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Republicans approve budget resolution in first step toward ACA repeal and tax reform

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Tax Hot TopicsThe House and Senate approved a budget resolution last week that would allow them to repeal the Affordable Care Act (ACA) using the budget reconciliation process. The quick passage of a 2017 resolution will also potentially allow Republicans to pass a second budget this year to create separate reconciliation instructions for tax reform.

Republicans have made both ACA repeal and tax reform top priorities after their election sweep. But they hold just 52 votes in the Senate, well short of the 60 votes needed to overcome procedural hurdles like filibusters. Because of Democratic opposition, Republicans are considering using reconciliation both for ACA legislation and tax reform. The reconciliation process allows the Senate to move specific types of legislation with simple majorities in the Senate.

The budget resolution passed last week would allow Republicans to repeal some of the ACA with 50 votes in the Senate, with Vice President-Elect Mike Pence as the tie breaker. However, reconciliation comes with restrictions. Reconciliation does not allow for provisions that do not affect revenue or for provisions that lose revenue outside the 10-year budget window. This may make it difficult to fully repeal all the ACA taxes and many of the ACA reforms that do not have a direct revenue impact.

Republicans are also still mired in a debate among themselves about the best way to proceed. Leaders are generally calling for a delayed repeal that would give Congress time to write ACA replacement legislation, while President-elect Trump and some rank-and-file members are pushing for immediate repeal.

The resolution applies to fiscal year 2017 (which began in September), and opens the door for a second budget resolution with reconciliation instructions to be passed later in the year. This could potentially allow for a tax reform reconciliation bill in the current calendar year, but the tax reform process is likely to be long and difficult and could spill well into 2018.

Contact
Mel Schwarz
Partner, Washington National Tax Office
+1 202 521 1564

Dustin Stamper
Director, Washington National Tax Office
+1 202 861 414


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