Capitol Hill Recap: Speaker Vote on Ice?

The House will likely pause on voting for a permanent Speaker until January, putting a huge question mark on what legislation can be brought to the House floor until next year.

What Went Down:

• The House of Representatives will temporarily halt a vote for a permanent House Speaker until January, which throws into question what legislation can pass the chamber this year.
  • Meanwhile, the tax-writing House Ways and Means Committee has postponed hearings as the Speaker crisis took control of the House. Will these hearings get rescheduled?
• Tax-writers cheer IRS Direct file.
• Bicameral, bipartisan move on Taiwan legislation.
• Re-inventing the wheel: Putting together ANOTHER fiscal commission to reduce debt.

Let’s Get To It:

House Halted:

As this blog piece gets posted, the House is not expected to vote for a permanent Speaker until January of 2024. Until then, the chamber will be ruled by a temporary Speaker, Rep. Patrick McHenry (R-N.C.) – unless plans change.

The reason for delaying a vote for a permanent House Speaker is to buy lawmakers time to get enough support to elect someone (anyone?) as permanent House Speaker.

McHenry is the current temporary Speaker and he has said that his only job is getting a permanent Speaker elected to replace him. He is not interested in advancing legislation, like a tax or spending bill. He feels that those responsibilities rest with a “real” Speaker.

That was then. This is now.

If all goes according to plan, McHenry’s extended tenure as House Speaker will include the moment when the federal government runs out of money on November 17^th. It will also include an opportunity to pass year-end legislation that could include passing a tax bill.

It remains to be seen what legislative powers McHenry will have as a temporary Speaker with a long tenure. Will he be able to put legislation (be it tax or spending) on the floor and allow lawmakers to vote on it?

Meanwhile, the Senate is about to jam the House on a bipartisan supplemental dealing with Israel and Ukraine as well as a spending bill that will likely require bipartisan support to pass the House. Will House lawmakers be able to act on them?

The questions raised will get answered, eventually. The most likely answer is that House lawmakers will be able to vote and pass legislation. However, as of the posting of this blog, that decision has not yet been made.

Since the Speakership crisis began, the tax-writing House Ways and Means Committee largely postponed its schedule. Below is what got delayed:

• A markup of the “Federal Disaster Tax Relief Act of 2023”, the “Moving Americans Privacy Protection Act”, the “BRIDGE for Workers Act”, and legislation addressing customs and border protections.
  • This event was scheduled to occur on October 4^th. Details on these pieces of legislation is here.

• A field hearing on access to health care in rural and underserved communities in the U.S.
  • This event was scheduled to occur on October 17^th. There were no documents that accompanied this hearing.

Legislative outlook: It is not clear if the postponed events will be rescheduled. If they are, it is not clear how much traction they will get in the House considering that funding the federal government has become a permanent problem to overcome.

The Committee also had two hearings scheduled for this week that were not postponed. One was a subcommittee hearing on Social Security and improper payments. The other was a subcommittee hearing on frauds that occurred during the Pandemic. Neither are specifically about income tax law.

In the other chamber, the tax-writing Senate Finance Committee held a hearing on Medicare Advantage Annual Enrollment this week. Again, not really a tax thing. Its focus was on open enrollment.

Three Cheers?

Two of the four top, congressional tax-writers this week cheered the fact that certain taxpayers will be able to file their federal returns to the IRS for free next year through its Direct filing program:

Senate Finance Chairman Ron Wyden (D-Ore.):

“All Americans deserve a free and easy way to file their taxes directly online with the IRS and I’m glad to hear a pilot is slated to launch in time for next year’s filing season. I look forward to the day when every taxpayer has this option. There is no good reason to coerce taxpayers to pay the big tax software companies for the convenience of filing taxes online, or to require them to disclose confidential tax information to companies who have been turning it over to big tech firms.”

House Ways and Means Ranking Member Richard Neal (D-Mass.):

“Direct filing will ease taxpayers’ burden and help deliver more comprehensive services, including bilingual customer support lines, that particularly benefit low- and moderate-income families across America.”

The lawmakers are responding to the IRS announcement this week that it has launched its Direct File pilot for the 2024 filing season.

From the announcement:

“The IRS will conduct a limited-scope pilot during the 2024 tax season to further assess customer support and technology needs. It will also provide a platform for the IRS to evaluate successful solutions for potential operational challenges identified in the report the IRS submitted to Congress earlier this year.”

The states participating in the program are Arizona, California, Massachusetts and New York.

Legislative outlook: Legislation could be needed depending on what the pilot program discovers. Getting that legislative fix through a divided Congress will be a slog.

Taiwan tax bill:

All four of the top congressional tax-writers formally introduced legislation this week that would relieve the double-taxation of investments between the U.S. and Taiwan.

The sponsors of the legislation are:

• House Ways and Means Chairman Jason Smith (R-Mo.)
• Senate Finance Committee Chair Ron Wyden (D-Ore.)
• House Ways and Means Ranking Member Richard E. Neal (D-Mass.)
• Senate Finance Committee Ranking Member Mike Crapo (R-Idaho)

This is tax legislation. Members from both political parties, and in both chambers, want it enacted. In fact, it passed unanimously out of the Senate Finance Committee, and follows on the heels of Congress approving a new trade agreement with Taiwan.

In other words, it appears likely that the Taiwan tax bill will get votes in the Senate and the House (assuming it is open for business).

A tax bill that goes to the floor can have additional tax provisions added to them.

Could additions include R&D expensing, expanding the interest deduction, and upping Bonus Depreciation to 100%? Yes. These provisions would be germane additions. Will they be added, probably not.

Legislative outlook: Getting these provisions added to the Taiwan bill would likely require including an expansion to the Child Tax Credit and upping the SALT cap to something above $10,000. These measures do not have bipartisan, bicameral support and, if added to the Taiwan tax bill, would hurt its chance for enactment. In other words, it is unlikely that the aforementioned business tax provisions will be added to the Taiwan tax bill.

Been There, Done That:

The House Budget Committee held a hearing this week that tried to understand why past congressional fiscal commissions to reduce the debt did not help in lowering the deficits and debt. The overriding objectives for the hearing were:

• Evaluate the historical context of a fiscal commission;
• Assess the role of a commission;
• Learn from the experiences of the expert witnesses.

The witnesses testifying before the committee were retired lawmakers who participated in past fiscal commissions. These groups sought to lower the deficits and debt of the U.S. Federal government but failed to do so.

Why did the past commissions fail? Because they suggested remedies to Congress that were politically unpopular, like creating a new form of taxation, increasing income taxes, cutting spending, and reforming entitlements (i.e., increasing the payroll tax while also cutting benefits).

The recommendations were not the problem. The issue was they were so politically unpopular that any lawmakers who supported them would likely lose their next election.

Legislative outlook: If another debt commission is created, it will likely make the same recommendations, which will also be wholly ignored by lawmakers seeking to win another term in office.

Pardon if this recap missed a monumental moment, but we can recap it next time!

Adios amigos!