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February 7, 2024

What to expect in Washington (February 7)

The "consensus" among Senate Republicans is that the House-passed $78 billion Tax Relief for American Families and Workers Act of 2024 (H.R. 7024) — addressing TCJA pre-cliffs, the Child Tax Credit (CTC), US-Taiwan double-tax relief and other issues — requires a Finance Committee markup, Senator John Cornyn (R-TX) said February 6, Bloomberg reported. Other Republicans have previously called for a committee markup but the comments of Senator Cornyn, who is on Finance and as a former member of leadership is quite attuned to the GOP conference, are the most direct since the bill passed the House January 31. "We need to go through the Finance Committee, so I don't think it's on the fast track," Senator Cornyn said.

Politico reported Finance Committee member Ron Johnson (R-WI) as saying he is opposed to the bill because it would establish a "legislative groundwork for expansionary entitlements," presumably through CTC provisions that would gradually increase the refundable amount per child to $2,000 per year and allow the use of earned income from the prior taxable year to calculate the maximum credit. Johnson said other members are opposed as well. The report also noted the opposition of Senate Finance Committee Thom Tillis (R-NC), who questioned the integrity of the Employee Retention Credit (ERC) crackdown offset.

Punchbowl News reported that Ranking Member Mike Crapo (R-ID) met with Republican committee members Tuesday afternoon and said he requested a markup from committee Democrats. "We need to deal with a number of issues that senators want to raise," Crapo said.

Senate Democratic leaders haven't expressed an inclination for a Finance markup — which could result in changes to the bill that would send it back to the House for a re-vote — and had been expected to try to attach the bill to appropriations legislation required to meet March 1 and March 8 deadlines. Finance Committee Chairman Ron Wyden (D-OR) developed the bill with House Ways & Means Committee Chairman Jason Smith (R-MO) and has repeatedly said the strong vote in the House should compel the Senate to clear the measure. "We're just going to be looking at ways to move forward," Wyden said. After this week, the Senate is set to be out for a two-week President's Day recess February 12-23.

SALT — The rule for House consideration of a separate but related measure meant to appease high-tax state Republicans who unsuccessfully pushed for relief from the $10,000 SALT deduction cap, the SALT Marriage Penalty Elimination Act (H.R. 7160), is now expected to be voted on by the House next week, Rep, Mike Lawler (R-NY) said. The bill, to provide a $20,000 SALT deduction cap for joint filers with adjusted gross income of less than $500,000 for 2023, cleared the Rules Committee last week. It is seen as unlikely to be enacted, as other Republicans support the TCJA's $10,000 cap.

Asked about the issue by Rep. Josh Gottheimer (D-NJ) during a February 6 House Financial Services Committee hearing, Treasury Secretary Janet Yellen said, "I agree that SALT has had a disproportionate impact on different states. There are also fiscal implications from the legislation that you discuss. I haven't had a chance to examine, and it's really up to the White House and the President to decide whether or not to be supportive of this."

A story in the February 6 Washington Post said, "Lawler and other New York and California Republicans represent districts that President Biden carried in 2020, and they may face longer odds to reelection after liberal state legislatures redraw congressional districting maps. Bringing home a SALT expansion, the lawmakers say, could be key to the economic planks of their campaigns."

Congress — The latest reports of Senate GOP demands and opposition on the broader tax bill are obstacles to enactment of the measure that congressional leaders in the House and, at least on the Democratic side in the Senate, had hoped to insulate from the type of partisan standoff that the Ukraine-Israel national security supplemental bill is mired in. Senate Republican leader Mitch McConnell (R-KY) has encouraged members to oppose a bipartisan border security plan three months in the making that is intended to be appended to and help propel the supplemental, and which was pursued at the behest of Senate Republicans. Former President Trump and House Speaker Mike Johnson (R-LA) have both spoken out against the Senate border plan, and Senate Republicans are now advocating keeping the issue separate from Ukraine and Israel funding. That could be the fallback if a Senate test vote expected to occur around 1 p.m. today fails.

"We had a pretty robust discussion about whether or not this product could ever become law, and it's been made pretty clear to us by the Speaker that it will not become law," Senator McConnell said after the regular Tuesday party lunches. "So, I want to congratulate Senator Lankford on a remarkable job of negotiating with the other side … but it looks to me and to most of our members is that we have no real chance here to make it law."

Meanwhile, the House February 6 failed to pass an Israel-only funding measure, free from the IRS funding cuts of the previous version that made the bill a nonstarter in the Democratic-led Senate, on a 250-180 vote that required a 2/3 majority for passage under the suspension of the rules procedure used to consider the bill. Over the weekend, Speaker Johnson challenged Senate Democrats to oppose the measure with the IRS piece removed. He said following the vote that Democrats "are now committed to using Israel aid as leverage to force through other priorities that do not enjoy nearly the same degree of consensus." The House also failed to pass a resolution on impeaching Homeland Security Alejandro Mayorkas in a 214-216 vote. The New York Times said, "Assuming no one changes their vote, Republicans would be able to win a slim majority once Representative Steve Scalise of Louisiana, the No. 2 Republican, returns to Washington."

The House is out for the week after votes this morning, and the chamber's Democrats will hold their annual issues conference at a resort in Northern Virginia.

Amidst the acrimony surrounding the national security supplemental, the strong vote on the Tax Relief for American Families and Workers Act has been cited in press reports as a case study in how Speaker Johnson can move legislation with a fractious Republican caucus and razor-thin majority, with only 3 votes to spare given the current 219-212 ratio or, effectively, 2 votes until the return of Majority Leader Scalise from medical leave.

A Washington Post analysis cited the tax bill vote, 357-70 under suspension of the rules, as an example of how "House Speaker Mike Johnson (R-La.) once again found a way around the blockade from his far-right faction that regularly tries to sabotage the normal flow of legislation if it's deemed insufficiently pure for conservatives. It's the fifth time in four months House GOP leaders have used this fast-track process for what are considered important legislative matters but are usually considered under a formal rule that the majority party is tasked with passing. Faced with a renegade faction that votes against those rules, Republicans instead have turned to the suspension calendar to pass these critical bills."

Politico said the tax bill vote reflected "A combination of leadership tactics, old-fashioned logrolling, an end-run around the most virulent opposition, intense lobbying by business and the support of interest groups across the ideological spectrum, even if some of it was grudging. Not least, members and aides say, it was also a result of close cooperation and good-faith negotiations between the new Republican chair of the House Ways and Means Committee, Jason Smith, and the veteran Democratic chair of the Senate Finance Committee, Ron Wyden."

The 219-212 ratio follows the resignation of Ways & Means member Rep. Brian Higgins (D-NY) from Congress February 2, to head a performing arts center. With his departure, Rep. Jimmy Gomez (D-CA) has rejoined the Ways & Means Committee and is expected to serve on the Tax and Work and Welfare subcommittees.

Tomorrow, February 8, there are two health hearings at 10 a.m.:

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For additional information concerning this Alert, please contact:

Washington Council Ernst & Young