Facing an already shortened work week due to Rosh Hashana, House Republican leaders say when the lower chamber reconvenes tomorrow, Sept. 12, it will stay in session through the end of the week despite the impending landfall of Hurricane Florence.
The reason for powering through, possibly without GOP representatives from the Carolinas and Virginia who said they plan to ride out the potentially devastating storm in their home districts? Tax Reform 2.0.
The GOP is committed to passing this month additional tax provisions, primarily making permanent the individual tax breaks that are set to expire at the end of 2025.
To meet that self-imposed deadline, lawmakers will need to take advantage of every available legislative hour.
The urgency is based not only on the upcoming midterm elections, which are less than two months away, but also on the rest of the items on Congress' packed to-do list. Most critical these are the spending bills necessary to prevent a government shutdown on Sept. 30.
So, to borrow a phrase from the current White House, it's Tax Reform 2.0 Week.
Tax Reform 2.0 times three: Three bills were introduced yesterday, Sept. 10, covering the tax measures. They are:
H.R. 6760, the Protecting Family and Small Business Tax Cuts Act of 2018. The key provisions in this bill would make permanent the —
- New individual tax rates created by the Tax Cuts and Jobs Act,
- Section 199A passthrough business income deduction and
- $10,000 cap on the itemized deduction for state and local taxes (SALT).
There had been some speculation (hope?) that the SALT section would be removed to ease the concerns of Republican Representatives in high-tax states whose residents are hit hardest by this limitation.
H.R. 6757, the Family Savings Act of 2018. This bill would, in part —
- Further expand how 529 college savings account money could be used, most notably allowing for coverage of some home-schooling expenses,
- Repeal the maximum age for IRA contributions,
- Exempt certain lower-balance retirement plans from required minimum distribution (RMD) rules for individuals,
- Create a new tax-exempt individual savings option dubbed the Universal Savings Account (USA) and
- Allow penalty-free withdrawals up to $7,500 from retirement plans when a child is born or adopted.
H.R. 6756, the American Innovation Act of 2018. This bill covers the small business components of added tax reform. It would, in part —
- Expand start-up business deduction limits and
- Allow startup businesses to retain their built-up tax benefits if ownership changes.
Add-ons to the added legislation: Tax Reform 2.0 also is a return to the wish list that the House created when this process got underway in earnest last year.
Back then, the House and Senate created their own versions of the TCJA. By the time the process wrapped up in December 2017, the Senate prevailed in most cases.
Now some provisions that were in the House's original tax reform version but didn't make the final bill cut are resurrected in some form in the three Tax Reform 2.0 bills. See the home-schooling addition to 529 rules noted above.
Will they make it into law this second time around? Or will the Senate win again?
We'll see in a few weeks.
The Ways and Means Committee is expected to mark up all three bills on Thursday, Sept. 13. GOP leaders hope to get the bills to the full House for a vote by the end of the month.
Cost concerns, round two: Just like last time, Democrats are expected to oppose these latest GOP tax proposals.
And just like last time, money will be a key argument against their passage. Yes, we are living in a political bizarro world (it's not the first time…) where Democrats are chastising Republicans for not paying enough attention to Uncle Sam's bottom line.
It's not an unwarranted worry.
An estimate by the Joint Committee on Taxation says that the effort to make the TCJA's temporary individual tax provisions permanent would cost $627 billion over the next decade.
Timing also is not on the GOP's side, at least when it comes to talking about tax cut costs.
At the same time bipartisan Congressional numbers crunchers were working on the tax bill costs, the Congressional Budget Office announced that that the federal budget deficit hit $895 billion for the first 11 months of fiscal 2018.
That's roughly $222 billion more, or 32 percent higher, than the shortfall recorded for the same time frame in fiscal 2017.
And don't look now, but government expenditures are going to rise if the predictions of Hurricane Florence's strength and potential damage are correct.
Republicans insist that deficit will drop once its tax cuts take full effect and are expanded.
We'll see whether the House, Senate and voters will find this argument persuasive.
You also might find these items of interest:
- Business tax deductions aren't hurt by IRS SALT rule
- GOP law means 75 million won't owe any 2018 income tax
- Treasury, IRS issue 199A business tax deduction guidance