House Republicans Step Up Effort on Tax Bill

In a year of legislative disappointments, House Republicans are hoping that getting a package through Congress that reforms the code and cuts taxes will finally give them an accomplishment to hang their hats on. While key members are stepping up the push to get the bill passed, it has also been disclosed that a repeal of the individual mandate will be in the proposed legislation. House leadership is targeting this Thursday for the crucial vote. If the bill does pass, it would then go to the Senate and likely take a different form before it ever became law.

The only Republicans standing in opposition are those from high tax states such as the Northeast and California, whose constituents will see their deduction for state and local taxes disappear. In a sign that House leadership believes it has the necessary votes, they have refused to budge on closing that loophole despite the opposition.

Despite the House not giving in to some conservative members, as well as President Trump, and including a repeal of the individual mandate from the Affordable Care Act out of fear that it could sink the entire bill, Senate Republicans have states that in their bill it will be included. Not only would such a repeal be popular with the Republican base, but also potentially allow for larger tax cuts. The Congressional Budget Office has said that its analysis is that the repeal would result in 13 million more uninsured Americans but reduce budget deficits by $338 billion over the next decade.

A further complication in the U.S. Senate is the so called “Byrd rule” which requires that no bill increasing the deficit beyond ten years can be passed with a simple majority. Senate Majority Leader Mitch McConnell would be unlikely to have Democratic Party support to reach the 60-vote supermajority threshold, leaving the Senate with few options besides passing a bill that does not increase the deficit beyond the next decade. With $1.5 trillion in tax cuts planned, that would mean that the Senate bill may require that the tax cuts sunset after a decade. The “Byrd rule” was also the reason why the large tax cuts passed in 2001 and 2003 automatically expired after a decade, although most of those were later made permanent.

With the situation still fluid, it is hard to predict how the final legislation could impact a typical family. What is clear is that the legislation is likely to do away with some individual and corporate tax deductions while lowering marginal tax rates. Individual filers will lose deductions but have an increased standard deduction and likely lower marginal rates. Rates on pass-through businesses will also be decreased and the estate tax could well be repealed.

The House and the Senate hope to have a bill signed into law by the end of the year. There is still some work to do before then, however.

 

 

 

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