Comprehensive tax reform now appears to be a promising goal in 2017 with Republicans in control of the White House and both chambers of Congress following the party’s Election Day victories, some experts believe.
“It makes the probability that Congress enacts comprehensive tax reform by the August recess of 2017 ... near 80 percent,” Kenneth J. Kies, managing director of the Federal Policy Group LLC, said.
President-elect Donald TrumpDonald TrumpUN meeting with US, France canceled over scheduling issue Trump sues NYT, Mary Trump over story on tax history McConnell, Shelby offer government funding bill without debt ceiling MORE won a stunning victory over Democratic presidential nominee Hillary ClintonHillary Diane Rodham ClintonGOP political operatives indicted over illegal campaign contribution from Russian national in 2016 Clinton lawyer's indictment reveals 'bag of tricks' Attorney charged in Durham investigation pleads not guilty MORE, bucking recent polling predictions. Republicans also maintained their majorities in the House and Senate.
Trump campaigned on an economic agenda that includes deemed repatriation and slashing taxes primarily for businesses and high-income earners. House Republicans say that’s a vision shared through their “Better Way” policy platform that was unveiled in June.
“The blueprint the House laid out is very close to Mr. Trump's proposal. It's really important that we redesign the way we tax so our companies can compete and win anywhere in the world, especially here at home,” House Ways and Means Committee Chairman Kevin BradyKevin Patrick BradyHouse panel advances key portion of Democrats' .5T bill LIVE COVERAGE: Ways and Means to conclude work on .5T package LIVE COVERAGE: Tax hikes take center stage in Ways and Means markup MORE (R-Texas) said Nov. 9 on CNBC.
“We need to make sure those dollars are flowing back to the United States for jobs, for manufacturing, for research. We want to make sure we eliminate every tax incentive to move U.S. jobs or headquarters or research overseas,” Brady said.
Brady has said committee staff have been engaged with Trump’s advisers since the release of the “Better Way” plan.
Small window of opportunity.
However, Trump needs to be aware of timing if he wants any major tax bill to pass Congress by next August, according to Kies, who served as chief of staff for Congress's Joint Committee of Taxation.
“First-term presidents have a window of opportunity to do big things but it doesn’t stay open much later than the August recess of their first year in office,” Kies said, alluding to past presidents passing major tax and spending measures in that time frame.
For example, Congress passed then-President Ronald Reagan’s Economic Recovery Tax Act by August 1981 following his election a year before. Former President Bill ClintonWilliam (Bill) Jefferson ClintonVirginia governor's race enters new phase as early voting begins Business coalition aims to provide jobs to Afghan refugees Biden nominates ex-State Department official as Export-Import Bank leader MORE, elected in 1992, passed his budget deal in August 1993.
Former President George W. Bush, elected in 2000, passed his Economic Growth and Tax Relief Reconciliation Act by May 2001. President Obama, who was first elected in 2008, was able to get Congress to pass both children’s health insurance and $800 billion stimulus bills by August 2009.
Fast-track to tax reform.
A fast-track legislative process called budget reconciliation could be the key to moving any major tax reform bill, Jon Traub, managing principal of tax policy for Deloitte Tax LLP, said.
Reconciliation can be used to expedite tax and spending bills by circumventing the Senate’s 60-vote threshold.
That approach “could prove difficult for political, substantive and procedural reasons, but could be the most direct path to the passage of tax reform,” said Traub, former tax counsel and staff director of the House Ways and Means Committee.
Sen. Charles SchumerChuck SchumerLouisiana delegation split over debt hike bill with disaster aid The Hill's Morning Report - Presented by Alibaba - Government shutdown fears increase as leaders dig in McConnell signals Senate GOP will oppose combined debt ceiling-funding bill MORE (N.Y.), likely the next Senate Democratic leader who attempted to work on a bipartisan international tax deal in 2015, could be a major legislative hurdle for Republicans.
“The hindrance would be disagreement and the ability of Sen. Schumer to slow things down if he so chooses,” said Matthew D. Cutts, partner at Squire Patton Boggs.
A tax administration challenge.
Treasury Department appointments may happen quickly if tax reform is the priority for the new administration, but implementation could pose a problem — especially with the IRS’s ongoing budget cuts, according to Joshua Odintz, partner for Baker & McKenzie's North America Tax Practice.
“Tax reform is not just a one-time event, where it passes and that’s the end of the story,” Odintz, former Treasury senior adviser for tax reform, said.
“A lot of guidance needs to be issued. The IRS will have to issue new forms, reprogram systems. It will take resources that the IRS may not have right now,” Odintz said. “So that’s the concern that the agency needs — more funding — to put tax reform to the finish line.”
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