IRS Audits and AI, the One Big Beautiful Bill Act, European Union Tariffs
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Tax Policy/News:
May 27: IRS leveraging AI for audits amid layoffs
The Internal Revenue Service (IRS) is expected to rely more heavily on artificial intelligence (AI) technology as it carries out widespread layoffs. A report by the Treasury Inspector General for Tax Administration (TIGTA) found that the IRS could improve its processes by using AI to select cases for examination, as current models have resulted in many unproductive examinations.
The IRS has been using AI for several years to select tax returns and identify issues for examination, and TIGTA recommended further refining these AI models and incorporating ensemble machine-learning to improve accuracy. The IRS agreed with these recommendations and is awaiting new guidance from the Treasury Department on AI governance.
The IRS is also facing significant workforce reductions, with over 11,400 employees having received termination notices or voluntarily resigned, representing an 11% reduction in the agency's workforce. This has led to concerns about increased wait times and delays in issuing tax refunds.
The administration's goal is to reduce the IRS workforce to about 50,000 to 60,000 employees, which is expected to make IRS operations more challenging. The cutbacks have also led to the cancellation of many audits already in progress, and the IRS is likely to conduct fewer audits going forward due to the reduced staff.
May 22: Trump’s big tax bill has passed the House. Here’s what’s inside it
House Republicans stayed up all night to pass their multitrillion-dollar tax breaks package, with Speaker Mike Johnson defying skeptics and unifying his ranks to muscle President Donald Trump’s priority bill to approval Thursday.
The legislative package, titled the “One Big Beautiful Bill Act,” combines tax breaks, spending cuts, border security funding, and other priorities. It includes permanent individual income and estate tax cuts, temporary boosts to the standard deduction and child tax credit, and various business tax provisions. The bill also proposes temporary full expensing of domestic research and development costs in the year they occur and the cost of machinery, equipment and other qualifying assets.
The bill also proposes new work requirements for Medicaid and SNAP recipients, reducing spending on food aid and Medicaid by billions over the next decade. Additionally, the package eliminates the $200 tax on gun silencers, prohibits Medicaid funds from going to Planned Parenthood, and introduces “Trump” savings accounts for children.
It allocates significant funds for Trump’s mass deportation operation and the Defense Department, including the construction of Trump’s wall along the U.S.-Mexico border and the “Golden Dome” missile defense shield. The bill also includes a tax increase on some university endowments and allows increased leasing of public lands for drilling, mining, and logging. The package is expected to undergo more changes when it goes to the Senate.
Economic News/Policy:
May 25: Trump grants extension to European Union on tariff hike
President Donald Trump announced Sunday that he is granting an extension to the European Union on the timeline to strike a deal to avoid his sweeping 50 percent tariffs, moving the deadline to July 9.
The announcement followed a phone call with the president of the European Commission, Ursula von der Leyen. The tariffs were initially set to take effect at the beginning of June, but Trump agreed to the extension, stating that talks will begin rapidly. The European Union currently faces a 10 percent tariff rate, which is scheduled to rise to 20 percent in early July if a deal is not reached.
Von der Leyen expressed optimism about pushing negotiations forward to meet the new deadline, emphasizing the close trade relationship between the EU and the U.S. The European Commission has taken a sterner tone in recent days, emphasizing the need for mutual respect and readiness to defend its interests.
EU trade chief Maroš Šefčovič highlighted the importance of working in good faith and discussed the latest offers sent to the U.S. during a call with U.S. Trade Representative Jamieson Greer and Commerce Secretary Howard Lutnick. Trump’s latest threat has cooled the prospects of a fruitful discussion.
May 22: ‘We can’t afford it’: Senate GOP balks at House megabill as messy fight awaits
Before Speaker Mike Johnson could get his first real stretch of sleep in three days, the House GOP’s painstakingly drafted “big, beautiful bill” was running into resistance in the Senate.
Senators Lisa Murkowski and Mike Rounds voiced concerns over the bill’s work requirements for Medicaid and the spectrum auction plan, respectively. Senate Majority Leader John Thune and other Senate Republicans are also seeking changes, including a more robust child tax credit. Fiscal hawks in the Senate are pushing for deeper cuts to federal programs than those proposed by the House.
The Senate GOP is divided on how far to go with Medicaid cuts, with some senators advocating for more aggressive reforms. The House Freedom Caucus warned their Senate counterparts not to water down the $1.5 trillion in spending cuts.
However, some Senate budget hawks believe the House GOP’s changes did not go far enough. The Senate will now begin the work of drafting a compromise bill that can pass their divided conference, with few votes to lose. The bill’s future remains uncertain as the Senate and House work to reconcile their differences.
May 21: After meeting at the White House Speaker Johnson vows to push ahead on Trump’s big bill
House Speaker Mike Johnson has vowed to push forward with a multitrillion-dollar tax breaks package after a lengthy White House meeting with GOP holdouts. Despite opposition within his ranks, Johnson and his GOP leadership team are confident they can shore up support for final passage.
The bill, titled "One Big Beautiful Bill Act," includes extending tax breaks from Trump's first term, new tax provisions, spending cuts to federal safety net programs, and a rollback of green energy tax breaks.
The Congressional Budget Office estimates the tax provisions will increase federal deficits by $3.8 trillion over the decade, while changes to Medicaid, food stamps, and other services will reduce spending by $1 trillion.
The bill also proposes new work requirements for Medicaid and SNAP recipients. Democrats are using all available tools to oppose the bill, arguing it will hurt children, families, veterans, seniors, and cut health care and nutritional assistance. The bill's passage in the House remains uncertain, with factions within the GOP expressing concerns over various provisions.
Energy and Environmental Policy/News:
May 23: House moderates accept sledgehammer approach to green energy tax credits despite calls for scalpel
Despite months of advocating for a more precise approach to green energy tax credits, moderate Republicans ultimately accepted significant cuts to these subsidies in President Trump’s “big, beautiful bill.”
The legislation, which passed the House 215-214, imposes strict limitations on tax credits for low-carbon energy projects, requiring them to start construction within 60 days of the bill’s passage and begin producing electricity by 2029. A carve-out for nuclear energy allows projects to receive tax credits if they begin construction by the end of 2028.
The bill also excludes projects using Chinese components, minerals, or subcomponents. Some GOP lawmakers prioritized the increase in the state and local tax (SALT) deduction over the energy tax credits. Despite the bill’s imperfections, many Republicans supported it for its broader provisions, including tax cuts and increased funding for border security and deportations.
Moderate Republicans hope the Senate will make changes to the bill, particularly regarding the energy tax credits. Four Republican senators have called for a more targeted approach to the credits, but it remains unclear how hard they will fight for this issue.
May 23: Watchdog says Trump administration illegally halted EV charger funding
The Trump administration is breaking the law by withholding funds appropriated by Congress for a national electric vehicle (EV) charging network, according to a government watchdog.
The Bipartisan Infrastructure Law allocated $5 billion for the National Electric Vehicle Infrastructure (NEVI) program, but the Department of Transportation (DOT) announced in February that it would rescind all guidance related to the program and halt new obligations until updated guidance is issued.
A lawsuit from several states alleges that $2.74 billion in funding is being withheld. The Government Accountability Office (GAO) stated that the administration's actions violate the Impoundment Control Act and that DOT must continue to carry out the program's statutory requirements.
The DOT spokesperson argued that the GAO's report misunderstands the law and that the department is updating the program guidance to improve its efficiency. Senate Democrats estimate that the administration is blocking a total of $430 billion in funding across various programs. Senator Patty Murray criticized the administration for blocking bipartisan investments and emphasized that Congress holds the power of the purse.
Technology:
May 23: Exclusive: Musk’s DOGE expanding his Grok AI in US government, raising conflict concerns
Billionaire Elon Musk’s DOGE team is expanding the use of his AI chatbot Grok in the U.S. federal government to analyze data, potentially violating conflict-of-interest laws and risking sensitive information on millions of Americans.
The DOGE team allegedly pushed Grok at the Department of Homeland Security (DHS) without approval, raising privacy concerns. Experts warn that Musk's xAI could gain an unfair competitive advantage in federal contracts. Grok, developed by xAI, may monitor users for specific business purposes, and its use in analyzing sensitive federal data could mark a significant shift in DOGE's work.
The team has accessed heavily safeguarded federal databases, which are typically off-limits to all but a handful of officials. If Musk was directly involved in decisions to use Grok, it could violate a criminal conflict-of-interest statute. The push to use Grok coincides with a larger DOGE effort to use AI in the federal bureaucracy, including attempts to gain access to DHS employee emails and train AI to identify communications suggesting disloyalty to Trump’s political agenda. The Department of Defense stated that DOGE had not been involved in any network monitoring nor directed to use any AI tools, including Grok.
May 21: Klarna used an AI avatar of its CEO to deliver earnings, it said
Sebastian Siemiatkowski's buy-now-pay-later startup Klarna, which is preparing for an IPO, used an AI avatar of its CEO to present quarterly earnings.
The AI avatar, featured in a YouTube video, showed subtle signs of being artificial, such as less frequent blinking and imperfect voice sync. Klarna credited AI for achieving 100 million users and a fourth consecutive profitable quarter, noting a workforce reduction of about 40%, driving revenue per employee to nearly $1 million.
Siemiatkowski mentioned the company now has around 3,000 employees, down from 5,000. The concept of AI replacing CEOs is gaining traction, with research suggesting AI could outperform human CEOs in decision-making, though it struggles with unpredictable events. Klarna declined additional comments.
For Fun:
May 22: The Treasury unveils its plan to kill the penny
The US Treasury is phasing out production of the penny and will soon stop putting new one-cent coins into circulation.
The decision, first reported by the Wall Street Journal, comes as the production cost of a penny exceeds its value, costing more than three cents each to produce. President Donald Trump ordered the US Mint to stop making pennies, citing the wasteful expense.
Consumers can still use existing pennies for purchases, but businesses will need to round cash transactions to the nearest nickel. The Treasury estimates an immediate savings of $56 million from halting penny production. However, the Mint loses even more money on each nickel it produces, costing 13.8 cents per nickel.
The Treasury did not address plans for nickel production, but the move to eliminate pennies may lead to increased nickel production, potentially wiping out any savings. The idea of dropping the penny has been supported by some merchants to speed transaction times. Canada stopped minting pennies in 2012 and using them entirely in 2013. Many pennies do not remain in circulation, often ending up in jars or left behind at cash registers.
May 22: These contact lenses give people infrared vision — even with their eyes shut
Researchers at the University of Science and Technology of China (USTC) have developed the first contact lenses that convey infrared vision, allowing users to see infrared light even with their eyes closed.
The lenses are infused with nanoparticles that convert near-infrared light into visible light. The technology, detailed in Cell, offers a lightweight alternative to bulky night-vision goggles and provides multi-colored infrared images.
However, the lenses currently produce blurry images and only detect intense infrared signals. Potential applications include reading anti-counterfeit marks and aiding doctors in near-infrared fluorescence surgery.
The team plans to optimize the lenses further to improve their sensitivity and image clarity. The lenses are estimated to cost around $200 per pair.