Administration officials and senior GOP leaders in Congress have predicted that tax reform legislation will be drafted this Fall and come to the floors of both the House and Senate for a vote before year-end. The officials and lawmakers outlined broad principles for individual and business tax reform in a statement released just before Congress started its August recess.
“A lot of people were disappointed the unified statement didn’t have more meat to it, but I think it is an important step,” Dustin Stamper, Director, Washington National Tax Office, Grant Thornton LLP, told Wolters Kluwer. “The statement clearly gives Congress the greenlight to begin writing a bill. Everyone had been waiting to see if the administration would release a more detailed plan first or the ‘gang of six’ would get a preemptive agreement. Now taxwriters can finally get to work.”
In April, the White House released a one-page outline for tax reform. The outline called for lower individual tax rates, doubling the standard deduction and protecting the home ownership and charitable gift tax deductions. On the business side, the outline proposed a 15 percent corporate tax rate, moving to a territorial tax system, and implementing an unspecified one-time tax on earnings repatriated to the U.S.
After the announcement, the White House and administration officials began listening sessions with stakeholders about tax reform. Administration officials and senior GOP lawmakers also have held discussions about tax reform.
“For three months we have been meeting regularly to develop a shared template for tax reform,” House Speaker Paul Ryan, R-Wisconsin, said.
The joint statement on tax reform was released by Treasury Secretary Steven Mnuchin, National Economic Council Director Gary Cohen, Senate Majority Leader Mitch McConnell, R-Kentucky, House Ways and Means Committee Chair Kevin Brady, R-Texas, Senate Finance Committee Chair Orrin Hatch, R-Utah, and Ryan. The officials and lawmakers called for “a plan that reduces tax rates as much as possible, allows unprecedented capital expensing, places a priority on permanence, and creates a system that encourages American companies to bring back jobs and profits trapped overseas.”
“We all agree that the tax code isn’t working for middle-class families but the past has shown that for tax reform to be successful, it must be undertaken in a truly bipartisan manner,” Ways and Means Committee Ranking Member Richard Neal, D-Massachusetts, said.
Legislation to be drafted
“The time has arrived for the two tax-writing committees to develop and draft legislation,” the officials and the lawmakers said. They predicted that tax reform legislation would be taken up by the House Ways and Means and Senate Finance Committees this Fall, under regular order. Hearings and committee votes would be followed by consideration on the House and Senate floors. “The President fully supports these principles and is committed to this approach,” the officials and lawmakers said.
In 2016, House Republicans unveiled a Blueprint for Tax Reform. One proposal would have created a so-called border adjustment tax. Generally, the proposal would see border adjustments to the taxation of products, services and intangibles that are imported into, or exported from, the United States.
In their joint statement, the officials and lawmakers said that border adjustability has been tabled. “While we have debated the pro-growth benefits of border adjustability, we appreciate that there are many unknowns associated with it and have decided to set this policy aside.”
“The death of the border adjustability proposal made big news, but there are some other interesting tidbits if you read between the lines,” Stamper observed. “The commitment to ‘unprecedented’ expensing might make it more likely that a limit on interest deductions survives because it is the typical tradeoff for full- or near-full expensing.”