tens of billions of dollars in new funding. The Senate Finance Committee has cleared a third choice for the Tax Court, Rose Jenkins, but it’s currently not clear when the full chamber might act on that nomination. And just last week, the committee held a hearing with three more Tax Court nominees. All 19 of the Tax Court’s slots would be filled if the six current nominees are confirmed by the Senate. It usually hasn’t been necessary for Tax Court nominees to need Senate floor votes, at least in recent history. (Only one of the 13 current judges, Travis Greaves, saw their nominations considered on the floor, tallying a grand total of three no votes. The rest passed by voice vote. There is nothing particularly controversial about this current batch of Tax Court nominees, though the second trio faced new questions at the Finance Committee about how they would incorporate the Supreme Court’s recent decision to strike down the decades-old precedent of the judiciary generally deferring to agency interpretations of regulations. The reason these potential Tax Court judges look like they’ll need full Senate confirmation is the blanket hold that Senate Republicans, led by Sen. J.D. Vance (R-Ohio), started on nominations after Trump was convicted of falsifying business records in New York. About that bipartisan tax bill: It’s still not clear if or when Schumer might bring up the package negotiated by Senate Finance Chair Ron Wyden (D-Ore.) and House Ways and Means Chair Jason Smith (R-Mo.), though lots of interested parties on K Street have their educated guesses. Most observers don’t expect the bill to pass if it does make it to the Senate floor, with Schumer likely instead seeking to offer political help to vulnerable Democratic incumbents who support an increase in the Child Tax Credit, like Sen. Sherrod Brown (D-Ohio), and to make it clear that Senate Republicans would be responsible for killing a bill that would also restore key business incentives. For his part, Wyden told reporters shortly before the Senate left town last week that “a lot of senators want that vote when we get back.” “I just think it’s time for everybody [to] have a chance to vote. I believe we’re going to win,” the Finance chair said. “What does it say about taxes in 2025 when we can’t do a bipartisan bill that got 357 votes in the House.” Some actual legislating: Before it left on Thursday, the Senate did pass by unanimous consent a bipartisan bill that exempts any damages or awards received by human trafficking survivors from the income tax. Sens. John Cornyn (R-Texas), James Lankford (R-Okla.), Kyrsten Sinema (I-Ariz.) and Wyden are sponsors of the measure. No words on next steps for the bill, but this is the second time in just over two months that the Senate has sought to offer income tax relief to crisis survivors. Back in May, the chamber approved a measure from Sens. Chris Coons (D-Del.) and Mike Rounds (R-S.D.) that excused any late tax penalties that hostages might have accrued while under detention. AND FINALLY … : Here’s something to keep an eye on — that bipartisan tax deal would also bring the pandemic-era Employee Retention Tax Credit to a close, with lots of lawmakers and officials in both parties believing the program has been weighed down by too many questionable claims. But with that bill stalled, small pockets of lawmakers are questioning whether the IRS should end its current moratorium on processing new ERC claims, which the agency launched back in September. And now, Missouri’s Republican attorney general, Andrew Bailey, is suing the IRS after the agency didn’t turn over requested documents about its decision to launch the moratorium. Bailey filed a freedom of information request back in May, and essentially says the agency is currently stonewalling him. The agency is asking questions of the attorney general’s office “that would be virtually unknown to anyone outside of the IRS,” according to the release from Bailey’s office.
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