Although health care has been the recent priority in Congress, don’t make the mistake of thinking that legislators have given up on tax reform.
In January, it seemed that the Affordable Care Act (ACA) would be repealed in short order, giving Congress the opportunity to move quickly on tax reform. Even under those circumstances, a tax reform bill would probably take the remainder of the year to make its way through the House and Senate.
Although the health care debate is far from over, tax reform has not fallen by the wayside. The House has been holding tax reform hearings and conducting roundtable discussions since 2011. Bills have been introduced, and House leaders have spent a considerable amount of time keeping their colleagues informed on the topic. Last summer, Paul Ryan and Kevin Brady, Chairman of the House Ways and Means Committee, issued A Better Way, an outline of what has become the latest iteration of the tax reform bill. Once the healthcare debate is out of the way, the House will be ready to go on tax reform.
But what about the border adjustable tax (BAT) outlined in A Better Way? Many representatives greeted the tax with skepticism, and there are fears that this could grind tax reform to a halt. While hardly universally popular, this tax is the only measure that proposes to raise the $1.3 trillion necessary to offset other items on the wish list like lower income tax rates, a repeal of the Alternative Minimum Tax, and a repeal of the estate tax.
President Trump campaigned and won on the basis of what an overhaul to the tax laws could promise – a more affordable life for the middle class and more jobs. Since this is a pillar of Trump’s campaign platform, he is likely to cling to the BAT.
Given the progress on health care, the expectation is that a tax bill will appear sometime in June or July, with a full vote in the House before the August recess of Congress.
Representatives will spend the recess trying to sell the plan to their constituents. When they return, the Senate will look at the bill. The Senate is quite different in its approach, and has more complex rules and procedures. Therefore, don’t expect quick action. The Democrats will also have filibuster power, which can slow things tremendously.
Republicans can attempt to forestall a filibuster through an “expedited budget reconciliation process.” This requires only 51 votes in the Senate, and the Republicans have 52. It is very possible that they could pass the bill without even one Democrat. Don’t be fooled into thinking that tax reform won’t be a big issue this year.
For more information, please read:
Tax Reform Bill On the Front Burner | Wealth Management