11 December 2017 EY Center for Tax Policy: This Week in Tax Reform for December 8 Tax bill conference: House Ways and Means Committee Chairman Kevin Brady (R-TX) has announced that the "Tax Cuts and Jobs Act" (H.R. 1) House-Senate Conference will hold an open meeting on Wednesday, December 13 at 2 p.m. "Our open meeting will be an opportunity for the conferees to discuss our best, most pro-growth tax reform ideas that will help improve the lives of all Americans," Chairman Brady said. "We are committed to delivering the Tax Cuts and Jobs Act to the President's desk this year and fulfilling our promise to people across our country." Conference underway: The House December 4 voted 222-192 to go to conference with the Senate on the "Tax Cuts and Jobs Act" (H.R. 1), and the Senate followed with a 51-47 vote December 6. A public conference meeting will be held on Wednesday, December 13 at 2 p.m. On the House floor December 7, Majority Leader Kevin McCarthy (R-CA) said he does not expect the final tax bill to be brought before the House the week of December 11, but if it is possible he will "bring it up as soon as we come out of conference." McCarthy announced the House will now be in session the week of December 18 when he expects to pass the tax bill that he said, echoing President Trump, would "be an excellent Christmas present." Congress also faces another government funding deadline on December 22. It is possible that a conference agreement could be completed the week of December 11 and first be voted on by the Senate. In a December 7 Bloomberg TV interview, House Budget Committee Chairman Diane Black (R-TN), a conferee, said there will be work over the weekend to blend House and Senate bills that have a lot in common, and that negotiators are making progress on sticking points, determining what the bigger issues are, and spending time on those. In a December 8 CNBC interview, National Economic Council Director Gary Cohn said, "There's a lot of progress being made and this is going to be a big weekend for the conference committee. They're spending the weekend working on taxes and I think we'll see an enormous amount of progress over the weekend." A list of conferees follows. The Senate Republican conferees are: 1. Finance Committee Chairman Orrin Hatch (R-UT) The Senate Democratic conferees are: 1. Finance Ranking Member Ron Wyden (D-OR) The House Republican conferees are: 1. Conference Chair: Ways and Means Committee Chairman Kevin Brady (R-TX) The House Democratic conferees are: 1. Ways and Means Ranking Member Richard Neal (D-MA) Corporate rate: President Trump was previously adamant about a statutory corporate tax rate no higher than 20%, but December 2 said the rate under tax reform could be increased to 22%. There has been constant speculation since then over whether the conference will increase the 20% corporate rate approved under the House and Senate bills (but delayed until 2019 in the Senate bill) to pay for other priorities under the bill. Administration officials have backed off their hard positions on the 20% rate. "If something small happens in conference that gets us across the finish line, we'll look at it on a case by case basis," OMB Director Mick Mulvaney said on CBS' "Face the Nation" December 3. There has been less flexibility projected by congressional Republicans, including Senate Majority Leader Mitch McConnell (R-KY), who said December 5, "I think the corporate rate should be at 20." After previously pushing back against the notion of increasing the proposed corporate tax rate, Finance Committee Chairman Hatch said in Politico December 7, "The 22% keeps cropping up so it's a viable thing." In a December 8 letter, 26 conservative groups urged the conference committee to support a tax cut bill with a 20% corporate rate. State and local tax deduction: The House and Senate tax bills limit the state and local tax deduction to a property tax deduction up to $10,000. House Republicans representing high-tax states like California are seeking to secure a change to allow taxpayers the deduction for either property or income taxes. House Ways and Means Committee Chairman Brady said December 5 that is one option being discussed. During a December 6 interview with Hugh Hewitt, Leader McConnell said the state and local tax deduction is not as important to Republicans in the Senate as it is to those in the House but, "bearing that mind, we put the $10,000 deduction in the Senate bill." He noted interest among House Republicans in seeing that amount applied "not just to property, but to income tax, you know, where you can sort of pick which state and local tax you want to deduct. That sounds like a kind of reasonable idea." During a December 8 Bloomberg TV interview, NEC Director Cohn said the White House is "fine with that" proposal if that is what conferees decide on. On CNBC, Cohn said House Republicans from areas greatly affected by state and local tax deduction changes "have to have a solution that allows their residents to come away from this in a position that allows those members to support this." The Wall Street Journal reported McCarthy as saying December 5, "There's a lot of things that Californians are working on and why we said we'd move the process forward, looking to be able to make those fixes." McCarthy said members also want the mortgage interest deduction to exceed the $500,000 cap under the House bill. The Senate version would not change the $1 million cap under current law. Corporate AMT: A late change to the Senate bill would retain the corporate alternative minimum tax (AMT), which Leader McCarthy December 4 said "has to be eliminated because that would destroy R&D." The individual AMT would also be retained under the Senate bill, at higher exemption amounts. During a December 5 Fox News interview, House Budget Committee Chairman Black, a conferee, said she disagrees with the Senate decision to retain the corporate and individual AMT under its bill for revenue raising purposes after initially, like the House bill, proposing repeal. "We're all for repealing that AMT," she said. International tax issues: House Ways and Means Committee Chairman Brady told reporters December 7 that the complexity of the international tax provisions being sorted out by the conference committee, and 2018 effective dates, have resulted in calls for transition periods. Brady did not address specific provisions and said he hadn't broached the subject with Senators on the conference committee, but said, "Most of those requests I think are very fair." Bloomberg Tax this week reported on a letter circulated by Ways and Means Member Mike Kelly (R-PA) urging adoption of the Senate anti-base erosion tax provisions; and on European Union scrutiny of House and Senate provisions as potentially violating WTO rules. FIFO letter: In a December 6 letter to House and Senate Republican leaders and tax committee chairmen, more than 40 House Republicans said they strongly objected to the inclusion of the Senate tax bill's first-in first-out provision. They raised concerns that include increasing taxes on the investment income of ordinary retail investors and the impact on middle class retirees. Estate tax: In a December 7 letter circulated by Rep. Warren Davidson (R-OH), more than 50 House Republicans urged their leaders to reach a tax deal that achieves eventual repeal of the estate tax, which is included in the House bill but not the Senate version. "I just think it's wrong. I'm going to fight hard for the House position on full[y] and permanently repealing it over time," Chairman Brady told reporters December 7. Senator Portman December 7 predicted the Senate position would prevail because of revenue constraints. Latest from JCT: The staff of the Joint Committee on Taxation this week released a comparison of the provisions of the House- and Senate-passed versions of the "Tax Cuts and Jobs Act" (JCX-64-17), and a revenue estimate of the bill as passed by the Senate (JCX-63-17). Polls and perceptions: Republican leaders are still confronting questions about the distribution of benefits under the bill. On "CBS This Morning" December 8, Senator Thune was asked about polls finding that Americans see the tax bill as disproportionately benefiting corporations and the wealthy, and think a corporate tax cut will not result in additional hiring or job creation. He was asked whether lawmakers have assurances from big businesses that they will reinvest in workers. Senator Thune said "all the analysis that has been done suggests that reducing the corporate rate, the business rate — a lot of that money is going to flow back into higher wages." During his news conference December 7, House Speaker Paul Ryan (R-WI) said, "I know people are hearing a lot of hysteria and a lot of hyperbole from opponents of this plan, all kinds of doom and gloom. None of this surprises me. The defenders of the status quo just see their old, broken system slipping away from them." He said the debate comes down to "what people care about: more money in their paychecks, more jobs, a healthier economy, faster economic growth, more fairness, more peace of mind when tax day rolls around." Continuing resolution: President Trump December 8 signed a two-week continuing resolution, or "CR" (H.J. Res. 123), keeping the government open through December 22. The Senate vote on the measure a day earlier was 81-14, and followed a House vote of 235-193, with 14 Democrats supporting it and 18 Republicans voting against. House conservatives had threatened to oppose the measure over concerns about what kind of year-end bill would result from a pre-Christmas deadline, and made their voting power known by initially withholding support for the unrelated vote to go to conference on the tax bill December 4 while they sought assurances from leadership. The CR also directed additional funds to states that are running out of money under the Children's Health Insurance Program (CHIP). Appropriators and the congressional leadership now have a number of issues to potentially resolve over the next two weeks in conjunction with an additional funding bill to avoid a shutdown of the government just before Christmas, including: an agreement to change the spending caps for fiscal 2018; Medicare "extenders"; possibly tax extenders; funding for community health centers (CHCs); a long-term reauthorization of CHIP; funding for a wall on the southern border; and a solution for the Deferred Action for Childhood Arrivals program, which the President rescinded earlier this year. There was already interest in more disaster relief to include funding to respond to wildfires, and there will be greater urgency given the week's developments in California. Tax bill ramifications: Though separate matters, government funding and the mix of issues members want (or don't want) addressed along with it have effects on the tax bill. Freedom Caucus Chairman Mark Meadows (R-NC) suggested that conservatives opted not to block the CR passed on December 7 to avoid a distraction from tax negotiations but, according to the AP, also said they would not support the next funding bill if spending is deemed excessive. Leaders from both parties and both chambers of Congress met with the President December 7 to discuss a longer-term funding measure. Senator Susan Collins (R-ME) said December 7 that she believes her agreement with Leader McConnell to support the conference report on the tax reform bill is contingent on House passage of a bipartisan package of measures, such as cost-sharing subsidies and reinsurance, intended to stabilize the Affordable Care Act's (ACA) insurance marketplaces. Speaker Ryan has made it clear he is not bound to the deal, and Republican Study Committee Chairman Mark Walker (R-NC) told reporters on Thursday that House leadership said end-of-year negotiations on spending bills would not include ACA cost-sharing subsidies. Debt limit: The Wall Street Journal December 6 said some House Republicans are considering pushing for inclusion of a federal debt limit increase in the year-end bill, potentially of a magnitude to take the issue off the table until after the 2018 midterm elections. The limit is reinstated as of December 9 but there is ample time to act; the Congressional Budget Office has said Treasury likely won't run out of cash until late March or early April 2018. In a December 6 letter to Speaker Ryan, Treasury Secretary Steven Mnuchin said the Department will be using extraordinary measures to avoid default until the debt limit is raised or suspended. "I know we're close, but we have to finish the job. So in a short time frame, you will find the conferees will work together. I know the Senate and House will find common ground, and at the end of the day we'll get this bill through, not for Congress but for the American people." - House Majority Leader Kevin McCarthy (R-CA), December 5
Document ID: 2017-2082 | |||||
