Capitol Hill Recap: Tax Teams Announcement

Lawmakers took a week off to celebrate Memorial Day as Senate tax writers formed working groups.

What Went Down:

• Both chambers of Congress were on recess this week, so nothing happened concerning taxes.
• Late last week Senate Republican tax-writers created groups for upcoming tax fight.

Let’s Get To It:

Memorial Week

The House and Senate were out this week for Memorial Day recess (not for the day, but for the entire week). This means nothing major occurred on Capitol Hill tax wise.

When I was a congressional reporter, a group of us used to joke that lawmakers get a week’s vacation for this holiday – that includes the word “day.” It’s not ‘Memorial Week.” Meanwhile, the rest of the country only gets a day off.

Playing Catch Up

Late last week (after the Recap was posted), Senator Mike Crapo (R-Idaho), the ranking member of the Senate Finance Committee, announced the creation of tax working groups.

These groups will seek to figure out which of the expiring provisions from the Tax Cuts and Jobs Act (TCJA) should be extended, allowed to expire, or modified.

The tax groups will focus on the following areas:

• Individual Taxes
• Business Taxes
• International Taxes
• Retirement
• Community Development
• Energy Taxes

These groups will be comprised of Republican members who sit on the Senate Finance Committee. They will seek to better understand the provisions assigned to their group. Many of these committee members were not on the Senate Finance Committee when the TCJA was enacted, and they need to better understand the provisions before determining their fate.

The groups are expected to meet weekly to discuss their TCJA provisions.

The same set-up is happening in the House Ways and Means Committee, where committee Republicans have created groups to scrutinize TCJA provisions.

Legislative outlook: Despite the creation of these tax groups, the biggest factor in determining the fate of the expiring TCJA provisions will be the outcome of the 2024 elections. Any findings by these Republican-led groups will only matter if their party wins the majority in their respective chamber after the elections.

The election results in the House will likely have the largest influence for how (or if) TCJA provisions get extended – according to the Constitution.

Article I, Section 7, clause 1 of the U.S. Constitution states that “All Bills for raising Revenue shall originate in the House of Representatives.” This means that the House will have the first shot at amending the TCJA. (One could argue that the Senate will play second fiddle in this tax debate because of the Constitution.)

If Democrats win the House (which some election projections predict), the current projection is that TCJA provisions that only benefit taxpayers earning $400,000 or less will be extended. Taxpayer earning above this threshold will see tax rules revert to pre-2018 levels.

If Republican win the House, the current projection is that all TCJA provisions will be extended, which is an expensive proposition. Full extension of TCJA tax cuts is projected to cut revenue to the Federal government by nearly $5 trillion between 2025 and 2034, according to the Congressional Budget Office.

No matter which political party wins the House, offsetting the cost of any TCJA extension plan will be a part of the debate, meaning that certain tax increases could accompany any extensions of the TCJA.

Election prognosticators also see Republicans taking control of the Senate.

If these election projections are correct for which party wins the House and Senate, the next Congress will be politically divided. Under a divided Congress the debate over extending TCJA provisions is expected to stretch into 2026 and possibly 2027, according to tax staffers who work on Capitol Hill.

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

Adios amigos!