Congressional taxwriting committees’ senior staff and the Joint Committee on Taxation’s (JCT) chief of staff provided a legislative update at the Federal Bar Association’s (FBA) 41st annual tax conference in Washington, D.C. on March 3. The congressional staff previewed their inside perspectives on tax reform and Patient Protection and Affordable Care Act (ACA) repeal and replacement efforts, as well as some of the variables that may slow down progress.
Despite its complexity, the “stars have aligned” for tax reform in 2017, according to House Ways and Means Committee Chief Tax Counsel (majority) Barbara Angus. “We all know that tax reform is difficult, there is a reason why it has been 31 years since the last time we had major tax reform…but it is long overdue,” Angus said. She did recognize, however, the challenges of negotiating a final bill with competing interests among the many members who want reform, but with each looking for one specific provision to remain untouched. “Whenever you try to change the status quo, there are always those that say fundamental reform is terrific…let’s shake things up…except for this one thing,” she noted, adding that everyone has a different “one thing.”
Senate Finance Committee (SFC) Chairman Orrin G. Hatch, R-Utah, tells members that if they want tax rates lowered, some sacrifices will have to be made, according to SFC Chief Counsel Mark Prater. “It is simply math; you can’t get rates down without doing some base broadening,” Prater said.
Tax reform will immediately follow the repeal and replacement of the ACA, Angus predicted. This confirms what both Ways and Means Chairman Kevin Brady, R-Tex., and Speaker Paul Ryan, R-Wis., have said lately. Both legislative objectives are “huge priorities” for Ways and Means and the Trump administration, according to Angus.
The budget will play an important role in determining whether ACA replacement and tax reform move forward smoothly, according to the taxwriting committees’ senior staff. Agreeing on the budget as the vehicle needed to pass the ACA and tax reform if done through reconciliation is one of the most controversial elements of the replacement and reform initiatives, said Aruna Kalyanam, tax counsel and staff director (minority), on the Way and Means Tax Policy Subcommittee.
The government is currently operating on a continuing resolution (CR) that will have to be closed out for a new budget to take control, Kalyanam noted. “You’re going to need some sort of agreement on a repeal and replace plan from both chambers of Congress before you can get to the reconciliation process with respect to tax reform,” she added. Much will also depend on President Trump’s budget. The administration’s “skinny” budget is expected to be released on March 16, and the final budget in May.
Comment. Although the current GOP majority congressional make up only needs a simple majority to move legislation through the Senate, rather than the normal 60 vote requirement, achieving the 51 votes needed under reconciliation is not guaranteed. Several Republicans have voiced concerns with the GOP’s budget proposal and various provisions within the leaked ACA replacement draft. Senate Minority Leader Charles E. Schumer, D-N.Y., has expressed doubt in the GOP’s ability to achieve the necessary votes to repeal and replace the ACA.
Since 2003, the House requires that macroeconomic analysis be provided to members for tax legislation out of the Ways and Means Committee, JCT Chief Of Staff Thomas A. Barthold said. But as of 2014, the JCT now must also provide a best estimate as to how those macroeconomic outcomes will affect gross domestic product growth, he noted. “In terms of timing, this slows things down, this is not an easy analysis,” he said. Brady and Hatch” understand fully the demands of asking for this information,” Barthold added.