Budget passage clears way for tax reform bill next week

Budget passage clears the way for a tax reform bill next week.The House agreed to the Senate budget resolution on Oct. 26 in a major step toward tax reform. The House Ways and Means Committee is now scheduled to introduce a full tax reform bill on Nov. 1.

The budget agreement, which does not need to be signed by the president, includes reconciliation instructions that allow tax writers to lose up to $1.5 trillion in revenue in a tax reform bill. Reconciliation is key to tax reform because it allows Republicans to bypass 60-vote procedural hurdles in the Senate and approve a bill with a simple majority vote.

With a budget resolution in place, tax reform efforts should immediately gain momentum. Tax reform is clearly now the top Republican priority, and one of their last opportunities to secure a signature legislative achievement before mid-term elections in 2018. Republican leaders are setting an aggressive timeline to complete a bill.

The House Ways and Means is planning to introduce their bill on Nov. 1, mark it up the following week, and send it to the House with the goal of final passage before Thanksgiving. The Senate is at least a week behind and probably more, but Republican leaders are hoping they can reconcile House and Senate bills and enact final legislation before the end of the year.

That goal may be overly optimistic. Tax reform will certainly run into hurdles that could significantly delay that timeline well into 2018, or even derail the effort altogether. Tax writers are already dealing with political pushback on many of their proposals and are facing scoring and revenue challenges. The reconciliation process makes tax reform easier, but comes with its own restrictions. Reconciliation bills cannot lose money outside of the 10-year budget window, leaving Republicans with many difficult decisions.

Despite the challenges, major tax reform appears more possible now than it has in decades. Many of the proposals would have a profound impact on how both individuals and businesses are taxed. For more information on the framework tax writers are using as the template for their bills, see our previous Tax Legislative Update.

Dustin Stamper
Director, Washington National Tax Office
+1 202 861 4144

Shamik Trivedi
Senior Manager, Washington National Tax Office
+1 202 521 1511

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