This week (October 3-7)

Congress out: The House and Senate are out of session until after the elections. The House is slated to return on November 14. The next roll call vote in the Senate will occur at 5:30 p.m. on Tuesday, November 15, on passage of H.R.4511, the Gold Star Families Voices Act.

Last week (September 26-30)

Congressional leaders call for tax reform: As Congress was preparing to exit until after the elections, Senate Majority Leader Mitch McConnell (R-KY) and House Speaker Paul Ryan (R-WI) continued to call for tax reform. Asked during a September 29 news conference whether there is opportunity for progress on big-ticket items in 2017 with either Donald Trump or Hillary Clinton as president, Senator McConnell said, "We need to do tax-reform — comprehensive tax-reform — not piecemeal." In order to "tackle the really big issues confronting our future, you need a president who is willing to engage and accept, in this particular instance, the fact that his party does not control the Congress," McConnell said. He said his greatest disappointment with President Obama is that despite numerous discussions on tax reform, trade, and entitlement programs, "he was not willing to move to the political center," which was a necessary step to make progress under divided government. "I hope the next president, whoever it is, will step up to the really big challenges confronting the future. We were prepared to do it," Senator McConnell said. "But it requires somebody willing to engage, willing to bring the members of his party, in this case, it would be the Democratic Party, along." His comments came a day after the House and Senate voted to extend government funding through December 9.

Speaker Ryan discussed the need for tax reform on multiple occasions, including a September 29 appearance at The Atlantic's Washington Ideas Forum during which the Speaker warned that another recession could be "right around the corner" without an increase in economic growth. "If we keep taxing our businesses at so much higher tax rates than our foreign competitors tax theirs, we will lose in global competition … " Ryan said, as reported by The Hill. "We've got to make our tax code more competitive so that it pays to stay an American business, so that it makes sense to manufacture in America, so that is makes sense to have your headquarters in America." A day earlier, Speaker Ryan told the Economic Club of Washington, D.C. , regarding his priorities, "number one, the tax code has got to be reformed. I spent a lot of time on this. We have an actual tax reform bill we're proposing," he said of the House Republican Blueprint for tax reform released on June 24. He continued to say that while Democrats advocate a worldwide system of taxing foreign earnings and repeal of deferral, "We believe that we should have a pure territorial system … And so I do believe that this issue is coming. I don't think you can stand against a territorial system much longer." In a September 25 appearance on CBS's "Face the Nation," Speaker Ryan noted that the Republican presidential candidate Trump has brought his tax plan closer to the House Blueprint and "we think Donald Trump will be more than willing to work with us on this." He continued, "more importantly, on the tax plan, you have to get tax rates down to create more economic growth. Our plan does that. His plan is similar to ours."

House Democratic leader Nancy Pelosi (D-CA) has also voiced support for tax reform. "I do think that we really have to come together in a nonpartisan, bipartisan way to do revenue reform," Pelosi told reporters during a September 27 lunch meeting, according to Bloomberg BNA. "We have to. I think there's general agreement that we want to lower the corporate rate, we want to close loopholes. We want to do so in a way that grows the economy." Tax Notes September 30 reported Ways and Means Committee member John Larson (D-CT) as predicting that tax reform will be considered in the first half of 2017, regardless who wins the election, because it is a focus of both parties. "I do think there is enough interest now that there's got to be some blueprint that's put out there for the future, and the only time to do that is going to be between January and May, so I would suspect if they're going to move, that's when they will … "

Outlook for lame-duck session: Also with the extension of government funding into December came speculation about what Congress may consider during a lame-duck session following the elections, slated to begin the week of November 14. The top priority will be funding the government for the remainder of the fiscal year, which may take the shape of a large omnibus bill or a continuing resolution if Speaker Ryan's preference for moving bills on a standalone basis or in packages does not pan out. Several tax items could be considered in year-end legislation, including tax extender provisions, various House and Senate tax bills, and tax technical corrections. Asked September 29 whether he is open to taking up energy tax extenders this year, Senator McConnell said he is. On the matter of whether provisions beyond those said to be inadvertently left out of the 2015 year-end bill will be considered, McConnell said, "We're committed to taking a look at that before the end of the year." Technologies omitted from the 2015 bill include geothermal, small wind property, combined heat and power, and fuel cell property. Additionally, both Speaker Ryan and Leader McConnell have expressed a desire to enact during the lame-duck session the 21st Century Cures legislation to fund medical research and speed drug approvals, which McConnell said "could end up being the most significant piece of legislation we pass in the whole Congress."

Reform talk on campaign trail: Tax reform continued to be a topic in the presidential campaign. During a Committee for a Responsible Federal Budget event September 28, "How Would Clinton and Trump Manage Our Money? A Conversation with the Candidates' Economic Advisors," Trump adviser Stephen Moore addressed the proposed 15% business income tax rate for pass-through entities, which has generated some confusion over how it would be applied. Moore said the rate would apply if funds are reinvested in the business, and money taken as a wage or dividend would be subject to individual income or dividend rates. The campaign has previously suggested that smaller firms would be exempt from a second layer of tax.

During the first presidential debate September 26, the candidates highlighted their own tax plans and exchanged criticisms. Republican candidate Trump said: "Under my plan, I'll be reducing taxes tremendously, from 35% to 15% for companies, small and big businesses. That's going to be a job creator like we haven't seen since Ronald Reagan. It's going to be a beautiful thing to watch." Addressing Democratic candidate Hillary Clinton, he said, "You are going to approve one of the biggest tax increases in history. You are going to drive business out." Clinton described her opponent's plan as "Trumped-up trickle-down," and said: "Trickle-down did not work. It got us into the mess we were in, in 2008 and 2009. Slashing taxes on the wealthy hasn't worked … I don't think top-down works in America. I think building the middle class, investing in the middle class, making college debt-free so more young people can get their education, helping people refinance their — their debt from college at a lower rate. Those are the kinds of things that will really boost the economy."

JCT estimate of earnings held offshore: The Joint Committee on Taxation (JCT) estimated the amount of undistributed, non-previously taxed foreign earnings of US corporations at the end of 2015 at $2.6 trillion, up from $2.3 trillion in 2012. The estimate responded to a request from Ways and Means Committee Chairman Kevin Brady (R-TX) and Rep. Richard Neal (D-MA), who released the updated estimate September 29. "The latest estimate from JCT is further proof that our broken, outdated tax code stands in the way of increased investment and job creation in America, and our global competitors are reaping the trillions of dollars in benefits," Chairman Brady said. "Today's JCT estimate highlights the need for comprehensive pro-growth tax reform that not only strengthens the economy, but also makes the necessary investments in our infrastructure," Rep. Neal said. "For too long, trillions of dollars have been stuck overseas providing no benefit to the American people."

Wyden on deferral, infrastructure: In a story published by Reuters September 26, Senate Finance Committee Ranking Member Ron Wyden (D-OR) continued to call for repealing deferral of taxation of foreign earnings, and said if Democrats win control of the Senate, "This is going to be front and center at the beginning of January." Wyden also said his first priority would be infrastructure. "The first bill out of the gate would be roads and bridges and transportation," Wyden said. "My sense is that there will be an interest among members in using a portion of the money derived from international reform for the roads and bridges and transportation systems."

Quote of the Week

"The first thing you do is don't let the jobs leave. The companies are leaving. I could name, I mean, there are thousands of them. They're leaving, and they're leaving in bigger numbers than ever. And what you do is you say, fine, you want to go to Mexico or some other country, good luck. We wish you a lot of luck. But if you think you're going to make your air conditioners or your cars or your cookies or whatever you make and bring them into our country without a tax, you're wrong. And once you say you're going to have to tax them coming in, and our politicians never do this, because they have special interests and the special interests want those companies to leave, because in many cases, they own the companies. So what I'm saying is, we can stop them from leaving. We have to stop them from leaving. And that's a big, big factor." — Republican presidential candidate Donald Trump, September 26

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