Tax Analysts Blog

3 Early Signs of What to Expect From Congress

Posted on Jan 27, 2015

The 114th Congress is off and running. Lawmakers have already elected their leaders, had a few spats behind closed doors, and decried how the other side isn’t willing to work together on common issues. None of that is anything new -- it’s pretty much how all legislatures open. But along with routine business and the usual sniping, there have been a few key indicators of what this new GOP-led Congress will mean for tax issues.

    1. This year will be heavy on tax talk.
    President Obama made taxes a big part of his State of the Union address. House taxwriter Devin Nunes released the outlines of a business tax reform plan. New Senate Finance Committee Chair Orrin Hatch has spoken extensively about the role working groups will play in developing his version of tax reform. Taxes are definitely in vogue in Washington, and those hoping for comprehensive changes to the tax system might start to become hopeful.

    But behind all the tax rhetoric are troubling signs about the future for actual legislation. Obama’s plan contains many elements that are simply anathema to Republicans. Even after he pledged to explore common ground with the new Congress, he put forward a host of tax increases (including a bank levy and a new way to tax inheritances) that have absolutely no chance of making it through Congress. Early signs from Hatch and House Speaker John Boehner are that only the president’s idea for a bigger child credit has much support. It’s surprising they are being even that generous. The State of the Union seemed design to revive Obama’s successful 2012 class warfare pitch. That isn’t likely to lead to the White House and Congress working together on bipartisan reform.

    2. It will be unpredictable.

    Apparently the art of whipping up votes has been lost. After Boehner endured an unexpectedly close reelection for his speakership, the GOP lost a relatively symbolic vote on repealing part of the Dodd-Frank Act when fewer Democrats voted for it than last year. It then had to postpone vote on an abortion measure after moderate Republicans and some female GOP representatives balked at it.

    Democrats will be more disciplined, of course, because they are in the minority and it’s much easier to hold together a smaller number of lawmakers. It’s the inability of the Republican caucus to control its votes that’s more disturbing for the future of any serious legislation. Despite what the media might imply, there are only a small number of ultraconservative Tea Party representatives in Congress (and you can count the number in the Senate on one hand). But for whatever reason, Boehner always seems to need those votes in order to do much of anything.

    If Boehner can’t keep those lawmakers in line, there’s little chance of anything passing the Senate. And that means it will be almost impossible to predict the fate of any legislation being pushed by House leadership (or the taxwriting committees) until the votes are actually taken.

    3. Dynamic scoring isn’t a done deal yet.
    The House may have put in place new rules for the expanded use of so-called dynamic scoring, but the debate is far from over. It’s not clear what kind of scores the new rules will generate for tax reform legislation or how the Senate will treat a proposal that is revenue neutral under dynamic scoring, but a revenue loser under traditional methods. It will be fascinating to see how the new scoring technique works in practice, how eager Republicans are to push bills that test traditional means, and whether Democrats will ever stop calling it a budget gimmick (not likely).

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