Full House, Senate Committee, Pass Two Versions of Tax Reform
Focus of tax reform shifts to Senate Floor as new issues emerge
TAX ALERT |
On Nov. 16, the House passed its tax reform legislation H.R. 1, the Tax Cuts and Jobs Act, by a vote of 227 to 205 largely along party lines. In-depth coverage of the House bill can be found in our prior tax alerts. The same day, the Senate Finance Committee approved its different version of tax reform by a strict party-line vote. While this ‘train’ seems to be speeding along, some of the differences and emerging issues may conjure the image of two ‘runaway trains’ headed towards each other on the same track.
Some of the recent debate in the Senate involves whether the proposal provides enough benefit for pass-through entities. Senator Ron Johnson (R., Wis.) recently voiced his opposition to the bill, stating that he would vote against the current form of the Senate proposal because it lacked enough tax relief for pass-throughs, compared to that provided for C corporations. Senator Johnson’s comments came after the Nov. 14 amendment to the Chairman’s Mark, which offered increased tax benefits for pass-throughs, including raising the wage threshold for the 17.4 percent deduction and allowing businesses to be eligible for the deduction whether or not they paid wages, and even if they were service businesses–but only for taxpayers with household income below $500,000 for joint filers and lower amounts for single filers. The Senate Republicans cannot afford to lose too many votes if they are to get their bill through the Senate without the support of any Senate Democrats, which seems the likely situation they will face. Another contentious issue in the Senate is the bill’s inclusion of a provision repealing the individual mandate of the Affordable Care Act.
Apart from the issue of pass-through entities, there are many other conflicting provisions in the two bills. If the Senate proposal, as amended on the Senate floor, is eventually approved by the full Senate it may still be difficult to reconcile the two bills in a manner that can assure passage, again, by the full House and full Senate–a constitutional requirement before sending the bill to the president for his signature.