This week (November 21-25)

Congress out: The House and Senate are out of session for Thanksgiving, returning the week of November 28. The next Senate roll call vote, on passage of the Expanding Capacity for Health Outcomes (ECHO) Act (S. 2873), is expected at 11:30 a.m. on Tuesday, November 29.

In light of the holiday, This Week in Tax Reform will not be published next week.

Last week (November 14-18)

Brady confident about tax reform in 2017: As Congress returned to Washington to begin a post-election lame-duck session, Republican leaders expressed confidence that comprehensive tax reform will happen next year but stressed that the details and timing are still being sorted out. "I'm here to tell you that tax reform is going to occur in 2017," House Ways and Means Committee Chairman Kevin Brady (R-TX) said at a Bloomberg BNA event November 15. Brady said the Blueprint on tax reform released by House Republicans in June was intended to allow a new president to "hit the ground running" on the issue in 2017, and that there are many similarities between the proposal and the tax plan outlined by President-elect Donald Trump during the campaign. The timing of further action related to the Blueprint and legislative steps on tax reform have yet to be determined, the Chairman said, adding that his tax team is continuing to write portions of the tax reform bill and working on transition rules. "The exact timing on a Committee markup or bringing it to the floor hasn't been determined yet," Brady said. "That will be determined by discussions we are having with the Trump team." On whether tax reform will be revenue neutral, Brady said the House Republican Blueprint is designed to be "break-even with the budget, counting on economic growth." On the potential interplay between repatriation revenue under tax reform and infrastructure investment, Brady said it is important that the $2.6 trillion-plus in unrepatriated earnings of CFCs of US companies profits be brought back to America to grow jobs and the economy, permanently and not temporarily; the Blueprint applies the revenue from "deemed repatriation" toward rate reduction and tax code redesign. The Chairman said he is cognizant of bipartisan interest in an infrastructure package, but he has not seen the details of a Trump proposal that he believes is still under construction. "We will have that discussion going forward, but in our Blueprint we apply those revenues to more growth and more competitiveness," he said, rather than towards infrastructure spending. Chairman Brady repeated that he does not want to act on tax extenders in the lame-duck session, and that the provisions should be dealt with in tax reform.

Ryan says schedule still taking shape: Similar to Brady's remarks, House Speaker Paul Ryan (R-WI) November 17 also stressed that the details and timing of the legislative agenda are still being discussed with President-elect Trump, but acknowledged, "Comprehensive tax reform is one of the things we can do to get this economy growing." With regard to the agenda generally, Ryan said: "We are just in the beginning of the transition period so we are just now working with the incoming administration on planning that transition. So it's a little premature to get into what day, what bill is coming up for vote other than to say, that's the kind of conversations we're having right now. Making sure that we plan, not just here in the House, but with our friends over in the Senate and with the new incoming administration that is just a couple of weeks into this transition." In terms of the lame-duck session of Congress that will continue after Thanksgiving, there have been indications that a continuing resolution to fund the government beyond the current December 9 expiration of funding could stretch until the end of March 2017. "I think the new incoming government would like to have a say … on how spending is to be allocated in 2017. And so we are working with the new incoming government, the new Trump administration on the timing of that on the continuing resolution," Ryan said. "And so I think they would like to have a say so on how money's going to be spent going into the rest of this fiscal year." Whether other legislation will be addressed in the lame-duck session is uncertain; the CR could be the extent of Congress's work until 2017. Chairman Brady is not the only member who is unenthused about addressing 2016 expiring tax provisions during the lame-duck session, which some saw as an opportunity for extending credits for energy technologies said to be inadvertently left out of the 2015 tax legislation (geothermal, small wind property, combined heat and power, and fuel cell property) and other items. "I don't think the [majority] leader is very excited about having tax extenders, and I'm not either," Senate Finance Committee Chairman Orrin Hatch (R-UT) told reporters November 16, as reported by Politico. "I'm not a big fan of doing extenders."

Tax reform and infrastructure also a priority in the Senate: For his own part, Senate Majority Leader Mitch McConnell (R-KY), following his re-election to the top post by fellow Republicans November 16, said members will "try to make as much progress for the American people as we can on the things that affect their lives — things like addressing the health care crisis that we have by repealing and replacing Obamacare; things like comprehensive tax reform … " Outstanding questions for the forthcoming tax reform effort include whether it will include an infrastructure investment package; the two issues have been connected under previous proposals and both are a priority for President-elect Trump, though he has not explicitly tied infrastructure investment to repatriation revenue. Senate Commerce, Science & Transportation Committee Chairman John Thune (R-SD), who is also a member of the Finance Committee, said of an infrastructure plan November 16: "My guess is if that gets done, it probably hitches a ride on tax reform. I don't know that just an infrastructure bill on its own, a standalone, would probably go anywhere. But I think it'd have to be coupled with something that we view to be really advantageous in terms of growing and stimulating the economy." Thune stressed the growth aspect during a November 18 CNBC interview: "You're going to have to have, to pass anything up here, a tax plan that people believe will, one, benefit them, and two, will generate economic growth. The key to me is that what tax reform ought to be about is growth. We need a pro-growth tax code that gets out all these embedded costs that we have in our tax code today and enables the economy to start growing at a faster rate." He also stated that tax reform should be revenue neutral. Senate Finance Committee member Chuck Schumer (D-NY), who was involved in previous discussions about linking infrastructure investment with tax reform, was elected the Senate's top Democrat for the next Congress on November 16.

Republican members have suggested that bipartisan support would make tax changes more likely to be retained on a long-term basis. "If you do things purely on the party line, then it's unsustainable," Senate Republican Whip John Cornyn (R-TX) said in a November 18 Washington Post article. Chairman Hatch too mentioned a need for bipartisanship and is also supportive of the use of budget reconciliation, which under strict rules is a way around the 60-vote filibuster threshold in the Senate. The use of budget reconciliation to enact legislation that can pass with only a simple majority vote requires both the House and Senate to pass a concurrent budget resolution with reconciliation instructions to committees of jurisdiction to change spending or revenue numbers (or both). The limitations of the process include prohibiting the bills from contributing to the budget deficit for the period outside the budget window, which left the 2001 Bush tax cuts slated to expire after 10 years and required subsequent legislation to make many of the provisions permanent.

The Hatch staff continues to develop a corporate integration proposal that is expected to pair a dividends paid deduction with a 35% withholding tax for dividends and interest and which Hatch has said could address international tax challenges and the bias toward debt and against equity financing. A Finance Committee staffer said during a Bloomberg BNA event that they expect to finish the proposal in short order, after which Chairman Hatch will decide whether the draft is released.

Moore on separate bills: During a November 16 event sponsored by Politico, Trump adviser Stephen Moore of The Heritage Foundation said Congress should first address business tax reform, which is easier to accomplish, and make changes on the individual side later. He said individual tax reform is "incredibly thorny," especially Trump's proposal to cap itemized deductions at $200,000 for married joint filers or $100,000 for single filers. Moore said infrastructure proposals should be included in the tax bill in order to attract support from Democrats, and made that point during a November 15 Capitol Hill visit to discuss tax changes with top House Republicans. House Majority Whip Steve Scalise (R-LA) told Bloomberg BNA following the meeting, "We would like to move aggressively on tax reform to lower tax rates so that we can make our country competitive again and rebuild the middle class."

Quote of the Week

"It is really exciting. We have a president in Donald Trump who wants to fix this broken tax code, get the economy going. So House Republicans, we've had a head start on this for many years. We're going to be ready to go." — House Ways and Means Committee Chairman Kevin Brady (R-TX) on Fox News November 16

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