By Brian Cove
Much anticipated tax legislation is expected to be released by House Ways & Means Committee Chairman Kevin Brady (R-TX) on Thursday, following last week’s narrow House approval of the fiscal year 2018 budget resolution that will serve as the vehicle for tax reform.
Chairman Brady has announced that the Ways & Means Committee will begin consideration of the tax package on November 6, signaling that the bill is on a fast track. The goal of Congressional leaders and President Trump is to have the legislation approved in both the House and Senate by the end of this year.
Quick approval of the most significant revision to the tax code since 1986 may prove challenging for Congressional tax writers who will be tasked with coming up ways to replace tax revenue lost to the significant corporate rate reduction and new pass-through rate expected to be included in the bill.
The budget reconciliation process that Congressional leaders will employ for consideration of the tax legislation will allow it pass on a simple 51 vote majority in the Senate, eliminating the need for any Democrat support. However, the reconciliation instructions authorize $1.5 trillion in tax revenue losses over ten years but require that those losses be offset beyond that ten year budget window. While it remains unclear exactly how much in “pay fors” will need to be identified in the bill, some budget experts on Capitol Hill have put that number at $4 billion.
Regardless of the exact number, Chairman Brady and Congressional Republicans will need to make some difficult choices in finding new tax revenue. Controversial ideas reportedly under consideration include elimination of the state and local tax deduction and capping the amount of pre-tax 401(k) contributions.
FEI Technical Committees have been active in the tax reform process since the current session of Congress convened in January. The
Committee on Private Company Policy (CPC-P) has engaged in an ongoing dialogue with key members and senior tax counsel of the Ways & Means and Senate Finance Committees to provide recommendations and practical advice on the tax code could be improved to level the playing field for pass-through businesses and other private companies.
Earlier this month, CPC-P members met with both Republican and Democrat tax counsel at the two tax writing committees to provide
feedback on the
unified tax reform framework released by the Ways & Means Committee in late September. The CPC-P was asked to provide additional feedback on how to prevent abuse of a proposed tax rate on pass-through business income and related issues. The CPC-P is currently formulating a response to that request and will continue its dialogue with Committee staff as the tax legislation winds through the legislative process.
In mid-October, FEI’s
Committee on Taxation expressed support for tax reform and provided their own
policy suggestions in a letter to the tax writing committees, House and Senate leadership, Treasury Secretary Steven Mnuchin and National Economic Council Director Gary Cohn.