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Category: Tax & Finance

Senate Expected to Take Up FY2018 Budget Resolution

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The full Senate is expected to take up this week its FY2018 budget resolution.  The House cleared its version earlier this month.

While the budget resolution usually lays out the budget parameters for a given year, the primary goal of the FY2018 budget resolution is to set up for procedures that would allow Republicans to pass a tax reform package with the minimum number of votes.  The House adopted resolution would also allow for a similar process.

While Republicans are united in their push for a big tax package, there is disagreement on several issues associated with such a measure, including whether a tax-cut bill should increase the debt.  Read more here and here.

More Disaster Relief; Tax Reform Slowly, Slowly

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It’s getting expensive to deal with disaster relief.

Going first, the House is scheduled to vote this week on the second installment of hurricane relief aid. While the Trump administration requested $29.3 billion, lawmakers have been busy trying to add to the total.

Texas lawmakers want an extra $18.7 billion for victims of Hurricane Harvey, which devastated coastal Houston. The Governor of Puerto Rico asked for another $4.6 billion to help the territory deal with the aftermath of Hurricane Maria. Florida lawmakers have asked for an additional $26.9 billion for victims of Hurricane Irma.

If all those requests were honored, the total aid package would balloon to $79.5 billion. Also, House Armed Services Chairman Mac Thornberry (R-TX) has lobbied the White House for extra money for missile defense to combat the threats from North Korea.

Disaster aid is considered emergency funding that is exempt from discretionary spending limits imposed by the Sequester. However, with the ultimate damage assessment from three recent hurricanes projected to reach a few hundred billion dollars, some conservatives are beginning push to pay for long-term rebuilding costs by cutting other programs, which is a nonstarter with Democrats.

This second installment does not even consider how the US is approaching federal disaster preparedness and recover. For example, the Administration’s request includes $16 billion to cancel debt owed by the National Flood Insurance Program, which has faced mountains of red ink since Hurricane Katrina in 2005. The FEMA-run program literally can not pay claims.

…and Congress and the Administration haven’t started talking about wildfires yet…

 

Meanwhile, House and Senate leadership are slowly trying to fill in the Administration’s framework for tax overhaul. Generally, lawmakers have said the cost of tax rate cuts would be offset by eliminating most of deductions and credits in the tax code. However, the few ideas floated publicly have run into stiff resistance.

The idea to include a border-adjustment tax, that would have raised $1.2 trillion over 10 years, has been dropped after business lobbies complained that it would raise prices for consumers. Also, the idea to eliminate the state and local tax deduction has unleashed a huge volume of complaints to tax writers. Plans to completely eliminate the “death tax” have also been sidelined as it becomes more clear that reducing of changing existing taxes will be more politically manageable than outright repealing them.

 

House Passes Budget

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House Republicans passed budget legislation today that sets the stage for an ambitious tax bill that they plan to pass. The House measure includes language that would allow the Senator to pass a tax measure without invoking cloture. The Senate is proceeding on a separate track toward passing its own budget, which will have to be reconciled with the House version in the coming weeks.

The Senate Budget Committee was poised to finish work Thursday on a resolution that is more focused on the tax legislation than the House version.

Budget? Budget?

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The Senate Budget Committee will take its first steps on a framework for federal spending and tax cuts in FY 2018 this week.

The Senate Budget Committee released its FY 2018 draft resolution on Friday that would establish the path for consideration of revenue, spending, and other fiscal legislation.

Senate Committee will debate overall limits on discretionary spending for the coming fiscal year and 10-year projections, as well as mark up the resolution on Wednesday and Thursday. If adopted, it could become an enforcement tool — through points of order — during the annual appropriations process. House and Senate majority were attempting to use   the FY 2018 budget as a means to further repeal the ACA — the House included language to instruct committees to do so — but all language instructing the Senate Committees to do similar has been stripped. Rather, the Senate focuses on tax reform, signaling a pivot in the Majority’s priorities.

The focal point of the legislation is the draft language instructing the Senate Finance and the House Ways and Means committees to increase the deficit by $1.5 trillion over the next decade. That number gives the tax-writing panels the opportunity to alter the tax code.

The whole Senate will begin its annual Budget consideration process, known as “vote-a-rama,” the week of October 16th.

Meanwhile, the full House plans to vote Thursday on its own budget resolution, which also would advance what would be the most sweeping tax overhaul in more than three decades. That plan would require Congress to cut at least $203 billion from entitlement programs over 10 years. House leadership has suggested the Senate version is more likely to prevail in a final compromise and the language on entitlements is likely to be stripped on the House floor.

There are other notable differences between the House and Senate budgets. For instance, the House budget includes instructions for a tax plan that does not increase the deficit, but the Senate budget would let tax writers add $1.5 trillion to the deficit over a decade. The Senate provides $549 billion for defense spending and $516 billion for nondefense discretionary programs, which are levels in line the the Budget Control Act caps. The House measure provides $621.5 billion for defense programs and $511 billion for nondefense discretionary programs. Since the House provides levels significantly beyond the BCA caps, enacting such a measure would take an act of legislation (and a signature by the President), which is beyond the scope of a typical Congressional budget, a document that only binds Congress and is not signed by the President.

Eventually, the two chambers would have to agree on a budget for Congressional Republicans to use reconciliation.

Big Six Reveal Tax Reform Framework

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As expected, the long-awaited proposal released Wednesday. Negotiated by the “Big Six” — Treasury Secretary Steven Mnuchin, National Economic Council Director Gary Cohn, Senate Majority Leader Mitch McConnell, House Speaker Paul Ryan, House Ways & Means Chairman Kevin Brady, and Senate Finance Committee Chairman Orin Hatch —  is heavy on promoting the Republican tax cut desires and light when it comes to explaining whose taxes will have to go up to help control costs. There is still a lot unknown about the plan with any specificity. While there is an agreement that the tax cut proposal will have some deficit impact, the plan will partially defray the cost with offsetting tax increases, but how and what will do so remains unclear.

The full blueprint is here and a one-pager is here.