What House panel vote next week on Tax Reform 2.0 means
WASHINGTON – The House Ways and Means Committee plans to vote next week on Tax Reform 2.0 legislation that would make the $10,000 federal cap on state and local tax deductions permanent, the top tax writer in the House said Tuesday.
Tax Reform 2.0 also would make permanent the lower tax rates for individuals and small businesses that are otherwise due to expire at the end of 2025, Ways and Means Committee Chairman Kevin Brady, R-Texas, told reporters.
A vote by the full House could come later this month, although passage of the bill is unlikely in the Senate where a 60-vote supermajority would be needed for any legislation that increases the federal deficit.
Brady didn’t say how much the new tax plan would increase the federal deficit, but pointed out that tax revenues are up this year since passage of the Tax Cuts and Jobs Act in December. The bill is not expected to include provisions that would fully pay for it.
“We are generating more revenue this year than last and making the family/small business cuts permanent equals about 1.4% of collections over the next decade if approved this year,” Brady said.
He described the proposal as “a very modest investment in a dramatically better economy where a lot of people in our country who really lost hope in finding a good paying job now have hope and are actively seeking jobs.”
House Speaker Paul Ryan, R-Wis., responded, "Yes we are" to a question Wednesday on whether House Republican leaders are still planning a floor vote on the bill. Bloomberg News reported Tuesday that GOP leaders were considering a delay until after the November election, but a senior House GOP leadership aide told The Bond Buyer the Bloomberg report was wrong.
House Majority Whip Steve Scalise, R-La., and Brady are hosting a briefing for House Republicans on Thursday to discuss details the legislation.
Republican Rep. Peter King of New York, who represents a Long Island district, told The Bond Buyer Tuesday that he would vote against a permanent SALT deduction cap just as he opposed the original one that was part of last year’s Tax Cuts and Jobs Act.
A number of Republican House members from New York, New Jersey, California and other high tax states are expected to vote against any permanent extension of the cap on the SALT deduction.
The IRS last month released its proposed regulations that would halt workarounds of the $10,000 cap on SALT deductions. The service also clarified on Wednesday that business taxpayers that make business-related contributions to charities or government entities for which they receive state and local tax credits generally can continue to deduct them as business expenses without any cap.
"The recent proposed rule concerning the cap on state and local tax deductions has no impact on federal tax benefits for business-related donations to school choice programs,” Treasury Secretary Steven Mnuchin said in a release.
Brady described the proposed regulation as a response to "some states that were trying to really conjure up tax evasion schemes to the detriment of the rest of the country. [The] Treasury Department was right on point to stop that tax evasion while also protecting the pre-existing credit programs of the other states that really were never intended to affect your federal tax liability.”
The conservative-leaning Tax Foundation and the liberal-leaning Institute for Taxation and Economic Policy have said the proposal takes a non-partisan approach to tackling what they perceive as abuses.
Top officials in New York and New Jersey, however, are threatening to sue the federal government over the proposed regulation in addition to the federal lawsuit they have filed challenging the constitutionality of the SALT cap.
“We’ve already sued the administration once over the SALT tax cap, and we’ll do it again if we have to,” New Jersey Attorney General Gurbir Grewal said the day Treasury and the IRS released the regulations.
A 45-day public comment period ends Oct. 11 and a public hearing it will be held Nov. 5 at the IRS headquarters in Washington.