President Trump signed Republicans' $1.5 trillion tax reform bill into law, setting in motion a series of changes that companies and the IRS will need to make to put the law into action.
The law, known informally at the Tax Cuts and Jobs Act (H.R. 1), drops the corporate tax rate from 35 percent to 21 percent, establishes a territorial tax system for multinational companies, and eliminates a raft of deductions and exemptions from the individual side of the tax code while increasing the size of the standard deduction.
Trump signed the bill in the Oval Office December 22, then departed the White House to spend the holidays at his home in Florida.
Payroll companies and the IRS are now working to make changes to their systems to address changes to wage withholding under the law, as well as create new forms and software updates to account for the shifts that take effect as soon as January 1.
The president also signed into law a short-term extension for government funding through January 19, which also includes a waiver of mandatory spending cuts under "pay as you go" budget requirements.
At his end-of-the-year briefing, Senate Majority Leader Mitch McConnell, R-Ky., brushed aside questions about the new law’s impact on the federal deficit. McConnell said the law’s $1.5 billion price tag would be offset by an additional 0.4 percent growth in the American economy over the next decade.
2018 Tax Agenda
House and Senate Republicans are divided over the need for tax extender legislation that would retroactively extend a group of energy and business tax provisions that expired at the end of 2016.
Senate Finance Committee Chair Orrin G. Hatch, R-Utah, introduced the Tax Extender Act of 2017 on December 20, but the following day, House Ways and Means Chair Kevin Brady of Texas questioned the need for enacting temporary tax policy. “The question always is what role do they play in the tax code, because they’ve really been anchored in the old one,” he told reporters.
Lawmakers may also seek to increase IRS funding in 2018 so the agency can implement the new tax law, but Ways and Means committee members have not decided whether it should be included in the upcoming government spending bill that must be in place by January 19.
Brady has also discussed the need for a tax technical corrections bill next year, based on inevitable problems with the new law. However, Democrats have made lukewarm comments about the possibility of working in a bipartisan fashion to address the new law.
McConnell said he and House Speaker Paul D. Ryan, R-Wis., plan to meet with Trump during the first week of January to determine the top priorities for the 2018 agenda. He indicated openness to another attempt by GOP lawmakers to repeal more of the Affordable Care Act in 2018, but noted that work on Medicare and Social Security would require cooperation from Senate Democrats.
On the tax front, McConnell acknowledged that a “potpourri” of year-end tax issues were not addressed before Congress adjourned December 21. While he didn’t specifically mention tax extenders, disaster funding, or technical corrections legislation to fix the errors in the Tax Cuts and Jobs Act, McConnell said tax issues would garner attention from lawmakers next year.
“We’ll work most of those out on a bipartisan basis and pass what we need to pass,” McConnell said.