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News and updates

Tax Cuts and Jobs Act

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The House Republican Leadership unveiled their much-awaited Tax Cuts and American Jobs act.

At first glance, the measure would:

  • cut the corporate tax rate to 20%;
  • reduce the seven individual tax brackets into four;
  • nearly double the standard deduction to $24K (married), $18,300 (head of household), and 12,200 (single);
  • increase the child care tax credit to $1,600 (from $1000);
  • change the mortgage interest deduction to apply to house loans up to $500,000 on new home purchases while existing homes would be grandfathered;
  • repeal the student-loan interest deduction;
  • private universities with assets exceeding $100,000 a student would pay a new 1.4% excise tax on their net investment income; and
  • businesses would no longer be able to deduct entertainment expenses, though today’s rules for business meals would remain.

The charitable deduction will not change, and the tax provisions related to 401(k)s are unchanged.

The bill text is here.

A section-by-section of the measure is here. 

Federal Relations is still going thought the measure and will continue to provide updates.

This Week: CHIP and Taxes

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The House and Senate are back this today for what will be the long slog until Thanksgiving. There’s a ton of to-do items on the agenda, including tax reform, raising the debt ceiling, FY 2018 appropriations, the annual National Defense Authorization Act (NDAA), and the list goes on. The focus for the House this week will be extending the Children’s Health Insurance Program (CHIP), while the Senate will continue on more judicial nominations. Both Houses will begin to turn efforts into tax reform.

The House is set to unveil their version of a tax reform bill on November 1 and a mark up in committee shortly thereafter.  Tentatively, this means, the House could consider the measure on the Floor during the week of the November 6. After passage, the measure would move to the Senate the week of November 13 for mark-ups in the Senate Finance and Energy and Natural Resources Committees and floor consideration during the week of the 20, which is Thanksgiving Recess. Per the agreed expedited process, the tax measure would be considered as a reconciliation bill, so it would only get 20 hours of debate and a vote-a-rama — it could be considered in three days.  While this schedule is incredibly ambitious, this framework is the working schedule as of now.

The House— one month after funding for the CHIP has lapsed — is gearing up for a vote on extending funding for the federal program, which insures nine million children in the US. Both parties have been negotiating for weeks. Earlier this month, the House Energy and Commerce Committee approved a measure to fund CHIP for five years with zero Democratic support. Democrats opposed cutting dollars from Obamacare’s public health fund to pay for the measure — so it wasn’t sent to the floor for a vote. However, the GOP is now moving forward as the clock keeps ticking: several states are slated to run out of CHIP money in the next few weeks.

Meanwhile, at the other end of Pennsylvania Avenue, ehe Administration is set to announce a new Federal Reserve Chair this week and keep up the drum beat on opioids, but the Mueller investigation might make that difficult.

Stay tuned.

House Agrees to Senate Budget and Tax Guidelines

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Today, the House adopted the Senate-passed FY2018 budget resolution, H. Con. Res. 71, that would lay down the foundation for tax cuts.  While a budget resolution is traditionally used to set up the broad parameters for spending for a given fiscal year, this year’s resolution is being used as a vehicle to set up procedures to move changes to the tax code. The measure passed by a vote of 216-212 and allows allows for fast-track consideration of tax overhaul legislation, without being subject to filibuster in the Senate.

Assuming that the budget resolution would pass, the House leadership announced earlier this week a draft tax measure would be unveiled next week pending the approval of the budget in the House. With passage, the House Ways & Means Committee, which has jurisdiction on all revenue raisers, is on track to release their tax bill as early as November 1.  What the House’s reformed package will contain is still a moving target. There have been many issues raised with proposed cuts and offsets to such a measure — the most recent issue is the State and Local Tax (SALT) deduction. Eliminating this deduction has been a big issue for Republicans in blue, high-tax states, such as New York and California, who want to preserve the deduction. Other recent issues include limiting the 401(k) pretax contributions, expanding the child care tax credit, and including Unrelated Business Income Tax (UBIT) as an offset for tax cuts.

Stay tuned.

 

 

 

 

Budget and Taxes

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The Senate passed its FY 2018 budget by a vote of 51-49 on last night. The passage is a key step to Republican hopes of creating and passing any tax overhaul measure through Congress along party lines in the coming months. Senator Rand Paul (R-KY) was the lone Republican dissenter. Behind the scenes, GOP leaders have already hammered out an agreement to reconcile the differences between the House and Senate budget resolutions, likely negating the need for a formal conference and giving Republicans more time to focus on tax reform before the end of the year.

The Senate adopted a package of House-requested tweaks Thursday night, teeing up the budget resolution for House passage as soon as next week. Both chambers need to pass identical budgets in order to allow Republicans to use the fast-tracking tool for tax reform that permits them to bypass a Democratic filibuster in the Senate. As part of the deal, the House will have to accept the Senate’s plan to add $1.5 trillion to the deficit via tax reform after the lower chamber’s budget initially demanded a deficit-neutral tax plan.

If the Senate resolution can be passed in the House – potentially as soon as next week – it would eliminate the need for a conference agreement or other negotiations to resolve differences between the chambers, and the need for reconsideration of the resolution in the Senate. That would accelerate the process for tax reform given that House leaders have said a tax bill will not be released and processed until the budget is completed. President Trump has urged House members to accept the Senate budget resolution to avoid a conference, and the President will head to the Hill next week to talk to the Senate on a path forward with tax reform.

 

 

Senate Begins Debate on Budget Resolution

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The Senate has begun its floor debate on the FY2018 budget resolution. As mentioned previously, although usually used to determine parameters of federal spending, this year’s package contains a set of procedures that would enable the chamber to adopt a tax package by a simple majority.

With all Democrats expected to oppose it, one Republican Senator currently back home for health reasons, and a number of other members of the party expressing reservations about certain parts of the legislation, it is not yet certain that the Republicans have the votes for its passage.  A long list of votes on amendments is expected between now and the final vote on passage, which could take place on Thursday.