Featured Articles

Tax Reform Closer as Senate Passes Budget

Posted on October 20, 2017 by Stephen K. Cooper, Dylan F. Moroses, David van den Berg

The Senate voted 51 to 49 the evening of October 19 to approve its fiscal 2018 budget resolution after approving several tax-related amendments, bringing passage of tax reform one step closer.

Senate Republican Whip John Cornyn of Texas, a member of the Senate Finance Committee, hailed the vote, calling it the “first step to getting us to pro-growth tax reform.” And Senate Majority Leader Mitch McConnell, R-Ky., highlighted the opportunity in front of lawmakers during his floor remarks. “We have a once-in-a-lifetime opportunity to replace a failing tax code that holds Americans back with one that actually works for them,” he said.

Senate Finance Committee Chair Orrin G. Hatch, R-Utah, said, “Tonight’s action sends a strong signal to the American people that Congress is unified in its effort to advance a comprehensive tax overhaul.”

But Finance Committee ranking minority member Ron Wyden, D-Ore., saw it differently. Calling the passed budget “a right-wing fantasy document that paves the way for a hyper-partisan process,” Wyden said that by embracing the budget reconciliation process, the GOP budget rejects bipartisanship on tax reform.

Earlier October 19 Hatch was unclear on what exactly the next steps would be for Republicans on their path to passing tax reform legislation, but he said he hoped the House would vote on the Senate budget resolution, bypassing a conference committee to work out differences between the two chambers.

Debate on amendments to the budget continued into the evening. Senators approved by voice vote an amendment to allow for budget adjustments for legislation to retain the progressivity of the current tax code. Sens. Deb Fischer, R-Neb., and Susan M. Collins, R-Maine, introduced it.

Senators also approved an amendment 52 to 48 from Senate Budget Committee Chair Michael B. Enzi, R-Wyo., which he said offered technical changes. However, Sen. Bernie Sanders, I-Vt., the Senate Budget Committee’s ranking minority member, said it would pave the way for increased defense spending, cuts in student aid, and a renewed effort to repeal the Affordable Care Act.

While those amendments were approved, senators overwhelmingly defeated one introduced by Sen. Rand Paul, R-Ky., by a vote of 7 to 93. That amendment would have increased the amount of allowable tax cuts to $2.5 trillion.

Senators considered more than two dozen amendments to the budget. Debate on the budget resolution centered on several principles proposed in the GOP’s tax reform framework, including eliminating the deduction for state and local taxes, tax simplification, and tax incentives for small businesses and families.

Finance Committee member Claire McCaskill, D-Mo., told Tax Analysts that Democrats' numerous amendments were largely trying to expose the lack of specifics in Republican tax proposals. Democrats want to help the middle class, she said, adding that the vague language available in the budget seems to disproportionately favor wealthy taxpayers.

Finance Committee member Pat Roberts, R-Kan., said the so-called vote-a-rama — a Senate tradition of spending long hours voting on amendments — is more theatrics than substantive debate. “They’re not even binding," Roberts said of the votes. "Sometimes I wonder why the hell we even have to do this."

SALT Takes the Stage

The Senate voted on two separate amendments concerning the state and local tax deduction, which has drawn a lot of attention in both the Senate and House, especially from Republicans who represent high-tax states such as New York, New Jersey, and California.

The Senate voted 52 to 47 to approve an amendment by Sen. Shelley Moore Capito, R-W.Va., to help middle-class Americans by reducing the deduction, which she said disproportionately favors high-income individuals.

Senate Minority Leader Charles E. Schumer, D-N.Y., criticized Capito’s proposal in floor remarks, calling it “incredibly vague.” A Democratic point of order against the resolution, offered by Finance Committee member Maria Cantwell, D-Wash., would have forced Republicans to vote on repeal of the state and local tax deduction. Lawmakers defeated it on a party-line vote 47 to 52.

Republicans also struck down in a 47-52 vote an amendment offered by Wyden that would have eliminated the reconciliation instructions for the taxwriting panel.

Senators voted 98 to 0 to approve an amendment introduced by Sen. Jeff Flake, R-Ariz., to allow budget adjustments for legislation to make the country’s tax system fairer and simpler as long as it does not increase the deficit in the 10-year window from fiscal 2018 to fiscal 2027.

Senators approved by voice vote an amendment from Finance Committee member Rob Portman, R-Ohio, that would allow budgetary adjustments for legislation to provide or enhance incentives for businesses to retain and generate jobs as long as the measure doesn’t increase the deficit either from fiscal 2018 to fiscal 2022 or in the 10-year window.

Senators also approved by voice vote an amendment from Sen. Marco Rubio, R-Fla., to allow for budget adjustments for legislation to increase per-child tax relief — which may include changing the child tax credit — provided that the legislation doesn’t increase the deficit either between the 2018 and 2022 fiscal years or in the 10-year window.

Senators approved by voice vote an amendment introduced by Sen. Joe Donnelly, D-Ind., that would bar the Senate from considering measures that allow companies that have outsourced jobs to receive any tax breaks without three-fifths of the Senate voting to do so.

Follow Stephen K. Cooper (@ScoopOnTaxes), Dylan F. Moroses (@DMoroses3244), and David van den Berg (@TAtaxDavidVDB) on Twitter for real-time updates.