Time is Money.” Credit: TaxCredits.net

November 16, 2017; CNBC

Early Thursday afternoon, the US House of Representatives passed the GOP tax reform bill by a party line 227-205 vote. Thirteen Republicans joined 192 Democrats in opposing the most significant changes to the tax code since 1986. Since this was the last vote for the week, members left the House chamber shortly after the vote total was announced. The 440-page bill, H.R. 1, now goes to the US Senate for consideration.

However, the Senate is working on its own version of tax reform which is both similar and very different from the House version. (Refer to Jeannie Fox’s newswire on tax-exempt bonds and the Johnson Amendment.) One important difference is a section ending the Affordable Care Act’s individual mandate, which requires individuals to certify to the IRS annually that they have health insurance which meets ACA requirements. (In addition to its partisan appeal on the healthcare issue, ending the individual mandate is estimated to save $338 billion over 10 years according to the Congressional Budget Office, making it an attractive target for “pay-fors” to subsidize tax revenue losses elsewhere in the bill.) People who are without health insurance coverage and ineligible for programs like Medicare and Medicaid are required to pay a penalty of 2.5 percent of adjusted gross household income or $695 per adult and $347.50 per child under age 18, whichever amount is higher. The IRS recently announced that it would block electronic filing and suspend processing of paper-based 2017 tax returns submitted by taxpayers not certifying they have health insurance and not paying the penalty.

The Senate version of H.R. 1 (technically referred to as the “Chairman’s Mark”) is being worked on in the Senate Finance Committee this week, and a vote is anticipated the week after Thanksgiving. It is certain that, if passed, the Senate version will continue to look different from the House version. In that case, a conference committee of House and Senate members will need to negotiate a compromise between the two versions of the bill, if possible. Then the compromise measure would need to be passed by both the House and the Senate before going to President Trump for his signature.

The likelihood that the Senate will pass any version of tax reform is uncertain at best. No Democrats have announced their support for the measure, and several GOP senators have expressed reservations, according to CNN:

  • Jeff Flake and Bob Corker: deficit concerns
  • Susan Collins: State and Local Tax (SALT), individual side concerns, individual mandate repeal
  • Ted Cruz: SALT, tax increases for some in the plan
  • John McCain: process, legacy consideration
  • Ron Johnson: pass-through entity rates
  • Rand Paul: whatever Paul decides he’s opposed to on a given day

The bill requires a majority to pass, with Vice President Pence able to break a 50-50 tie if all senators vote. Any Republican not voting for the bill, either for policy reasons or due to incapacitating ill health or otherwise unable to come to the Senate to cast their vote, makes passage less likely. Any Democrat not voting in opposition gives the GOP an additional one-vote margin. Concerns about the recent assault on Rand Paul, the ongoing illness of Thad Cochran, and the recent mistrial of Robert Menendez are examples of the fragility of the party balance currently at work in the hyperpartisan US Senate.

For those either supporting or opposing the bill and its anticipated effects, it’s not too late to make your voice heard at several points:

  • Senators on the Finance Committee are working on the bill now;
  • All senators will vote on the bill later this month;
  • Members of the House-Senate conference committee, once appointed, will be especially sensitive to pressure from all sides on all issues associated with the bill;
  • All House and all Senate members will need to vote on the reconciled bill; and
  • The president must sign or veto the bill if passed by both houses of Congress.

The timeline is very short and the bill is moving especially quickly due to a desire by Republicans to claim a major legislative accomplishment by the end of the year. Aspects of the legislation may change from day to day, so keep up with news stories, follow interest group reports, and, if possible, contact your legislators’ offices to find out what they and their staffs are thinking.