Jul 25, 2017
Tax Policy Update
NUMBER OF THE WEEK: $203 billion
The amount of mandatory savings and reforms called for in the House FY2018
budget resolution. The House budget sets overall discretionary spending at
$1.1 trillion for fiscal year 2018 and seeks to balance the budget within
10 years through a combination of spending cuts and projected economic
The House Budget Committee approved the blueprint in a party-line vote of
22 to 14. However, the budget resolution is unlikely to receive floor
consideration before lawmakers depart for August recess, as House
Republicans have yet to unite behind the proposal. House Republican
moderates are unhappy with the steep spending cuts proposed in the budget,
while members of the House Freedom Caucus want to see an outline for tax
reform before they vote on the measure. Fully aware of the division, House
Ways and Means Chairman Kevin Brady (R-TX) reminded his colleagues of
what’s at stake saying, “No budget is perfect, but for us to deliver on our
promise on bold tax reform, this budget needs to move forward.”
The House budget blueprint may have stalled at the moment, but the chamber
is moving to consider a “minibus” spending package this week. The bill,
H.R. 3219, contains
four House appropriations measures for FY2018: (1) Defense, (2) Legislative
Branch, (3) Energy-Water, and (4) Milcon-VA. The fate of the other eight
annual appropriations bills approved by the House Appropriation Committee
is still up in the air. The current fiscal year ends on Sept. 30, but
Republicans have yet to articulate a clear strategy to avoid a government
shutdown in the fall.
Third Time’s the Charm?
After two postponed votes, Senate Majority Leader Mitch McConnell (R-KY)
will hold a vote on the motion to proceed to the House-passed healthcare
bill this afternoon after the GOP caucus meeting. The vote is nail-bitingly
close. While Sen. Susan Collins (R-ME) has indicated that she will likely
vote “no,” others like Sens. Lisa Murkowski (R-AK), Dean Heller (R-NV), and
Shelley Moore Capito (R-WV) remain undecided. Leadership hopes to sway
holdouts during the caucus meeting.
All Eyez on Mitch.
If the motion to proceed is successful, the Senate will begin 20 hours of
debate on a healthcare bill. Which healthcare bill? Good question, no one
knows at this writing except for McConnell. Reports indicate that McConnell
will likely offer a substitute amendment to replace the text of the
House-passed bill with the Senate’s updated version of
H.R. 3762, the 2015 straight-repeal bill. During the debate, senators may offer
various amendments to the bill. Once all other amendments have been
considered, McConnell may offer a Manager’s Amendment (wraparound
amendment) for a vote. This will likely be some version of a
During this process, senators will also raise points of order to strip out
various provisions that don’t conform to the reconciliation rules. After
the conclusion of the marathon voting session, McConnell may then move to
vote on the underlying bill, as amended. Republican leaders will whip votes
to win over holdouts on the healthcare bill.
The Monty Hall Problem.
The vote today could lead to several results. The chart below illustrates
the different ways the healthcare debate may play out …
You Get a Goat! If the motion to proceed fails, the GOP may attempt …
You Get a Car (Maybe)!
If the motion to proceed succeeds, then the GOP will try to …
Killing Me Softly.
If McConnell’s life is not already complicated enough, earlier this
week, the Senate parliamentarian, Elizabeth MacDonough, ruled that key
provisions of the repeal-and-replace bill are subject to a 60-vote Byrd
Rule point of order. Key “Byrd-able” provisions include:
- the six-month lock out to stabilize the individual market;
- abortion restrictions for the tax credits and defunding Planned
- funding for the cost-sharing subsidies.
Several additional provisions are still under review, including:
- waivers for state innovations that allows states to
waive age rating, essential health benefits, and pre-existing condition
requirements so long as their proposal does not increase the federal
- changing the age-rating band from 3:1 to 5:1; and
- the flexible block grant option for states.
A full list of these provisions that Senate Democrats have compiled can be
. The House FY2018 budget resolution unveiled last week contains
reconciliation instructions for 11 committees to produce $203 billion in
savings and reforms. The House Ways and Means Committee has been instructed
to produce at least $52 billion in savings, which it plans to do via
deficit-neutral tax reform. Aside from affirming that tax reform will be
deficit-neutral, the budget blueprint contains no new details on tax
reform. Interestingly though, the budget resolution bucks the House GOP tax
reform blueprint’s use of …
Welcome Back, Kautter.
The Senate Finance Committee unanimously approved the nomination of David
Kautter to be the assistant secretary of tax policy at Treasury despite
Ranking Member Ron Wyden’s (D-OR) concerns with Kautter’s work at Ernst and
Young. The Senate is hoping to confirm Kautter before the start of August
At his July 18 confirmation hearing, Kautter said he would work with the
tax-writing in a “bipartisan, collaborative, and collegial manner.” On the
subject of interest deductibility, Kautter said that all options are on the
table, adding that he does not think there should be an “across the table”
change for the deductibility of interest expense because different
industries rely on debt financing and interest expensing in different ways.
2017 Unified Agenda.
On July 20, the Trump Administration released its
2017 Unified Agenda for Regulatory and Deregulatory Actions
(“Unified Agenda”) — a semiannual report on actions that the regulatory
agencies plan to issue in the near and long term. The purpose of this
report is to give the public a better sense of each agency’s regulatory
focus for the next 12 months. The Internal Revenue Service has outlined a
total of 238 pending regulatory items but did not provide much detail on
what the agency plans to do with them. Below is a list of the items that
may be …
- Vic Fleischer, co-chief tax counsel, for Senate Finance Committee
Democrats will be stepping down from his post at the end of July. No
explanation has been given for Fleischer’s departure, which leaves Tiffany
Smith as the sole chief tax counsel on the Democratic side.
- The House will take up a
under the Congressional Review Act this week to nullify the
arbitration rule recently finalized by the Consumer Financial Protection
- Rep. Mark Meadows (R-NC), chair of the ultra-conservative House Freedom
Caucus, would like to eliminate the Congressional Budget Office’s Budget
Analysis Division — the unit that is responsible for scoring legislation.
Meadows offered an
to the House’s “minibus” spending package (H.R. 3219) that would cut $15
million from the CBO to eliminate its scoring function and require the
nonpartisan budget office to rely on scoring data from various think tanks
IN THE QUEUE
House Judiciary Committee
Subcommittee hearing on H.R. 2887, a bill to regulate certain state
impositions on interstate commerce (i.e. internet sales tax)
House Ways and Means Committee
Oversight subcommittee hearing on the Treasury Inspector General for Tax
Administration’s audit of the IRS’s electronic record retention policies.
Senate Banking Committee
Executive session to vote on the following nominations:
- Mr. J. Paul Compton, Jr. to be General Counsel, HUD
- Ms. Anna M. Farias to be Assistant Secretary for Fair Housing and Equal
- Mr. Neal J. Rackleff to be Assistant Secretary for Community Planning and
- Mr. Richard Ashooh to be Assistant Secretary for Export Administration,
Department of Commerce
- Ms. Elizabeth Erin Walsh to be Assistant Secretary for Global Markets and
Director General of the United States and Foreign Commercial Service,
Department of Commerce
- Mr. Christopher Campbell to be Assistant Secretary for Financial
Institutions, Department of the Treasury.
Senate Appropriations Committee
Subcommittee hearing on the Treasury’s budget with Treasury Secretary
Steven Mnuchin testifying.
House Agriculture Committee
Nominations hearing on Rostin Behman, Brian Quintenz, and Dawn DeBerry
Stump – nominees to the CFTC.
House Financial Services Committee
Annual testimony of the secretary of the Treasury on the state of the
international financial system.
Senate Banking Committee
Nomination hearing for the following:
- Joseph Otting to be Comptroller of the Currency
- Randal Quarles to be Vice Chairman for Supervision of the Board of
Governors of the Federal Reserve System.
The Federal Open Market Committee holds a closed meeting, beginning at 9
a.m. The FOMC is the policymaking arm of the Federal Reserve, July 25-26.
Internal Revenue Service
Open meeting of the Taxpayer Advocacy Panel Joint Committee – the Taxpayer
Advocacy Panel is soliciting public comments, ideas, and suggestions on
improving customer service at the Internal Revenue Service.
Internal Revenue Service
IRS hosts an industry day event designed to increase transparency about IRS
strategic priorities and goals and build collaborative partnerships with
Financial Stability Oversight Council
FSOC will hold a closed executive session. The preliminary agenda includes
a discussion about the recommendations regarding the Volcker Rule in the
Treasury Department’s June 2017 report issued pursuant to Executive Order
13772, “Core Principles for Regulating the United States Financial System”;
an update on the annual reevaluation of the designation of a nonbank
financial company; and a discussion regarding the pending litigation
brought by MetLife against the Council.
U.S. Chamber of Commerce
The chamber will host a special discussion with SEC Chair Jay Clayton.
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