Senate Finance Committee Digs Into Tax Plan

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By Colleen Murphy and Kaustuv Basu (Bloomberg Tax)

The Senate Finance Committee began to wade through its tax reform plan Nov. 13, setting off a marathon markup process that will likely consume the remaining legislative days before Thanksgiving recess.

Senators have already submitted several hundred amendments, including two from Finance Committee Chairman Orrin G. Hatch (R-Utah) to make the plan compliant with chamber rules and to remove the two layers of corporate tax. Hatch hinted in his opening remarks that changes to the corporate provisions are afoot, and said he hopes to make them permanent despite concerns about how they would impact the deficit beyond the 10-year budget window allowed by Senate rules.

Hatch said he plans to release an updated chairman’s mark on Nov. 14. When asked about the document, he said “we will have to see. This is a wide open mark.”

Democrats at the markup slammed Republicans for supporting a plan that would add to the deficit and would disproportionately help corporations and the wealthy.

The markup comes the same week the House is set to vote on its bill ( H.R. 1)—possibly as early as Nov. 16. House Ways and Means Committee Chairman Kevin Brady (R-Texas) told reporters Nov. 13 he doesn’t anticipate any big changes to the legislation this week.

Brady also said he has told senators that keeping the $10,000 cap for property tax deductions is a top priority. The Senate plan would fully repeal state and local tax deductions. (For a road map of where to find key provisions and compare the House tax reform bill (H.R. 1) with the Senate Finance Committee version, read Bloomberg Tax’s analysis.)

The Congressional Budget Office said, however, that Congress’ main scorekeeper for tax legislation won’t be able to gauge the economic effects of the House tax-overhaul bill quickly, which means the House may vote on H.R. 1 before knowing those effects.

The Joint Committee on Taxation indicated to the CBO that it’s not practical to do a full “macroeconomic analysis” in “the very short time available between completion of the bill and the filing of the committee report.”

Red Lines?

During the markup, Sen. Pat Roberts (R-Kan.) said that while the plan isn’t “perfect,” it is “good” and can be improved.

Sen. Ron Johnson (R-Wis.) told Bloomberg Tax that he doesn’t like the tax treatment of passthrough businesses in the Senate tax plan. The Senate version suggests a 17.4 percent deduction for the non-wage portion of passthrough business income.

“Let’s honor what the people who developed the framework acknowledged when they said a 20 percent rate for corporates, and a 25 percent rate for passthroughs,” he said.

Johnson said he wasn’t drawing any “red lines” right now. “But I’m doing everything I can to make sure the framework is followed,” he said.

Awash in Amendments

Submitting an amendment doesn’t guarantee the senator will end up offering it. Republicans are likely going to try to control the markup process, allowing certain proposals to be brought forward. Democrats may also decide not to push certain amendments that are more about messaging than a certain policy.

Hatch submitted an amendment offering a 12.5 percent deduction on the dividends that corporations pay for five years. Hatch’s office has been exploring the idea, known as corporate integration, since 2016. Previous iterations discussed a 40 percent and a 25 percent deduction on dividends paid.

An amendment from John Thune (R-S.D.), the third-ranking Republican in the Senate, would include his CHARITY Act (S. 1343) in the tax plan, Thune’s bill is widely seen as a marker for where Republicans stand on nonprofit issues.

Sen. Ron Wyden (D-Ore.), the Finance Committee’s ranking member, filed three amendments requiring the state and local tax deduction to be fully reinstated in certain situations, such as if states cut school funding or eliminate first-responder jobs.

Sen. Claire McCaskill (D-Mo.) filed three amendments requiring parity between corporate deductions and individual deductions.

With assistance from Erik Wasson (Bloomberg).

To contact the reporters on this story: Colleen Murphy in Washington at cmurphy@bna.com; Kaustuv Basu in Washington at kbasu@bna.com (Bloomberg Tax)

To contact the editors responsible for this story: Meg Shreve at mshreve@bna.com (Bloomberg Tax); Derek Wallbank at dwallbank@bloomberg.net (Bloomberg)

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