The Senate tax reform provision to scrap the Affordable Care Act’s individual mandate should have GOP support in the House, but other legislative differences between the Houseand Senate bills still require debate in conference committee, the House’s top taxwriter said December 5.
Earlier that morning, House Ways and Means Committee Chair Kevin Brady, R-Texas, told CNBC that he expects the individual mandate repeal to remain in the final version of the Tax Cuts and Jobs Act. Brady previously reserved his opinion on several provisions in the Senate tax bill before suggesting the individual mandate repeal would be retained, and later said early indications from rank-and-file House Republicans point toward its inclusion in the final bill.
Brady told reporters that several areas of the bill — including how to separate passthrough business income from wage income and whether to retain the corporate and individual alternative minimum taxes — will be resolved during conference committee. He said would prefer that the AMT be repealed, as was proposed in the House bill. (Side-by-side comparison of the GOP tax plans.)
The corporate and individual AMTs are costly and complex, Brady said. “For families to re-figure their taxes a second time, on average it increases their taxes [by] $7,500, [and] many of those are in the high-tax states, which is one of the reasons we repealed it. On the business side, that added cost of complexity actually undermines some of the pro-growth provisions that we kept in the tax code, such as the research and development tax credit,” he said, adding that several rank-and-file House Republicans also support eliminating these taxes.
In addition to addressing the AMT, those “guardrails to keep companies from exporting their earnings, their IP, and their profits offshore,” and those measures to “keep companies — U.S. and foreign — from importing their interest and deductions” would also be part of discussions about improving the international tax system in the bill, Brady said.
Brady also suggested that the House and Senate will look to further improve the tax treatment of passthroughs, but did not say which chamber’s approach he prefers. Both structures have strengths, and the committee is looking at whether it can improve on both of them, “especially making sure passthroughs that make a lot of capital investments in their businesses can achieve the lowest rate possible that we can deliver,” he said.
The Senate bill would offer passthroughs a 23 percent deduction for qualified income, limited to 50 percent of wage income, whereas the House bill would create a new passthrough business income tax rate of 25 percent, with two options to calculate an entity’s liability. Both versions exclude some professional service companies from their proposals.
Senate Finance Committee Chair Orrin G. Hatch, R-Utah, told reporters that he supports the Senate approach on passthroughs, saying “it does what has to be done.”
On state and local tax deductibility, Brady said that the House conferees would bring several solutions to the bicameral committee addressing rate adjustments, the family tax credit, and the idea to expand the proposed $10,000 property tax deduction to include local SALT up to that threshold. “All of those options, and a few more, are being discussed,” he said, adding that the committee wants to learn whether they address state lawmakers’ concerns. Those ideas, however, would come at a substantial cost, Brady said without identifying how they would be paid for.
House Speaker Paul D. Ryan, R-Wis., would not tell reporters whether there are any items in the House tax bill that he believes must be included in the final Tax Cuts and Jobs Act. “We’re going to let the conferees wrestle with this” and make the legislation “better than what we’ve already seen,” Ryan said during a weekly GOP conference briefing.
Ways and Means Committee member Kristi L. Noem, R-S.D., said to reporters during the GOP conference briefing that she would draw on her experiences as a working mother and business owner to drive consensus during the conference committee.
Both Brady and Noem are part of the conference committee. Senate Republicans suggested that they will take procedural votes to move to conference in a few days after the House did so December 4.
Reaffirming the 20 Percent Corporate Rate
Despite President Trump's comments indicating openness to a corporate tax rate higher than 20 percent, Senate Majority Leader Mitch McConnell, R-Ky., told reporters that he believes the rate should stay at the proposed 20 percent, which he said GOP taxwriters think is “important to make sure we’re competitive in the global economy.”
House Freedom Caucus Chair Mark Meadows, R-N.C., told reporters the evening of December 4 that raising the corporate rate from 20 percent would be problematic. “Increasing the corporate rate is not something that would be considered a prudent passthrough with regards to the high-growth strategy that we’re trying to embark on,” Meadows said.
Meadows also expressed concern about the Senate’s plan to institute a delay to the corporate rate reduction. “Obviously there are people who think that that’s a good idea,” he said. “Historically it’s a bad idea. Anytime you delay a tax cut, people wait to take advantage of the tax cut.”
The House Rules Committee postponed a meeting on a short-term continuing resolution for funding the government until December 6.
Brady said it remains unclear whether the stopgap funding measure would extend to December 22 or December 30. McConnell said he would prefer a funding measure that expires December 22.
David van den Berg and Asha Glover contributed to this article.
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