Tax Reform Efforts Move Along

October 25, 2017

On Oct. 19, the Senate successfully passed a fiscal year 2018 budget resolution that cleared the Senate on an almost straight party-line vote of 51-49. The budget was opposed by all Senate Democrats, as well as Sen. Rand Paul (R-Ky.), who objected to several of the non-tax aspects of the plan, including its call for fiscal 2018 defense appropriations above the levels allowed under the current statutory caps on discretionary spending (i.e., the sequester) and the fact that the overall plan would not achieve balance within the 10-year budget window.

At the budget’s core – and a main reason Republicans were able to successfully band together to advance the plan – is the inclusion of the budget reconciliation instructions targeted at advancing subsequent tax legislation on a filibuster-proof basis in the Senate. Provided strict parliamentary and procedural rules are met, legislation moved under budget reconciliation can pass the House and Senate with simple majority votes. The vision of reconciliation included in the Senate budget calls on the taxwriting Finance Committee to report legislation that increases the deficit by no more than $1.5 trillion over the next decade.

The Senate plan include roughly $4.9 trillion of spending cuts – mainly coming from unspecified reductions in mandatory spending programs and to a lesser extent from nondefense appropriations and reduced debt service costs on account of the plan’s deficit reduction. The blueprint also banks roughly $1.4 trillion of assumed savings from added economic growth.

During its consideration of the plan, the Senate Republicans adopted certain (relatively minor) House-desired changes; as a result, a conference committee is not necessary and the House is expected to formally back the Senate’s budget resolution on Thursday. The House Rules Committee is scheduled to meet Tuesday to set parameters for considering the budget, H. Con. Res. 71. If the House quickly wraps up other work, floor debate could begin as early as Wednesday, with a vote on final passage scheduled to begin on Thursday.

House Ways and Means Committee Chairman Kevin Brady (R-Texas), has indicated that he will release the text of a comprehensive tax reform bill shortly after a unified budget resolution is approved in the House and Senate, with a formal committee mark-up to follow. In preparation for that phase of the tax reform process, Ways and Means Committee Republicans will gather for two multi-hour meetings on October 24 and 25. The current timeline is for the House Republicans to introduce their tax reform bill on Nov.1. The following week, the House Ways and Means Committee plans to begin its markup of the bill. The Senate Finance Committee will begin its own markup the week of Nov. 13.

While Chairman Brady and others have kept a close hold on the details that may be included in the legislative package, there have been hints about some of the provisions on which Republicans are focusing, including the treatment of passthrough entities, business interest and expensing, and some individual taxpayer incentives that have long been considered untouchable.

House Speaker Paul Ryan (R-Wis.) has set a deadline for enacting tax reform by the end of this year and has said he intends to keep the House in session through Christmas to make that happen.

You can read the full NSBA comment letter HERE.

The full framework can be found HERE, and a one page overview can be found HERE.

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