During a discussion yesterday with The Washington Post, House Ways and Means Chairman Kevin Brady—a former House colleague of mine—discussed his plans for “Tax Reform 2.0” and the timeline to advance that agenda.
It’s only been six months since the Tax Cuts and Jobs Act was signed into law by President Trump. We are still waiting for critical guidance from the Treasury Department and the IRS about the new Section 199A, the revolutionary and complex international tax regime, tweaked versions of cost recovery provisions and limitations on interest deductibility. But look for Republicans (at least those in the House) to begin ramping up fresh efforts to expand and improve the monumental tax overhaul.
Anticipated Changes and Legislative Fixes
In yesterday’s interview, Brady confirms this ambition and lists the need for permanence for pass through businesses and individuals, as well as hints that expanded retirement savings incentives will be part of this push. The timing? According to Brady, we will see the new tax language before we put away our swimsuits for the summer.
The ambitious timeline kicks off with draft legislation circulated within the committee immediately after the July 4th recess, a legislative outline released to the public by early August, votes in committee and final passage on the House floor in the fall. The Ways and Means Chairman predicts that there will not be one bill, but perhaps two to three or four approaches in separate bills. But for sure, one will include provisions that make permanent those tax sections that are scheduled in the Tax Cuts and Jobs Act to sunset at the end of 2025.
Brady was deferential about the Senate and would not hazard a guess about where they might land on the House bills. But with a margin as tight as possible, and Democrats in the Senate already on record as unanimously opposing the huge tax bill enacted at the end of last year, odds are long that a bill will get to the President’s desk.
Variables in Play
There are however three variables at play that could impact the ultimate outcome. First, ten of the Democratic Senators that are up this November are in states that were carried by President Trump in 2016, many of which he carried by double digits. That could encourage some of those in the toughest reelection races to vote for legislation that helps middle class taxpayers, small businesses and those saving for retirement.
The second variable is whether the widening budget deficit will become a potent political issue and limit the size of the tax relief. And the third is whether the economy continues to build momentum, in which case Trump and his fellow Republicans will likely tout that the major tax overhaul that passed without Democratic support is the reason the sluggish recovery has now shifted into high gear. Version 2.0, they will argue, will add that much more to the pockets of businesses, savers, investors and individuals.
This summer, the weather may not be the only thing that is heating up.
Former Congressman Rick Lazio recently became the Senior Vice President of alliantgroup, a national tax consultancy. A longtime advocate of small to mid-size businesses, Lazio spent his four congressional terms sponsoring pro-business initiatives such as the Small Business Tax Fairness Act of 2000. After his time in Congress, he held several positions in the private sector. He worked as Executive Vice President and later the Managing Director of the Assets Group at JP Morgan. Rick also served as a partner at Jones Walker LLP, a national financial services law firm, and headed the firm’s National Housing Finance Practice group. He serves on the Board of Directors for Enterprise Community Partners and the Bretton Woods Committee. He also has been an active member of the Committee for Economic Development and the Association for a Better New York (ABNY). Lazio is involved in numerous other business, philanthropic and civil organizations.