The House passed a package of three tax bills, collectively branded as “Tax Reform 2.0,” last week. The legislation now rests in the Senate, where it’s unlikely to be considered.
At the center is the Protecting Family and Small Business Tax Cuts Act (H.R. 6760), which makes permanent all of the individual tax changes enacted by the Tax Cuts and Jobs Act (TCJA), presently set to expire at the end of 2025.
The remaining two bills are a part of Republicans’ purported effort to regularly tune the tax code now that broad overhaul has been achieved through the TCJA. The Family Savings Act (H.R. 6757) contains a number of reforms to retirement plans and savings, including several provisions taken form the bipartisan Retirement Enhancement Savings Act of 2018 (RESA). And the American Innovation Act (H.R. 6756) seeks to encourage startup growth by increasing the amount of start-up and organizational costs that can be expensed and by relaxing restrictions on the use of start-up losses and credits after an ownership change.
For more details on each of the three bills, see our Tax Legislative Update
The overall effort appears largely motivated by its potential ability to help with messaging ahead of the midterms as Republicans do not have the support to overcome the 60-vote threshold required to secure passage through the Senate. H.R. 6760 is particularly unpopular among Democrats and even several Republicans from high-tax states, who oppose making permanent the $10,000 cap on state and local tax deductions.
The other proposals, however, could eventually garner enough bipartisan support to be included in future deals. If Republicans retain control of both chambers following the election, they may opt to wait until the new Congress and use budget reconciliation once again. While this would lower the threshold for passage in the Senate to a simple majority, it presents a challenge for any effort to make the TCJA’s individual provisions permanent as reconciliation bills cannot lose revenue outside the 10-year budget window.
Washington National Tax Office
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