Capitol Hill Recap: What Went Down and What Didn’t

Welcome to our first installment of Capitol Hill Recap. It summarizes tax activities that did and did not take place in our nation’s capital.

Congress is back! Actually, lawmakers returned to Washington a few weeks ago. But most of their time last month was spent deciding who would lead House Republicans (spoiler alert: Rep. Kevin McCarthy is the new Speaker) and which Senator would sit on what committee in the upper chamber.  Now, the congressional wheels are starting to turn. Let’s get to it:

What Went Down:

• Republicans won the House majority after last year’s election, making conservative lawmakers the new chairs for the chamber’s committees. Rep. Jason Smith (R-Mo.) is the new House Ways and Means Chairman. His focus is expected to skew toward individuals and small businesses, rather than corporations.
  • Coincidence? Tax breaks in the 2017 tax reform bill were permanent for corporations, but temporary for individuals. Smith’s focus on individual taxes might be well timed considering that those provisions expire in the next couple of years. Meanwhile, corporate tax relief is on cruise control.
  • The Committee is expected to propose legislation that extends provisions from the 2017 tax reform bill.
  • Will step-up in basis be modified?
  • But First: The Committee will hold a non-tax hearing with Assistant U.S. Attorney Michael Galdo about unemployment payments during the pandemic. (Expect finger-pointing at this hearing.)
  • A list of members on the House Ways and Means Committee is here.  
• The Senate Finance Committee is ready for action.
  • We’re waiting for Committee Chairman Ron Wyden (D-Ore.) to announce his first hearing.
  • It might seem that Wyden and Smith are cut from different clothes, but both have been known to work across the aisle. One should not be surprised if these committees find common ground – especially if that ground includes tax cuts.
  • A list of members on the Senate Finance Committee is here and here.
• The White House announced that President Joe Biden will give his State of the Union Address to Congress on February 7th.
  • Given the current lack of focus on tax policy, it is unlikely that the President will mention tax policy – expect in the context of raising the debt ceiling (more on this later).
  • White House officials have recently called for raising revenue by clamping down on “tax cheats.”
• President Biden announced that his budget will be released on March 7th. The President’s tax agenda will likely be included in this document. So “taxing the rich” will likely be put into context.

What Didn’t Go Down:

• A tax bill:
  • Interest groups have repeatedly called on Congress to fix the R&D tax break, interest expensing and bonus depreciation. It is not clear when (or if) lawmakers will tackle these issues. This is a frustrating situation for just about every business owner.
  • An R&D fix is already a year late. Pro tip: Lawmakers don’t care about time/schedules when it comes to anything except congressional recesses.
  • The current timeline for a tax bill happening in Congress is at the end of the year. Situations could arise (like a recession) that might accelerate this timeline. We’re in wait-and-see mode on taxes.
• It was reported that Secure 2.0 “would prohibit older workers from making catch-up 401(k) contributions in 2024 unless lawmakers or the IRS fix it this year,” according to Bloomberg.
  • No fix has been announced and good luck accomplishing this feat in a divided Congress. (Dems control the Senate and the GOP controls the House.)
• Debt ceiling fix:
  • Resolving this issue is months away.
  • One side wants spending cuts to accompany a debt ceiling increase. Others are calling for tax increases.
  • Don’t discount any proposals that are currently on or off the table. Remember the fiscal cliff fight of 2012? Tax increases were not on the table when those talks began, but the final agreement included the expiration of high-end Bush tax cuts. Watch this space!

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

Adios amigos!