‘Phase Two’ Tax Cut May Extend Full Expensing: Brady (1)

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By Allyson Versprille

Legislation implementing a second round of tax cuts may extend full expensing for businesses, the House’s top tax writer said.

“We think that’s one of the most pro-growth parts of this tax code,” House Ways and Means Committee Chairman Kevin Brady (R-Texas) said March 28 on Bloomberg TV.

The 2017 tax law changes permit businesses to fully expense new and used capital investments for five years. After 2022, the 100 percent allowance would be phased down by 20 percent each year.

Brady and White House officials have said they would like to introduce and pass “phase two” tax legislation this year, but doing so would require support from Democratic lawmakers. Conservative activists and lobbyists recently told Bloomberg Tax that talking about a second round of tax cuts could help the GOP in the upcoming midterm elections, even if legislation isn’t enacted before voters cast their ballots in November.

Aside from extending full expensing, Brady said he wants phase two to include provisions that would make the individual tax cuts in the law permanent, allow taxpayers to “save more and earlier for retirement,” and provide for greater innovation.

Treasury Rules, OMB Review

When asked during the interview whether the Office of Management and Budget should have greater authority in reviewing tax regulations, Brady said the Treasury Department is best equipped to interpret tax laws, such as the 2017 tax act.

“They know this tax code, they know the history of these provisions, and they worked closely with us on instituting a new pro-growth tax code,” he said.

Sen. Ron Johnson (R-Wis.), chairman of the Homeland Security and Governmental Affairs Committee, and Sen. James Lankford (R-Okla.), chairman of the Subcommittee on Regulatory Affairs and Federal Management, have recently been questioning a decades-long agreement to exempt the majority of tax regulations from review by the White House’s Office of Information and Regulatory Affairs, which is part of the OMB.

The argument for exempting most tax rules from the same review process and cost-benefit analysis that other agency regulations undergo partially stems from the belief that tax regulations are simply interpreting the laws that Congress enacts, and therefore any costs associated with them originate from the statute itself.

Overturning the long-standing agreement, which dates back to 1983, would give the OMB more input on regulations related to the tax law than it has had historically on other tax guidance.

“We have been working productively with OMB and are very pleased with the process,” Tony Sayegh, assistant secretary for public affairs at Treasury, told Bloomberg Tax March 28 in an emailed statement. “We look forward to a resolution in the near future.”

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