Part II Cont.: Two Votes Control $5.5 Trillion Tax Cut
The Senate Committee on Finance (“Committee”) chaired by Senator Orrin Hatch (R-UT) (“Chairman Hatch”) passed the Senate Republican’s tax reform bill shortly before midnight on Thursday, November 16, 2017 by party line vote. The Committee bill will now move to the Senate floor for a vote after Thanksgiving. The House of Representatives passed its version of tax reform also on Thursday, November 16, 2017.
At the beginning of the Senate Committee markup (the process the Committee uses to review and vote on amendments in a public hearing) 355 amendments to the Senate bill were filed by Republicans and Democrats on the Committee.
On Monday, November 13, Committee Members met in closed session to work through as many amendments to the Senate bill as possible. This is where the real horse trading or sausage making happens in Washington. Achieving a more streamlined amendment process among Committee members when they meet in public is the goal. Of the 355 that were filed, 54 were debated by Committee Members over four days. In the end, four amendments passed the Committee, three of which were amendments offered by Chairman Hatch. It is the Chairman’s prerogative to amend his/her mark, add new provisions, provide clarifications to existing provisions, and fix drafting errors to the bill.
Most of the Chairman’s amendments focused on generating additional tax revenue to meet Senate budget guidelines. One such amendment repeals the tax penalty on individuals who do not buy health insurance under the Affordable Care Act. This provision is scored as raising over $300 billion of new revenue because it reduces billions of dollars of federal health care subsidies needed to buy health insurance. Another amendment makes corporate tax cuts permanent and sunsets individual tax cuts after the 2025 tax year. Tax cuts that are not fully offset by tax increases must sunset within ten years under arcane Senate budget rules. Individual tax cuts in the Senate bill are not fully offset by tax increases and therefore must sunset no later than 2026.
With this in mind, I offer my BEST GUESS at how a House and Senate compromise might look like on select provisions. The table below compares the tax plan passed by the Senate Finance Committee with the tax reform plan passed by the House. Please keep in mind much can change the outcome of tax reform as the process advances. Overall, the differences between the plans do not seem insurmountable at least at this stage in the process.
Ahead of a full Senate vote, there are a handful of Republican Senators expressing concerns with the Senate Finance Committee bill related to increasing the deficit by $1.5 trillion, tax rates on small business, and the elimination of the state and local tax deduction for high cost states. Senate Republican leaders are working feverishly to figure out what changes must be made to the Senate bill to secure at least 50 votes. Senate Republican leaders hope to vote on the tax reform plan after Thanksgiving. No Democrats are expected to support the Senate Bill. Stay tuned. The next four weeks are critical to the success or failure of tax reform.
Boston Private is pleased to announce a partnership with Doug Fisher, a Washington Policy expert, who will offer a series of insights into a number of reform proposals making their way through Congress in 2017. Doug is Director of Retirement Policy at the American Retirement Association. In this role, Doug works with the ARA membership to protect, advise and grow their businesses through ideation and advocacy in the benefits area. Before joining ARA, Doug led Fidelity's legislative policy and thought leadership development teams involving retirement, health and welfare benefit plans. Doug has advised many Fortune 1,000 companies on the impact of legislation and regulation on the design and delivery of benefits. Before joining Fidelity, Doug served as tax counsel to the U.S. Senate Finance Committee and was involved in writing the pension, health and insurance provisions of the Small Business Job Protection Act of 1996; the Balanced Budget Act of 1997, including the Roth IRA, Simple retirement plan, medical savings account (predecessor to the health savings account); and the Health Insurance Portability and Accountability Act of 1996 (HIPAA).
You may also like
The opinions expressed and information contained in any article published in the Vault are given in good faith and considered reliable. However, such opinions and information are subject to change without notice and are provided only as of the date issued. Neither Boston Private nor its affiliates warrant the completeness or accuracy of such information. Any third-party opinion is solely the opinion of its author and does not necessarily reflect the opinion of Boston Private or its affiliates. The materials on this website are for informational purposes only and do not take into account your particular investment objective, financial situation or need. Since each client’s situation is unique, you should consult your financial advisor and/or tax planning professional before acting on any information provided herein.