Frenzy builds as tax legislation nears

Frenzy builds as tax legislation nears
© Greg Nash

The frenzy over a Republican tax bill is escalating in Washington as the release of legislative details becomes more imminent.

Draft legislation is expected soon after the House clears the Senate’s budget resolution, scheduled for Thursday. President Trump and GOP lawmakers hope to get a bill enacted by the end of the year so they can claim a victory ahead of the midterm elections.

As legislation is being finalized, Trump and other key players are stepping up their sales efforts. At the same time, lobbyists eagerly await the details and are pushing back against various proposals that they’ve heard could be on the table.

“Things are very intense right now,” said Rosemary Becchi, a partner at McGuireWoods, who advises clients on tax issues. “The [congressional] staff is working day in and day out drafting a bill and developing policy.”

Taxes will dominate much of the week on Capitol Hill. Trump is set to meet with Senate Republicans on Tuesday in the Capitol, where tax reform is sure to be a topic of conversation.

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On the House side, Republicans on the tax-writing Ways and Means Committee will meet on Tuesday and Wednesday to work on their legislation. 

The chamber is expected to vote on the budget resolution on Thursday. Once that happens, the Ways and Means Committee will announce the dates that a bill will be released and be marked up, committee Chairman Kevin BradyKevin Patrick BradyHow the Trump tax law passed: Breaking the gridlock  House GOP bill a mixed bag for retirement savers China imposes new tariffs on billion of US goods: report MORE (R-Texas) said.

Key players are also continuing their efforts to make the case for tax reform outside the Beltway. Ivanka Trump, a White House adviser, promoted the GOP’s efforts and pitched expanding the child tax credit at a town hall Monday in Pennsylvania.

Legislative text has been closely held by lawmakers, who have to find ways to raise revenue to help pay for cutting tax rates.

Once K Street gets a whiff of proposals being considered, lobbyists will jump into action.

Trump on Monday dealt a significant blow to one potential revenue-raiser that generated pushback from businesses and trade groups in the financial sector.

The president tweeted that “there will be NO change to your 401(k),” following reports in recent days that GOP lawmakers had been considering substantially reducing the amount of money that taxpayers could put into the retirement plans on a pretax basis.

Financial-industry stakeholders were encouraged by Trump’s statement.

“We feel heartened that the president is recognizing the importance of preserving the existing structure for tax-advantaged retirement savings,” said Derek Dorn, vice president for public policy at retirement services provider TIAA.

Still, opponents of such a change are not taking any chances.

The Save Our Savings coalition, which counts TIAA as a member, is still planning a fly-in next week to press lawmakers on the issue.

It’s unclear how seriously lawmakers are looking at changes to 401(k)s.

Brady on Monday wouldn’t say what the cap on pretax 401(k) contributions will be in the Ways and Means Committee’s bill because he didn’t want to get ahead of the panel.

Currently, the annual cap for most taxpayers is $18,000. Lobbyists have heard that lawmakers are considering reducing that amount to $2,400.

Brady also said that Trump’s tweet does not change the committee’s plans on the topic.

But following Trump’s tweet on Monday, K Street is bracing for any other changes to the GOP’s tax proposal that the White House could try to make unilaterally.

“These are uncharted waters,” said a Republican financial services lobbyist. “We’ve never had a president with a Twitter account, or one that uses it in the same way, to announce policy. It changes things.”

“I think there is great uncertainty and, beyond that, trepidation that the president could undo what is going to be a very delicate balancing act to get Republicans on board,” he said.

Another option for raising revenue — repealing the state and local tax deduction — has generated pushback from state and local governments, labor unions and GOP lawmakers from high-tax states.

While the Republican tax-reform framework called for the deduction’s elimination, House GOP leaders are now looking at ways to scale back the preference without fully doing away with the tax benefit.

The discussions over 401(k)s and the state and local deduction show how challenging it will be for lawmakers to craft legislation that meets their revenue targets. The Senate’s budget resolution only allows a tax bill to add up to $1.5 trillion to the deficit over 10 years.

“It’s going to be really tough because a lot of these trial balloons have been shot,” said Becchi.

So far, sudden flurries of lobbying have popped up in response to specific proposals being floated or rumored about. Lisa Zarlenga, co-chair of the tax group at Steptoe & Johnson, predicted that “it’s going to be that on steroids once they drop the legislative language.”

Besides debating how to pay for tax cuts, Republicans are also looking at how to prevent their bill from being a windfall for the rich, to counter criticism from Democrats.

Speaker Paul RyanPaul Davis RyanDems fight to protect Mueller amid Rosenstein rumors Jordan wants Rosenstein to testify before House Judiciary Committee Kamala Harris calls for Senate to protect Mueller probe as Rosenstein faces potential dismissal MORE (R-Wis.) on Friday signaled that the House’s bill would include a fourth tax bracket, above 35 percent, for high earners.

And lawmakers are considering keeping the top rate at 39.6 percent for those making more than $1 million, according to a report from Axios.

But Brady said that no decision has been made yet on what that bracket’s rate and income threshold would be, should it be included.

A tax-overhaul bill is likely to run around 1,000 pages and include details such as the effective dates of tax changes and rules about transitioning from the current code to a new system. Lobbyists will be closely studying these elements as they try to figure out how their clients will fare under the legislation.

“Whatever comes out I think people are going to be pouring through because I think in addition to what the highlights are, they’re going to really need to understand the details,” said Marc Gerson, chairman of Miller & Chevalier.

It’s unclear how much time there will be between the release of a bill and a committee vote, though Brady said his “current thinking” is to give more than the two days that’s required.

Lobbyists may have to act quickly to digest a bill and advocate for any changes.

“The longer you leave the bill out there, the more criticism you could be subjected to,” Becchi said.

Megan R. Wilson contributed reporting.