This week (February 5-9)

Congress: The House and Senate are in session. The Senate may consider immigration legislation.House Democrats are set to hold a retreat in Cambridge, MD beginning February 7.

Another CR likely: Government funding expires at midnight on February 8. Congress is poised to process an additional continuing resolution (CR) to fund to the government beyond then, possibly through March 15 or 22. Senate Democrats appear inclined to support another CR even if the immigration issue is not resolved, avoiding a repeat of the three-day shutdown in January.

Last week (January 29-February 2)

State of the Union: In his State of the Union Address January 30, President Trump said the tax law enacted in December has led to job creation, higher wages, and bonuses for American workers, and called on Congress to produce a bill that generates at least $1.5 trillion for new infrastructure investment. He said lawmakers should set aside their differences and seek out common ground, and "summon the unity we need to deliver for the people." The President said the new tax law delivered on a promise he made to the American people from the same podium 11 months ago, and he spent a considerable portion of the speech detailing the tax relief it provided, including to the middle class and small businesses. "We slashed the business tax rate from 35% all the way down to 21%, so American companies can compete and win against anyone else anywhere in the world," he said. President Trump said it is time to rebuild the nation's crumbling infrastructure and that every federal dollar dedicated to infrastructure investment should be leveraged by partnering with state and local governments and, "where appropriate," tapping into private sector investment. The President said the nation has turned the page on "decades of unfair trade deals" and that the "era of economic surrender is totally over." He said trading relationships are expected to be fair and reciprocal. The President said the Administration will work to fix bad trade deals, negotiate new ones, and protect American workers and intellectual property through strong trade enforcement. He also said his top priorities include reducing the price of prescription drugs.

Republican retreat: Speaking to congressional Republicans at their retreat in West Virginia February 1, President Trump pushed backed against House Democratic Leader Nancy Pelosi's (D-CA) assertions that employee bonuses resulting from the tax law enacted in December are "crumbs" compared to the benefits corporations received. "She called it crumbs, when people are getting $2,000 and $3,000 and $1,000. That's not crumbs — that's a lot of money," he said. The President said the new law reduced the US corporate tax rate from one of the highest in the world to one of the most competitive, allowing workers and companies to compete and win. He said companies and their money are pouring back into the United States and, referring to his Davos address January 26, "I believe I brought hundreds of billions of dollars with me back from Europe, back from Switzerland when I went there the other day to make a speech. They're so excited about this country and what's happening here. And they would never, ever have come." President Trump said until the tax bill was enacted, Republicans were not given credit for accomplishments like cutting regulations and confirming judges. "We got that — it was like putting it all in a box and wrapping it with a beautiful ribbon. We started getting credit, not only for that, but for all of the other things that we did during the year," he said. The President again called for infrastructure investment, fixing trade agreements, and negotiating new ones that are fair and reciprocal. "Because we have deals where companies will send in a motorbike; we charge them nothing," he said. "But when we send a Harley Davidson or a motorbike to those countries, they charge us 100% tax. That's not fair."

Also during his speech, Trump praised House Ways and Means Chairman Kevin Brady (R-TX) for his role in the tax bill and keeping in close contact with the President during the process. "Maybe we'll do a phase two, I don't know. We'll do a phase two," he said. "Are you ready for that, Kevin? Huh? I think you're ready. We'll get them even lower." Tax Notes reported Chairman Brady as saying following the speech, "We think there are still improvements [to be made] in the tax code," and highlighting such areas as expanding employee ownership of businesses and strengthening pensions and saving.

Infrastructure questions: President Trump had promised details of his infrastructure plan in early February, but his State of the Union remarks suggested he was leaving it to Congress. The New York Times January 31 reported the Administration as envisioning $200 billion in federal funding derived from unspecified budget cuts, with the remainder of the investment from state and local governments and the private sector. The proposal has raised questions in Congress about funding and other details. "One-point-five trillion [dollars] matched by apparently $1.5 trillion at the state — where does that come from, how does that work? A lot of details that need to be worked out," said Senator Cory Gardner (R-CO), who serves as National Republican Senatorial Committee Chairman, in the Washington Post. Transportation and Infrastructure Committee Chairman Bill Shuster (R-PA) said he raised during the retreat the idea of a federal gas tax increase, which has always faced an uphill climb in Congress. In a January 29 op-ed, Senate Democratic Leader Chuck Schumer (D-NY) did not seem receptive to consumer-level tax increases, saying, "Democrats want to work with President Trump to rebuild America's infrastructure. And we hope we can. But we shouldn't ask the middle class to pay $1 trillion in new tolls and local tax increases to get there."

Ways and Means ideas on IRS reform: The Ways and Means Oversight Subcommittee January 30 held a Member Day hearing on "Legislation to Improve Tax Administration." Full Committee Chairman Brady has promised action on restructuring the Internal Revenue Service this year. Subcommittee Chairman Lynn Jenkins (R-KS), who recently became the Chairman in a reshuffling of subcommittee chairs and members, highlighted the dispute resolution process at the IRS by which the agency seeks to resolve controversies without litigation. "Some expressed frustration at the prospect of not being able to plead their case face-to-face. Others have been completely denied access to independent review," she said. "Taxpayers are losing faith that they will receive an independent and fair review of their case." Members testifying about sponsored legislation included:

— Representative Jason Smith (R-MO) on the Preserving Taxpayer Rights Act (H.R. 3220) to establish new procedures and requirements for administrative appeals of IRS deficiency determinations;

— Representative Peter Roskam (R-IL) on the Free File Permanence Act of 2017 (H.R. 3641) to require continued operation, enhancement, and expansion of the Free File program;

— Representative Jim Renacci (R-OH) on the Stolen Identify Prevention Refund Act (H.R. 439) to require IRS to provide notifications, instructions, and forms to suspected victims of identity theft;

— Representative Tom Rice (R-SC) on the Electronic Signature Standards Act of 2017 (H.R. 3153) to require uniform standards and procedures for the acceptance of practitioner signatures in digital or other electronic form, as well as forthcoming legislation to require an automatic 30-day reset of the filing deadline in the wake of a major disaster declaration;

— Representative Steve Chabot (R-OH) on the Small Business Owners' Tax Simplification Act of 2017 (H.R. 3717) to simplify income tax compliance for small businesses;

— Representative Bill Posey (R-FL) on the Seniors' Tax Simplification Act (H.R. 2721) to make a simplified filing form available to taxpayers age 65 or older; and

— Representative Louie Gohmert (R-TX) on the idea of eliminating the IRS.

Debt limit: Enactment of the new tax law has accelerated the timeline for action on the federal debt limit, which was reinstated December 9; the Treasury Department has used "extraordinary measures" to meet obligations since then. In a January 30 letter, Treasury Secretary Steven Mnuchin urged Congress to act to increase the debt limit as soon as possible. In a January 31 report, the Congressional Budget Office projected that if the debt limit is not raised, the Treasury will not be able borrow additional funds using extraordinary measures, and could run out of cash, in the first half of March 2018. CBO previously projected funds to be exhausted in late March or early April 2018 but accelerated the projection after incorporating the effects of the tax law, including withheld amounts of individual income taxes that will be roughly $10 billion to $15 billion per month less than anticipated before the new law was enacted.

Quote of the Week

"Our massive tax cuts provide tremendous relief for the middle class and small business. To lower tax rates for hardworking Americans, we nearly doubled the standard deduction for everyone … In April, this will be the last time you will ever file under the old and very broken system, and millions of Americans will have more take-home pay starting next month — a lot more." — President Trump, January 30

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