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PICTURE OF THE WEEK
This Time We Mean It. The “Big Six” is set to unveil its much-anticipated unified framework for tax reform on Sept. 27. Republicans of the House Ways and Means Committee caught a glimpse of the plan at their tax policy conference yesterday. The House GOP caucus will get a briefing on the framework at its policy retreat this Wednesday prior to the official release. The framework is not expected to contain any groundbreaking details on the GOP’s forthcoming tax reform reconciliation bill nor will it be accompanied by legislative text. House GOP leaders are planning to get a bill introduced later this fall.
35! 25! 20! Hut! Despite the Big Six’s attempt to keep details of the unified framework on tax reform under wraps, news outlets such as Axios and the Washington Post are already churning the rumor mill by sharing their scoop on the proposal. According to their anonymous sources, the framework will include the following:
- 35% top tax rate for individuals – collapsing the current 7 income tax brackets to 3 with the lowest bracket set at 12%.
- 25% tax rate for pass-throughs with unspecified measures in place to prevent arbitrage
- 20% tax rate for corporations
- Doubling of the standard deduction
- Full expensing for five years
In addition, Treasury Secretary Steven Mnuchin told reporters that the framework will also include information on the fate of certain tax deductions, hinting that the state and local tax deduction may be on the chopping block. What the framework will say or won’t say on deductions is something to watch for as it will give the public a better sense of just what kind of “consensus” the Big Six has reached. In other words, if the framework contains no new information on which deductions will be preserved, modified, or eliminated, it means that the negotiators are still struggling to agree on how to pay for tax reform. It could also give some hints as to whether Republicans are still interested in pursuing revenue neutrality. But then again, the Big Six may choose to keep these details under wraps until a bill is ready to be introduced simply to protect controversial provisions or unpopular decisions from early attacks. The doomed border adjustment tax is a prime example of what can happen when a particular policy becomes the subject of public scrutiny for too long.
The Big Six’s unified framework is expected to anywhere between three to 10 pages. Accordingly, it will have few industry-specific provisions. Instead, the framework is expected to list provisions that are generally applicable to all individuals or all business enterprises. Below are some of the provisions that may be addressed in the Sept. 27 framework …
Suspending Suspension. House Democratic leaders yesterday announced their opposition to the disaster tax relief bill introduced by Ways and Means Chairman Kevin Brady, dooming the passage of the measure under suspension.
Democrats view the legislation as an attempt by the majority to use “a must-pass bill to push through unrelated Republican priorities — all while continuing to block Democrats from bringing the DREAM Act to the [f]loor.” The opposition means that House Republicans may need another week to pass the measure.
Brady’s Disaster Tax Relief and Airport and Airway Extension Act would deliver temporary tax relief to the victims of Hurricanes Harvey, Irma, and Maria by providing the following:
Deduction for Personal Casualty Losses:
- With respect to uncompensated losses arising in the disaster area, eliminates the current law requirements that personal casualty losses must exceed 10 percent of Adjusted Gross Income to qualify for deduction.
- Eliminates the current law requirement that taxpayers must itemize deductions to access this tax relief.
Penalty-Free Access to Retirement Funds:
- Provides an exception to the 10 percent early retirement plan withdrawal penalty for qualified hurricane relief distributions.
- Allows for the re-contribution of retirement plan withdrawals for home purchases cancelled due to eligible disasters.
- Provides flexibility for loans from retirement plans for qualified hurricane relief.
Temporary Suspension of Charitable Contribution Limitations:
- Temporarily suspends limitations on the deduction for charitable contributions associated with qualified hurricane relief made before Dec. 31, 2017.
Disaster-Related Employment Relief:
- Provides a tax credit for 40 percent of wages (up to $6,000 per employee) paid by a disaster-affected employer to an employee from a core disaster area.
Special Rule for Determining 2017 Earned Income Tax Credit and Child Tax Credit:
- For 2017, allows taxpayers to refer to earned income from the immediately preceding year for purposes of determining the Earned Income Tax Credit and Child Tax Credit.
In addition to the disaster tax relief provisions, the bill would also extend the FAA authorization for six months (through March 31, 2018) as well as certain expiring health provisions.
Whack-A-Mole. The Graham-Cassidy-Heller-Johnson (GCHJ) proposal is at death’s door — four GOP members, Sens. Susan Collins (R-ME), Ted Cruz (R-TX), John McCain (R-AZ), and Rand Paul (R-KY), have all indicated that they cannot support the latest iteration of the bill. Sen. Bill Cassidy (R-LA), a chief architect of the proposal, has said that he does not plan to make further changes to the proposal. Even if the GCHJ proposal moved further to the right to win back conservatives, it would likely lose support of more moderates. Similarly, a move to the center would cost the GOP conservative votes. In view of this political dynamic, it’s hard to envision a path forward for the GCHJ proposal.
For now, industry stakeholders seemed to have beaten back the Senate GOP’s fourth attempt to repeal and replace Obamacare through reconciliation. Senate GOP leadership announced today that a vote on the GCHJ proposal will not be held.
While the GCHJ proposal is dead, the GOP’s efforts to repeal Obamacare are likely far from over. A growing number of Republicans would like …
- Indianapolis is the next stop in President Trump’s cross-country tax reform tour. On Wednesday, the president is expected to highlight the work of the Big Six and the unified framework for tax reform.
- The White House has invited a bipartisan group of lawmakers on the House Ways and Means Committee to meet with President Trump to discuss the goals of tax reform. Democratic members are expected to push for revenue neutrality as well as a middle-class tax cut package.
- The House GOP conference’s policy retreat on tax reform will take place at the National Defense University on Sept. 27.
IN THE QUEUE
Senate Banking Committee
Full committee hearing on the oversight of the SEC. Chairman Jay Clayton is set to testify.
House Financial Services Committee
Subcommittee hearing on the “Overview of the Family Self-Sufficiency Program.”
House Agriculture Committee
Hearing on the CFTC’s 2017 agenda.
House Financial Services Committee
Subcommittee hearing on “Examining Insurance for Nonprofit Organizations.”
Regional Bank Coalition
Discussion with Dr. Shane Johnson of Texas A&M University’s business school on his new paper: “The Effects of Increased Post-Crisis Regulation and Supervision on U.S. Regional Banks and the Economies They Serve.”
Financial Services Roundtable
FSR holds a discussion on how tax reform can secure the futures of America’s workers with special guest Rep. Richie Neal.
Discussion with SEC Chairman Jay Clayton on securities regulation.
For listings of all the week’s tax and financial services happenings, read below to find out how you can become a subscriber.
The McGuireWoods’ Tax & Financial Services Policy Group assists clients in understanding how the latest legislative and regulatory proposals anddecisions may impact their business and industry. To learn more about how our team can help you monitor, analyze, and navigate all relevant legislativeand regulatory developments, please contact any of our attorneys and consultants below at (202) 857-1700. For more information on how to subscribe toour weeklyTax Policy Update and tax news alerts, please contact Radha Mohan, email@example.com, (202) 857-2944.