Tax Reform Takes Center Stage in Washington
As the nation’s capital gears up for a new legislative session, the debate over tax reform is heating up. Republican House Ways and Means Committee Chairman Jason Smith is pushing for a comprehensive approach, advocating for a single, sweeping bill that tackles multiple priorities at once.
A Single Bill to Rule Them All
Smith’s strategy is driven by the understanding that reconciliation bills, which require a simple majority, have been successfully passed by both parties in recent decades. He believes that attempting to break up the GOP’s priorities into multiple bills would be a recipe for failure. Instead, he’s proposing a single bill that addresses energy, immigration, and tax cuts, among other key issues.
The Challenge Ahead
Passing such a bill won’t be easy, however. Smith anticipates a narrow GOP majority in the House, with a margin of just two votes. He’ll need to navigate the complexities of tax policy, reconcile competing interests, and find a way to offset the costs of new tax cuts.
The Cost of Tax Cuts
One of the biggest concerns on Capitol Hill is the price tag of Trump’s expiring 2017 tax cuts, which alone totals $4.6 trillion. Smith argues that existing tax policy shouldn’t be considered a new tax item that needs to be paid for when being extended. However, the Joint Committee on Taxation would score the extension of tax policy as new policy, which could impact the overall cost.
Finding Common Ground
Despite the challenges, Smith remains optimistic about finding common ground with his colleagues. He’s been working with 10 tax committees since April to craft legislation that extends the 2017 tax cuts and explores new tax cuts. He’s also been in close contact with President-elect Trump, who has promised a range of tax cuts, including those for first responders, the military, and Americans living abroad.
Small Business Tax Rate Takes Center Stage
Smith is particularly concerned about the small business tax rate under section 199A of the tax code, which is set to expire at the end of 2025. He believes that allowing it to lapse would increase the average tax rate for small businesses to 43.4%, from a current rate in the “20s.” Making this provision permanent is his top priority, as it would have a significant impact on the economy.
Tariffs: A Possible Solution?
New tariffs imposed by Trump could potentially offset the cost of new tax cuts, but Smith is cautious about relying on this approach. He acknowledges that tariffs introduce risks for both Congress and Trump, as the income generated is not consistent and easy to score. Moreover, using tariffs to fund tax cuts would limit Trump’s ability to unilaterally impose tariffs.
Education and Compromise
Between now and the passage of new tax legislation, Smith faces two significant challenges: educating his colleagues on the complexities of tax policy and finding common ground with Democrats. With only 84 members of the GOP having been through the process of writing tax legislation, and just 5 GOP members remaining on the House Ways and Means Committee from 2017, Smith will need to be a skilled teacher and negotiator to get the job done.
Leave a Reply