Press Room: Tax Release

October 26, 2017

House Approves Senate Budget, Puts Tax Reform on Fast Track

On October 26, 2017, the House of Representatives approved the budget resolution previously passed by the Senate less than a week before. The House’s slim party-line vote (216-212) on a compromise budget eliminates the need for a lengthy budget conference and has the potential to accelerate the process for tax reform legislation. The approved budget relies on budget reconciliation instructions that would allow tax reform legislation to be advanced with a majority vote in the Senate (without requiring 60 votes to overcome a filibuster).

House Tax Bill Expected Next Week, Senate Proposal to Follow

Tax writing committees are furiously drafting legislation that could be enacted before year’s end, and it is time for individual and business taxpayers to plan and prepare for the possibility of significant changes. Following the House budget vote, Ways and Means Chairman Kevin Brady (R-Texas) announced that the House Ways and Means Committee will hold a mark-up of tax reform legislation beginning on November 6, 2017. A draft of the legislative language is scheduled to be released on November 1, 2017 prior to the mark-up session. For a discussion of the measures expected to be included in the tax reform legislation, see our prior Tax Release highlighting the objectives set forth in the Unified Framework for Fixing Our Broken Tax Code. For information on how the budget reconciliation process will impact the GOP’s ability to enact permanent tax reform measures, see our prior Tax Release following the Senate budget vote.

Compromise on State and Local Tax Deduction

The House discussions before the budget vote involved concerns by Republican representatives from New Jersey and New York regarding the state and local tax deduction. Elimination of the state and local tax deduction has been discussed by Republican leaders as a possible measure to bring in additional tax revenue and cover the cost of other planned tax breaks. High-tax districts (New Jersey, New York, California) would be most impacted by the lost deduction. This will be one of many contentious issues as the tax reform process moves forward.

The Takeaway

While there are still obstacles ahead in terms of tax reform, the approval of a compromise budget is an important step. A legislative draft, including the much anticipated key details is scheduled to be released on November 1, 2017 prior to the beginning of the mark-up session in the House Ways and Means committee, currently scheduled for November 6, 2017. In the interim, taxpayers should continue to prepare for potentially significant tax changes that include a reduction in the tax rates for corporations.