Capitol Hill Recap: Tax Bill Moves Forward, Don’t Get Excited

June 15, 2023

The House Ways and Means Committee approved three tax bills on June 13th that the chamber could pass in July, but passage in the Senate is unlikely.

What Went Down:

  • The House Ways and Means Committee approved legislation on a partisan basis that addresses the Big Three tax issues, as well as other measures.
  • The Senate Finance Committee held a hearing on June 14th about family tax policies, which could determine the fate of the House tax bill.

Let’s Get To It:

House Tax Bill:

The House Ways and Means Committee approved three tax bills on June 13th that modify taxes for individuals and businesses. The current expectation is that these bills will likely pass the House but not the Senate.

To name a few items in the bills, they allow R&D costs to be expensed, expand the 163(j) interest deduction and return Bonus Depreciation to 100%.

Passage in the House is expected, but not a lock.

Some House Republicans are warning they will oppose the bill if it doesn’t include a SALT fix for the $10,000 cap that is current law. Democrats are not expected to support the bill, and if more than five House Republicans oppose it, the legislation will not pass the chamber.

A SALT fix could be added to the bill when it gets a hearing in the House Rules Committee. This panel decides how and if legislation will be debated on the House floor. It also decides if amendments will be allowed and how much debate time the bill gets.

The House must approve the Rule before voting on the actual bill. Recently, some lawmakers have opposed the Rule, thereby blocking a vote on the legislation. It is not clear if this scenario will affect a floor vote on the tax bill. 

The legislation can pass the House with only Republican support. A vote on the bill is expected in July. If approved, it moves to the Senate.

In the Senate, Democrats are the majority party and have 51 members. For the House tax bill to pass the Senate, it will likely require 60 votes. This means that passage requires support from a broad swath of both parties. That level of support is not expected to occur.

The lack of approval in the Senate has little to do with the aforementioned tax provisions, which have bipartisan, bicameral support. Senate disapproval is more about what isn’t included in the bill.

The legislation will not pass the Senate if Democrats oppose it. To win their support, many of them insist that an expansion of the Child Tax Credit must be added to the legislation.

However, adding this provision to the bill will likely not be enough to secure its passage. For every Senator willing to support a Child Tax Credit being added to the bill there will likely be a greater number of Senators who oppose the legislation if the Credit is included (i.e., not all Senate Democrats support an expansion of the Credit).

Even if an expansion of the Child Tax Credit is excluded from the bill, it is not expected to pass because a vast majority of Senate Democrats won't support the bill.  

There are other reasons why the legislation is unlikely pass the Senate (and maybe even the House), which include:

  • The bill repeals several green energy tax incentives that were enacted in the Inflation Reduction Act (IRA). Only Democrats supported the IRA when it became law, and many of them might have trouble supporting legislation that undoes a chief policy priority for their party.
  • The bill creates Rural Opportunity Zones. Democrats have opposed these Zones since their creation in the 2017 tax reform bill.
  • The bill adds to the deficit. The federal government is drowning in red ink and lawmakers JUST passed legislation allowing the federal government to take on more debt. Now may not be the best time to pass legislation that adds more red ink.

If a Senate vote occurs on this bill, it will likely be toward the end of the year, according to House Ways and Means Chairman Jason Smith (R-Mo.).

Also, the White House has come close to threatening to veto the legislation.

White House Press Secretary Karine Jean-Pierre told reporters on June 14th that President Biden is against legislation that would repeal the green energy tax incentives in the IRA.

That being said, President Biden has flipped on prior veto threats.  

Regarding the $80 billion for the IRS, the New York Times reported in February that “Mr. Biden has vowed to veto any legislation to rescind the funding.”

Fast forward to June: Biden signed into law legislation that cuts IRS funding.  

Eide Bailly’s coverage of the House tax bill is here.

Senate Finance Committee:

The Senate Finance Committee held a hearing on June 14th about family tax policies, a subject that could play a central role in whether the upper chamber supports a tax bill that is working its way through the House (i.e., the above-mentioned bill).  

Most Senate Democrats want to add an expanded Child Tax Credit to the tax bill.

The Credit could be similar to what passed in the 2021 American Rescue Plan. That bill increased the Child Tax Credit from $2,000 per child each year to $3,600 for each child up to age 5 and $3,000 up to age 17. The credit was fully refundable and did not include a work requirement. The cost of this provision was roughly $1 trillion over ten years.

During the hearing, lawmakers from both political parties expressed support for expanding the Child Tax Credit. The parties differed on whether a work requirement should be included in the Credit.

Senate Finance Chairman Ron Wyden (D-Ore.) said that Committee lawmakers will work on finding a way to get bipartisan support for expanding the Child Tax Credit.

“We’re going to look at these [issues] and see where the possibilities are for bringing the committee together on this,” he said.

Good luck with that.

Eide Bailly’s coverage of this hearing is here.

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

Adios amigos!

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