Congress faces an uphill battle in addressing its remaining tax priorities this year, with attention in Washington shifting to the upcoming elections and only a handful of must-pass legislative items left to serve as vehicles for tax bills.
Atop the wish list for Republicans are technical corrections to the Tax Cuts and Jobs Act (TCJA). Democratic priorities include enhancing tax incentives for families and low-income taxpayers and securing at least partial relief from the $10,000 cap on the state and local tax (SALT) deduction.
The two sides were unable to find consensus on these issues despite agreeing on a broader, $428 billion tax package in December. The package, which was attached to the government spending bill Congress passed before adjourning for the year, included renewing extenders through 2020, a retirement incentives bill, changes to unpopular TCJA provisions, disaster relief and a repeal of three taxes enacted by the Affordable Care Act. For more details, see our Tax Legislative Update
Lawmakers spent much of last year working on a compromise to pair a handful of technical corrections with Democratic tax credit provisions, but remained far apart. Republicans were ultimately unwilling to meet Democrats’ request for $100 billion to expand the earned income tax credit, child tax credit or child and dependent care tax credit, contending the ask was too high.
Negotiations are expected to resume, particularly with another deadline to renew extenders looming at the end of the year. House Ways and Means Chair Richard Neal (D-Mass.) said recently he hoped there would be an opportunity to pair a fix for bonus depreciation and qualified improvement property with tax credits. But Senate Finance Committee Chair Chuck Grassley (R-Iowa) downplayed the possibility, stating that six weeks of negotiations last year failed because of strong resistance to Democratic tax credit priorities among Republican senators, including leadership.
The likelihood of a major breakthrough remains a constant uncertainty in the current political climate. And with the debt ceiling suspended through July 2021 and budget caps lifted for 2020 and 2021, the government funding deadline at the end of September presents one of few opportunities this year to bundle tax bills with major, must-pass legislation. Congress could also pass a standalone tax package, but there may be little impetus to get such legislation done in an election year, particularly if other issues emerge and take precedence.
Washington National Tax Office
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