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Capitol Hill Recap: Lawmakers Call for Passing Year-End Tax Bill

November 30, 2023
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Key Takeaways

  • House lawmakers call for passing the Big Three by year-end, as momentum on the issue has apparently increased (a little bit).
  • Tax-writers advance Taiwan and other tax bills. Will they play a role in moving the Big Three?
  • Did the Senate tax chief just start debate on paying to extend tax reform provisions?
  • House committee debates the creation of a fiscal commission that will likely go nowhere.

Lawmakers this week implored House Speaker Mike Johnson (R-La.) to pass the Big Three tax breaks before year-end as momentum has gained on this issue.  

What Went Down:

  • House lawmakers call for passing the Big Three by year-end, as momentum on the issue has apparently increased (a little bit).
  • Tax-writers advance Taiwan and other tax bills. Will they play a role in moving the Big Three?
  • Did the Senate tax chief just start the debate for paying to extend tax reform provisions?
  • A House committee debates the creation of a fiscal commission that will likely go nowhere, if history is any guide.

Let’s Get To It:

Believe It When You See It:

Scores of House Republicans signed and sent a letter this week to Speaker Mike Johnson (R-La.) imploring him to pass by year-end legislation on the Big Three (R&D expensing, expanding 163(j)-interest deduction, and upping Bonus Depreciation to 100%).

From the letter:

We write to urge you to support legislative action in any upcoming package by the end of the year to support three important, pro-growth tax changes. Specifically, we support extending: immediate R&D expensing, full capital expensing, and a pro-growth interest deductibility rule… Failing to act quickly will jeopardize hundreds of thousands of American jobs.

It's important to note that none of these lawmakers sit on the tax-writing House Ways and Means Committee, which was the intent. House Republicans who sit on the Committee have already shown their support for these measures. This letter shows that support for the Big Three is not restricted to tax-writing lawmakers. Non-tax lawmakers also understand the consequences for passing the Big Three. (BTW, Democrats also support these measures.)

The letter comes as publications reported this week that congressional tax-writers have become more bullish about passing the Big Three by year-end.  

Tax Notes ($):

Tax talks that would combine a beefed-up child tax credit and reinstate full research and development expensing aren’t exactly sizzling, but they are picking up speed after a year in the doldrums.

Senate Finance Committee Ranking Member Mike Crapo (R-Idaho), as reported by Bloomberg ($):

Crapo…told reporters Tuesday that he’s still working to get a bill renewing expired business tax breaks done before the end of the year, but noted that lawmakers will have to find a legislative vehicle that the package could hitch a ride on… “I’m not ready to say that we are not able to get something done this year,” Crapo said. 

Regarding his “hitch a ride” comment, please see the prior Recap, which is here.

If tax legislation gets House and Senate floor votes it is expected to include language expanding the Child Tax Credit, turning the Big Three tax bill into a Big Four tax bill.  

Here’s the thing: The passage of tax legislation by year-end is still considered a longshot. Hurdles still need to be cleared.

Arguably, the biggest hurdle is that congressional leaders (Speaker Johnson (R-La.), Senate Majority Leader Schumer (D-NY), House Minority Leader Jefferies (D-NY), and Senate Minority Leader McConnell (R-Ky)) must agree that tax legislation should pass by year-end. Bipartisan support will be needed to pass this tax bill so all leaders must be onboard.  

In conversations with tax-writing lawmakers and tax staff, they say that congressional leaders have yet to focus on moving tax legislation by year-end. Their focus is on the myriad of spending bills that many lawmakers insist must pass before they adjourn for the holidays.  

Tax legislation could be added to some of these spending measures, but, so far, that decision has not been made.

Legislative Outlook: If congressional leaders want to pass a tax bill by year-end, it will be done. If they don’t want to pass a tax bill by year-end, it will not happen. Period.

Leaders could move tax legislation as a stand-alone bill or by adding it to another piece of legislation that is expected to pass Congress before January. They can also force rank-in-file lawmakers in their respective party to support tax provisions the members oppose - that's why they're the leader.

However, things must move quickly to vote on tax legislation before year-end. Lawmakers have roughly two weeks before they leave for the holidays, according to the congressional calendar. They also have several other legislative priorities that out-rank the passage of tax legislation.

Bottom line: Don’t believe what lawmakers say or write in a letter. Believe what they do. Watch this space in regard of them advancing tax legislation by year-end.

Tax Committee Action:

The House Ways and Means Committee approved three tax bills this week, and one of them could become a vehicle for passing the aforementioned Big Four tax provisions.

The “United States-Taiwan Expedited Double-Tax Relief Act” would prevent taxpayers from double taxation when doing business in both countries – assuming Taiwan passes similar legislation. In short, this protection will not become law if Taiwan doesn’t pass the same protection.

Passage of the Taiwan bill is expected and some lawmakers would like to add the Big Four to the measure. For this to happen, lawmaker support for the Big Four tax bill must be broad and bipartisan. Currently, it is not clear if the tax bill has that level of support.

Other lawmakers contend that the Taiwan bill cannot be used as a vehicle for the Big Four because it is too small. Also, enactment of the Taiwan bill is contingent upon the Asian country passing similar legislation. If Taiwan fails to meet this demand, and the bill is not enforced, the Big Four would likely not become law. In short, it would be hard to enact a portion of a bill since the line item veto is now considered unconstitutional.

Legislative Outlook: The Taiwan tax bill passed the tax-writing committee unanimously and it is expected to pass the House and Senate. Currently, it is not expected to include the Big Four. But watch this space. Things once considered outlandish can sometimes seem reasonable as the year-end draws closer and lawmakers seek to leave town before the holidays.

The tax-writing committee approved two additional tax bills this week:

The “Terminate the Tax-Exempt Status Of Terrorist Supporting Organizations.” Its description is here.  

The “VSO Equal Tax Treatment Act.” Its description is here.

The fate of these bills is unclear, but both passed the committee with overwhelming, bipartisan support.

TCJA Debate Begins:

Call it the first salvo to pay for extending provisions in the 2017 tax reform bill that are scheduled to expire in 2025.

Senate Finance Chairman Ron Wyden (D-Ore.) this week introduced the “The Billionaires Income Tax Act.” The bill basically raises taxes on rich folks by requiring them to pay tax on unrealized capital gains every year.

Taxpayers with more than $1 billion in assets, or more than $100 million in income for three consecutive years, would be affected by the bill.

An explainer of the bill is here.

A section-by-section summary of the bill is here.

The bill’s text is here.

On Thursday, Wyden took to the Senate floor and spoke about his bill. He strongly suggested that the revenue raised by the legislation could help pay for other legislative priorities. The legislation is estimated to raise $557 billion over ten years, according to the Senator’s speech.

That amount would be a drop in the bucket if used to “payfor” extending the 2017 tax reform provisions that expire in 2025.

The Committee for a Responsible Federal Budget, a well-respect Washington thinktank, pegged the full-blown, ten-year cost at roughly $6 trillion if the tax cuts are extended and the “payfors” are allowed to expire.

If Congress extends all tax reform provision (tax cuts and their offsets) the ten-year price tag drops to $3.8 trillion, including interest.

Without offsets, Congress cannot pass a tax bill with a ten-year cost totaling $6 trillion. It also cannot pass a tax bill with a $3.8 trillion ten-year price tag.

The cost for extensions has prompted lawmakers and staffers to say that extending these provisions will be done annually, aka: A tax extender package.

There is also a debate over whether offsets will be needed. Some lawmakers contend that the cost to extend current tax law does not need to be offset. This argument was why tax extender packages in the past did not include cost offsets.

Legislative Outlook: The fight to extend the 2017 tax reform measures will be greatly affected by the turnout of the 2024 election.

The currently thinking is that if Democrats keep the White House and the Senate, and regain control of the House, the debate for extending the provisions will focus on taxpayers earning less than $400,000 a year. If Republicans gain control of the White House and both chambers, Katy bar the door. The focus will be on extending all the tax cuts and none of the tax increases. If Washington is politically divided, who knows what the focus will be.

Lawmakers and staffers have referred to 2025 as being the “World Series” or “Superbowl” of taxes. It could also be considered the “Armageddon” of tax.

Fiscal Commission Cometh:

The House Budget Committee held a hearing this week about creating a fiscal commission that would focus on reducing the debt level of the Federal government.

A message repeated during the hearing was that commissions rarely work. House Budget Committee Chairman Jodey Arrington (R-Texas) explained the usefulness of commissions by saying, “when all is said and done, more is said than done.”

Case in point: The Joint Select Committee on Deficit Reduction (aka: Supercommittee) was created in 2011 and cheered by lawmakers from both parties. But none of them followed its lead. In fact, the Supercommittee didn’t even send debt-reducing recommendations to Congress because they would have been politically toxic for lawmakers to support.

CNN (from 2011):

President Barack Obama and congressional leaders traded blame Monday for the failure of the congressional “super committee” to forge a deficit reduction deal… Earlier, the co-chairs of the bipartisan special joint committee said in a statement that “after months of hard work and intense deliberations, we have come to the conclusion today that it will not be possible to make any bipartisan agreement available to the public before the committee’s deadline.”

The Supercommittee was created when the Federal debt level was roughly $14 trillion. The current debt level is nearing $27 trillion. 

If a new fiscal commission is created, it will likely highlight the financial calamity that faces the Federal government – just like the Supercommittee did – and propose tough choices for reducing the red ink – just like the Supercommittee was supposed to do but didn’t.

Here’s the thing: Lawmakers already know how to reduce the wave of red ink flooding federal coffers. Congress has the “power of the purse.”  Its options to reduce the deficits and debt are spending cuts (which includes entitlement reform), tax increases (which includes entitlement reform), or a combination of both. Lawmakers don’t need a commission to tell them how to do their job.

Legislative Outlook: A commission might be created. If it makes recommendations to Congress, they will center around tax increases and/or spending cuts. The recommendations might be common sense, but they will also likely be politically unacceptable. To wit, digging out of a $27 trillion hole will require mammoth spending cuts and gigantic tax increases – all of which are politically unpopular.  

Most lawmakers want to get re-elected, and getting re-elected usually means avoiding tough choices, like reducing the Federal debt.

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

Adios amigos!

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About the Author(s)

Jay Heflin Photo

Jay Heflin

Director of Legislative Affairs
Jay brings more than two decades of experience to his job as Director of Tax Legislative Affairs in Eide Bailly’s Washington D.C. office. Jay provides political intelligence and guidance to the firm on the progress of tax legislation on Capitol Hill. Prior to joining the firm, he was a director at the tax lobbying shop Federal Policy Group, LLC, where he tracked tax legislation in Congress and participated in lobbying efforts to amend tax legislation. Before joining the Federal Policy Group, he was a Congressional reporter for several news organizations where his beat was tax policy.