Member Changes Could Impact Future Tax ReformJune 18, 2014
On June 10, House Majority Leader Eric Cantor (R-Va.) lost his primary bid to Tea Party challenger and economics professor Dave Brat to serve the seventh Congressional district of Virginia. House Republicans will select their new leader on June 19 and Cantor intends to step down from his leadership position by the end of July.
If Cantor is replaces by a member—such as Majority Whip Kevin McCarthy (R-Calif.)—currently serving in a leadership position, it would create an additional vacancy that will need to be filled. For a brief period, House Budget Committee Chairman Paul Ryan (R-Wis.) considered a bid, but has opted to stay focused on seeking the chairmanship of the Ways and Means Committee, when current Chair Dave Camp (R-Mich.) retires at the end of this year.
These changes may have some implications for tax reform in the long-term. If Republicans retain control of the House, although Cantor’s defeat proves anything is possible, Ryan and Kevin Brady (R-Texas) will be fighting for the top post at the tax-writing committee and priorities will certainly change. If control of the House reverts back to the Democrats, the chairmanship will likely go to current ranking member, Sander Levin (D-Mich.) who will be focused on his own set of legislative goals.
Further uncertainly stands in the Senate. The Republicans would need to net a total of six seats to reclaim the majority. If that happens, Finance Committee Chairman Ron Wyden (D-Ore.), and ranking member Orrin Hatch (R-Utah), are likely to switch places.
In the short term, this shakeup will have little impact on policy moving forward for the remainder of the year. Several believe the now-expired 55 tax extenders provisions will be extended in some form during a lame duck session after the November elections.
On June 13, however, the House did approve two separate bills that would permanently extend enhanced expensing limits for small businesses and certain incentives benefiting S corporations, all of which expired at the end of 2013.
The America’s Small Business Tax Relief Act of 2014 (H.R. 4457), which passed by a vote of 272-144, would make permanent the now-expired enhanced small-business expensing limit of $500,000 and phase-out threshold of $2 million under section 179. The Joint Committee on Taxation (JCT) estimates the bill would reduce federal revenues by $73 billion over 10 years.
The S Corporation Permanent Tax Relief Act of 2014 (H.R. 4453), which passed by a vote of 263-155, would make permanent the five-year recognition period for built-in-gains tax for S corporations and the basis adjustment for stock of an S corporation making charitable contributions of property at a combined 10-year cost of approximately $2 billion.