House Poised to Move on Tax Reform After Senate Approves Budget

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By Laura Davison and Colleen Murphy (Bloomberg BNA)

Congress will finish the month with forward momentum on tax reform after the Senate passed a budget resolution that will allow the process to pass with a simple majority.

Next, it’s the House’s turn to act. The Senate budget resolution ( H. Con. Res. 71) included several last-minute tweaks negotiated with House leaders that could bypass the need for a conference committee and speed up the process for both chambers to come to agreement on the package. It scrapped mandatory spending cuts and allows both the House Ways and Means and Senate Finance committees to cut up to $1.5 trillion in taxes over the 10-year budget window.

Ways and Means Committee Chairman Kevin Brady (R-Texas) told Bloomberg Tax he is confident the budget will pass the House the week of Oct. 23, paving the way for the committee to release a bill. A markup is likely to follow soon after the legislation’s release. The House Rules Committee is scheduled to consider the budget resolution Oct. 24.

The Senate’s “action really accelerates the timetable in a very good way,” Brady said Oct. 20 at a Texas Oil and Gas Association event in The Woodlands.

The Ways and Means Committee will meet Oct. 24 and 25 to walk through the tax bill and discuss provisions that have to be resolved, according to a committee spokeswoman.

House leadership is pressuring the Ways and Means Committee to be ready to release a bill and mark it up the moment the budget passes both houses, a former Senate staff member, who spoke on the condition of anonymity to speak freely, told Bloomberg Tax.

The bill text is in rough shape as many of the decisions on key provisions have yet to be made, according to a tax lobbyist who requested anonymity to talk freely. Several big issues, such as the fate of the state and local tax deduction, rules for the special passthrough business rate, and how to tax multinationals earnings overseas, are still under discussion, the lobbyist said.

Brady said Oct. 20 he envisions that a compromise on the state and local tax deduction will be reached before the bill’s release.

The conservative House Freedom Caucus will likely support the budget without going to conference, as long as Ways and Means agrees to mark up and pass the bill in two weeks, Mark Meadows (R-N.C.), the group’s chairman, told Bloomberg News in an interview.

“We are willing to take a look at supporting the Senate budget next week without going to conference, as long as it speeds up the work on the tax bill,” he said.

‘Future of the Party’

“We have to do something on tax reform for the good of the economy and the future of the party,” Sen. Lindsey Graham (R-S.C.) told reporters. “If we fail to deliver a meaningful tax cut after having the White House, the Senate, and the House, then our base is going to explode and our days will be numbered.”

The Senate’s budget resolution passed 51-49. Under reconciliation rules, the bill can’t add to the deficit outside the 10-year time frame, which will affect how much Republicans can cut tax rates—and for how long. Both tax-writing committees have to release their tax bills by Nov. 13, according to the resolution, but there is no penalty for missing the deadline.

Republicans are aiming to pass a tax bill by the end of the year, though there is skepticism that a bill can move that quickly, especially because GOP members haven’t coalesced around how to pay for legislation.

The state and local tax deduction, one large revenue raiser likely to be included in the bill, has been a source of contention among House Republicans from high-tax states. Members and leadership are working on a compromise. The Senate passed an amendment emphasizing that the deduction should be limited, saying that the tax provision “disproportionately favors high-income individuals.”

The Senate passed several amendments that direct the Finance Committee to make the tax system simpler, to cut taxes for families with children, and to come up with rules to prevent wealthy individuals from gaming a lower passthrough business income rate. These amendments are largely symbolic and don’t put specific limits on what tax-writing committees can or can’t include in the bill.

Minority Involvement

President Donald Trump and other White House officials have been meeting with House and Senate Democrats who could face pressure from their constituents to pass a tax bill. Republicans don’t need members in the minority to pass the bill, as long as no more than two GOP senators refuse to back the legislation.

All but three Senate Democrats—Heidi Heitkamp (N.D.), Joe Donnelly (Ind.), and Joe Manchin III (W.Va.)—signed a letter earlier this year saying they wouldn’t support a tax bill if it went through budget reconciliation. The passage of the budget resolution effectively closes the door for most Senate Democrats to back the bill.

“I think it’s clear that what this has been all about is a fast track to a partisan tax bill. I don’t think the American people are going to go for it,” Finance Committee ranking member Ron Wyden (D-Ore.) said. “We have laid out our principles. It’s about the middle class, not the top of the top. It’s not about creating huge additional deficits.”

With assistance from Kaustuv Basu in Washington, Nushin Huq in Houston (Bloomberg BNA); Billy House in Washington (Bloomberg News)

To contact the reporters on this story: Laura Davison in Washington at lDavison@bna.com; Colleen Murphy in Washington at cmurphy@bna.com

To contact the editors responsible for this story: Meg Shreve at mshreve@bna.com (Bloomberg BNA); Kevin Whitelaw at kwhitelaw@bloomberg.net (Bloomberg News)

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