Waiting on Tax Reform


With about 30 days left on the legislative calendar before Congress starts a five-week August recess, time may be running out for the Trump administration to pass a tax-reform plan in 2017.

President Donald Trump released his fiscal 2018 federal budget proposal May 23. Curiously, the budget request did not include the administration's taxreform proposal, which would reduce the number of federal income tax brackets to three from seven. Payroll professionals, thinking that the administration would tackle changes to the tax system and repeal Obamacare early in its tenure, anticipated midyear withholding changes. 

The tax-reform proposal, which was similar to what Trump promoted during the 2016 election campaign, calls for individual federal tax brackets of 10, 25 and 35 percent. During the campaign, Trump proposed brackets of 12, 25 and 33 percent. The seven brackets now in place are 10, 15, 25, 28, 33, 35 and 39.6 percent.

With the summer recess nearing for Congress, the lack of a tax-reform bill in the House is apparent. However, that did not stop Trump from promoting his tax plan June 1 in a statement on the Paris climate agreement. “Our tax bill is moving along in Congress, and I believe it’s doing very well,” Trump said at the White House. “I think a lot of people will be very pleasantly surprised.  The Republicans are working very, very hard.  We’d love to have support from the Democrats, but we may have to go it alone.  But it’s going very well.”

A tax-reform plan is not the only issue payroll professionals are watching. Included in the budget plan was a nationwide paid-leave family program of six weeks for new parents after the birth or adoption of a child. The  budget proposal would allow the administration “to fund additional priorities, including infrastructure, student loan reform, and initiatives to help working families such as paid parental leave,”  Trump said in a statement released with the budget proposal. He promised to start a federal paid parental-leave program during the 2016 presidential campaign.

Implementing the paid family-leave proposal likely would require that employers modify unemployment payroll processes but the proposal did not specify how the funding would occur. Budget Director Mick Mulvaney described the implementation process in part at a briefing May 23. “We propose to do parental paid leave in this budget,” he said. “We propose to do that using the tools that already exist through the state unemployment insurance.”

Of course, the first order of business after Congress returns Sept. 5 likely would be establishing a budget for fiscal 2018, which starts Oct. 1. By then, summer will have ended and lawmakers will be looking at the calendar’s last few months for direction. 

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