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The Senate Budget Committee on October 5, 2017, approved 12-11 an FY 2018 budget resolution with tax reform reconciliation instructions that, if the House and Senate agree to the same resolution, will allow a tax bill to pass the Senate with the votes of as few as 50 senators (with the Vice President breaking the tie).

The Democratic side of the Committee offered amendments reflecting concerns about Republican tax reform plans, including to prohibit the tax bill from benefitting the top 1% of Americans by income.

Most amendments to the resolution were dismissed, though some were approved by voice vote, including amendments by:

— Senator John Kennedy (R-LA), to ensure tax reform protects middle-income taxpayers
— Senator Angus King (I-ME), to establish a deficit-neutral reserve fund for legislation that relates to making the cost of child and dependent care more affordable and useful
— Senator Patty Murray (D-WA), to ensure the timely and adequate provision of disaster and other assistance for relief and recovery efforts to areas devastated by hurricanes and flooding in 2017

An amendment by Senator Tim Kaine (D-VA) to "prevent Medicare, Medicaid, and Social Security from being cut in exchange for deficit-increasing tax cuts" was approved 12-11. Kaine said he wanted to "change some of the provisions in this that call for our work to be deficit-neutral … to make it revenue-neutral" because he doesn't want deficits as a result of tax changes to be paid for with entitlement cuts.

The Senate resolution provides reconciliation instructions for tax reform legislation that results in a net tax cut of $1.5 trillion over 10 years, seen as accommodating revenue from dynamic scoring and use of a current-policy baseline that may not be counted in official revenue estimates for purposes of the reconciliation process. In an opening statement October 4, Senator Bob Corker (R-TN) said he won't back tax legislation that adds to the deficit, with dynamic scoring taken into account. Bloomberg BNA reported Corker as saying he is asking for hearings on what type of dynamic models would be permissible and whether estimators other than the Joint Tax Committee could weigh in.

Reconciliation instructions under the House resolution provide for deficit-neutral tax reform, as well as $203 billion in mandatory savings over 10 years. The House and Senate will need to resolve differences in their budget resolutions after the Senate passes its version, and then each will need to pass the same resolution for reconciliation instructions to take effect. The Senate is out of session next week and is expected to consider the Budget Committee-approved resolution in the full Senate upon returning the week of October 16, to be capped-off with the "vote-a-rama" series of consecutive roll call votes on amendments offered after debate time has expired.

Amendments that were either defeated or ruled non-germane to the bill included those by:

— Senator Bernie Sanders (I-VT) to ensure that there are no tax cuts for the top 1% of Americans
— Senate Finance Committee Ranking Member Ron Wyden (D-OR) to strike the reconciliation instructions
— Sanders to restore $473 million in cuts to Medicare paid for by reducing tax breaks for the wealthy
— Senator Kamala Harris (D-CA) to create a point of order against legislation that would increase taxes on taxpayers whose annual income is below $250,000
— Senator Debbie Stabenow (D-MI) to create a budget point of order against any legislation that would give a tax cut to companies that offshore American jobs
— Senator Chris Van Hollen (D-MD) to create a point of order against legislation that would eliminate the deduction for state and local taxes
— Sanders to invest $1 trillion in infrastructure, paid for by closing tax loopholes that allow corporations to shift jobs and profits overseas
— Senator Jeff Merkley (D-OR) to create a point of order against legislation that would allow for a net reduction of taxes paid by persons with income of more than $1 million dollars

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Contact Information For additional information concerning this Alert, please contact:   Washington Council Ernst & Young    • Any member of the group, at (202) 293-7474.