Trick or Treat? Full Text of Comprehensive Tax Reform Legislation Could Drop the Week of Halloween

By Stuart E. Leblang, G. Hunter Bates, Geoffrey K. Verhoff,  Amy S. Elliott, and Ryan Ellis

Investors and traders carefully following the prospects of tax reform will not have to wait long to see details of the many tax law changes that could impact their investments and trading positions. One of the last amendments that the Senate adopted on October 19, 2017, (no. 1561 ¹ ) could speed up consideration of tax reform legislation by more than 2 weeks, potentially obviating the need for a conference committee by amending the House-passed budget resolution to bring the two chambers in agreement on the outlines for a tax reform bill. ² Assuming the House votes in favor of the changes, the agreed-upon outline calls for a net tax cut of as much as $1.5 trillion during the first 10 years. The tax reform package is likely to be a combination of permanent tax cuts for provisions that are fully offset and temporary tax cuts (through 2028) for provisions that are not offset.

While large and numerous hurdles stand in the way of enactment of tax reform by the end of 2017, recent developments have opened up a small, but not insignificant, possibility that a tax bill could move more quickly than previously anticipated. What is theoretically possible?

The accelerated timeline means that, absent inevitable stumbling blocks, the House could vote on tax reform legislation by Thanksgiving. The Senate could pass its bill by the end of November, followed by negotiations between the two chambers over a compromise agreement (assuming their tax plans diverge, which is likely). There is at least a technical chance, albeit a slim one, that Congress could get tax reform passed by Christmas.

There are a few unique features of this tax reform reconciliation process that could facilitate quick enactment. First, because lawmakers ultimately decided to give only one committee in each chamber jurisdiction to write the legislation (the tax writing committees: Ways and Means in the House and Finance in the Senate), the bill can skip the budget committees and go straight from tax committee markup to full floor consideration. ⁸ 

In addition, the Senate’s amended budget resolution would undercut the Senate’s Pay-As-You-Go (PAYGO) point of order by giving the Senate Budget Committee chairman the authority to “make adjustments to the pay-as-you-go ledger, for one or more bills [etc.] relating to changes in federal tax laws.” ⁹ 

Lawmakers must realize the enormity of the challenge ahead of them. It is likely that the so-called Big Six tax writers are presenting this as a critical moment to their members: Either pass tax reform under this accelerated timeline by the end of 2017/early 2018 or the effort will fail.

Some view the parallel but different tracks pursued by the two chambers as doomed. With so little room for error, House and Senate Republicans will have great challenges passing their separate tax reform bills, let alone agree on a compromise solution. But Republicans seem to understand the urgency of a major accomplishment and are unified behind the goal of tax reform. These latest developments are an indication that tax reform is still possible and could happen sooner than most people realize.

^{[1] https://www.congress.gov/amendment/115th-congress/senate-amendment/1561/text}

^{[2] https://www.rollcall.com/news/senate-moving-adopt-house-backed-budget-blueprint-changes/?utm_source=news-alert&utm_medium=email&utm_campaign=newsletters) and https://www.washingtonpost.com/news/powerpost/wp/2017/10/19/republicans-have-the-budget-votes-they-need-but-democrats-prepare-to-make-it-painful/?utm_term=.a153401cb0f5}

^{[3] https://www.dropbox.com/s/54v0d0i3ji1h0jr/Tax%20Blueprint.pdf?dl=0}

^{[4] https://fairandsimple.gop/}

^{[5] https://www.bloomberg.com/news/articles/2017-10-20/house-republicans-to-keep-higher-tax-rate-on-wealthy-ryan-says}

^{[6] http://www.breitbart.com/big-government/2017/10/04/exclusive-sen-rand-paul-cut-taxes-for-all/}

^{[7] https://www.nytimes.com/2017/10/20/us/politics/republicans-tax-401-k.html}

^{[8] Lawmakers had previously included the natural resources committees to allow a provision that would open the Arctic National Wildlife Refuge to oil drilling, but have now dropped that plan, thus speeding up the legislative process. (See Section 5113 of amendment no. 1561, which modifies Section 2002 in the substitute amendment.) This move streamlines the approval process, especially since the budget committees in both chambers generally contain more budget-conscious members.}

^{[9] The Senate’s PAYGO point of order gives one senator the ability to strike any provision that would increase the deficit relative to current law (according to the ledger) at year 5 and year 10, unless 60 senators vote to waive the point of order. http://www.crfb.org/papers/fy-2018-senate-budget-and-budget-gimmicks}