Tax Reform 2.0 Success, Timeline in Question

A “Tax Reform 2.0” legislative package may move through the House later than expected. Some lawmakers are beginning to question its impact on upcoming midterm elections, which may result in a delayed full chamber vote. A House Ways and Means Committee spokesperson told Wolters Kluwer on August 29, however, that the committee is still working from the originally projected September timeline.

Tax Reform 2.0

House leadership has said that a House vote on the next tax reform package would occur before midterm elections in November. Further, House Ways and Means Committee Chairman Kevin Brady, R-Tex., previously told reporters that a House vote would occur sometime in September. However, some lawmakers are now reportedly expressing doubt about whether the House will vote on a Tax Reform 2.0 package before midterm elections after all.

A House Ways and Means Committee spokesperson told Wolters Kluwer on August 29 that the committee is still working off the timeline of receiving the Tax Reform 2.0 measure in early September. And from there, “we are confident the elements of Tax Reform 2.0 will pass the House with wide support,” the spokesperson said. However, the precise timing of the House vote remains to be seen.

Brady unveiled a framework for the Tax Reform 2.0 package last month, which is expected to consist of three separate bills. Brady has said that making permanent the individual and small business tax cuts, enacted last December temporarily through 2025, will be the “centerpiece,” of the next tax reform package.

SALT Cap

However, an expected proposal to make permanent the temporary state and local tax (SALT) deduction $10,000 cap ($5,000 if married filing separately) may put a damper on the 2.0 momentum. The SALT cap has remained one of the most controversial provisions of the Tax Cuts and Jobs Act (TCJA) (P.L. 115-97).

Some Republicans are reportedly concerned that a House floor vote before elections on a measure making the SALT deduction cap permanent could threaten the GOP-majority hold. Moreover, some Republican lawmakers from high-tax states have already expressed opposition toward the cap.

Democratic Criticism

Meanwhile, many Democrats are voicing opposition of last year’s GOP tax code overhaul while campaigning ahead of midterm elections. Democrats continue to criticize the TCJA for primarily benefiting corporations and wealthy individuals. To that end, several Democratic lawmakers have expressed desire to see the corporate tax rate raised from its current and permanently enacted seat at 21 percent.

Additionally, Democrats have criticized controversial TCJA provisions such as the SALT cap and Code Sec. 199A pass-through deduction, both of which are temporary under the TCJA. Making permanent these TCJA provisions, at least as currently written, may prove to be stumbling blocks in Republicans’ Tax Reform 2.0 efforts. And, if not in the House, at least in the Senate, where Republicans hold a much narrower majority. Democratic support will be needed to move the measure through the Senate under regular order requiring 60 votes.

Tax Reform 2.0 Support

A “wide range” of members support the forthcoming tax reform package, a Ways and Means spokesperson said in a statement. “They want to make the policies that produced those results permanent, do more to encourage additional savings for retirement and other purposes, as well as help startup businesses grow and produce new jobs.”

The House is scheduled to return from its August recess on September 4. Tax Reform 2.0 legislative language is expected to be released shortly thereafter.

By Jessica Jeane, Senior News Editor

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