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Byrd Rule Doomed Some Provisions in Senate Tax Reform Bill

Posted on December 7, 2017 by Dylan F. Moroses

Senate reconciliation rules forced Republicans to jettison provisions from tax reform legislation covering college savings accounts for unborn children, tax-exempt sports leagues, and craft beer, according to a document made available by Senate Finance Committee staff December 6.

Meanwhile, Senate Republicans took another procedural step toward sending a comprehensive tax reform bill to President Trump, voting 51-47 the same day to go to conference with the House to develop final legislation.

The Finance Committee staff document describes several provisions that the Senate-passed version of the Tax Cuts and Jobs Act stripped from the bill as reported because they did not havea budget impact as required by the Byrd rule. Those changes include eliminating language to allow section 529 college savings accounts to be opened for unborn children, to extend the IRS Free File program, to repeal the tax-exempt status of professional sports leagues, and to create rules for the tax treatment of craft breweries, among others.

The document also lists amendments that were added to the final Senate bill and their associated costs relative to the Finance Committee-reported legislation. Among the most costly changes to the bill is aprovision to increase a 17.4 percent deduction for qualified passthrough business income to 23 percent, which would reduce revenue by about $114 billion over a decade. A modified individual alternative minimum tax would raise about $132.9 billion over 10 years, while increasing the deemed repatriation rates for foreign corporate earnings would raise about $113 billion over that time span.

On the floor, senators agreed by voice vote to a motion from Sen. Marco Rubio, R-Fla., to instruct conferees to increase the child tax credit. A motion to prevent the tax bill from causing reductions in healthcare coverage or increases in premium prices, introduced by Sen. Cory A. Booker, D-N.J., failed 47-51. 

Sen. Al Franken, D-Minn., who is contending with a slew of sexual harassment allegations, did not cast a vote, and Sen. Lamar Alexander, R-Tenn., was not present. Sen. Bob Corker, R-Tenn., issued a statement explaining his opposition to the tax bill last week, but voted to go to conference committee.

Several areas of the tax bill will need to be reconciled with the House version, including international anti-base-erosion measures, the tax treatment of passthrough businesses, and a litany of provisions on individual tax rates, credits, and deductions.

Conferees

Senate Majority Leader Mitch McConnell, R-Ky., designated eight Republicans to join the House in a conference committee on H.R. 1. Senate Finance Committee Chair Orrin G. Hatch, R-Utah, will lead the Senate side of the committee, accompanied by fellow Republicans Michael B. Enzi of Wyoming, Lisa Murkowski of Alaska, John Cornyn of Texas, Rob Portman of Ohio, John Thune of South Dakota, Tim Scott of South Carolina, and Pat Toomey of Pennsylvania. All except for Murkowski are members of the Senate Finance Committee.

“Now that the Senate has voted to join our House colleagues in a conference committee, I’m confident that this distinguished group of senators will work to get the job done for the American people,” McConnell said in a release.

The House designated conferees December 4, including several members of the Ways and Means Committee. Ways and Means Chair Kevin Brady, R-Texas, will chair the conference committee.

Two motions to instruct Senate conferees failed along party lines. One, offered by Sen. Angus S. King Jr., I-Maine, would have instructed Senate conferees not to increase the federal deficit in the next decade. That motion failed 48-50, with Corker voting for it.

Another motion, offered by Finance Committee member Debbie Stabenow, D-Mich., would have caused the corporate tax rate to revert back to the current 35 percent rate if “real average household wages do not increase by at least $4,000 as a result of enactment of this bill.” The motion failed 44-54.

Pay-Go Problems Persist, Cardin Says

The King motion is “something that we should insist upon — all of us,” Finance Committee member Benjamin L. Cardin, D-Md., told Tax Analysts, noting that he helped design the King motion language to limit the bill’s deficit impact.

“That’s important also because of the pay-go requirements, if there are deficits,” Cardin said. “That’s a calculation that’s made at the end of the year, so we don’t know what that will be, but from what I’ve seen of the tax bill from the Joint Committee on Taxation, is that this bill will likely trigger pay-go.”

Cardin explained that no formal calculation can take place until the bill is signed into law to determine whether "pay as you go" rules apply. The rules prevent legislation from increasing the federal budget deficit within five years. Cardin added that calculation would have to be made before the end of the year, and suggested there would be unanimous Democratic opposition to waiving the rules.

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