Daily Archives: June 22, 2024

The GOP party line on the expiring 2017 tax law has been to extend and make it permanent, but changing politics and growing debt has House Republicans charged with reviewing the provisions shifting away from that message.

Lower tax rates on individuals, relief from the alternative minimum tax, treatment of money U.S. companies make abroad, small-business deductions and other provisionsestablished by 2017 law are set to expire at the end of next year.

The impending tax cliff has prompted lawmakers to start laying the groundwork for 2025, even though no one can predict the outcome of Novembers elections.

Biden administration officials, including Treasury Secretary Janet L. Yellen and Director of the National Economic Council Lael Brainard, have said Democrats would extend tax breaks for households making less than $400,000 and offset the cost with tax increases on the wealthy and corporations.

Republicans have long said they would like to extend and make permanent expiring provisions, but in a shift in messaging some members on the tax-writing House Ways and Means Committee say fully extending the provisions isnt a foregone conclusion.

Addressing the tax cliff is likely to be central to the budget reconciliation plans GOP leadership is pulling together in the event of a Republican sweep in November. And the constraints of that process are such that squeezing in a multitrillion-dollar increase in federal deficits could be difficult, even if the willingness on the part of lawmakers was there.

I dont think it is the default position, Rep. Randy Feenstra, R-Iowa, said of a full extension of the 2017 law, often referred to as the Tax Cuts and Jobs Act. I would call it Tax Cuts and Jobs Act 2.0. What worked? What didnt work? What changes can be made?

Feenstra, a Ways and Means member, has been assigned to the supply chains, global competitiveness and rural America tax teams, three of the 10 Republican-only working groups established by Ways and Means Chairman Jason Smith, R-Mo., to prepare for next years expirations.

[House GOP tax teams in the spotlight as expirations near]

Ways and Means member Blake D. Moore, R-Utah, vice chair of the global competitiveness tax team and a member ofthe community development team, said shifting politics and risingdebt were major considerations as lawmakers weigh how to approach next years expirations. Tax teams are examining every provision with an open mind, he said.

No one understands it more than us that 2017 politics versus 2025 politics, theyre not in the same spot, Moore said. Were taking a look at whats worked, whats been helpful. How has it affected things? And whats the biggest impact? And prioritize those things moving into the next cycle. Everythings on the table.

Offsets included in the bill, such as the $10,000 cap on state and local tax deductions, are unpopular among members representing districts in high-tax states, including New York Republicans, who helped hand the GOP majority in the House in 2022, Moore said.

Other provisions intended to lower the cost of the 2017 law, such as the amortization of businesses deductions of research and development investments, are also unpopular among Republicans and Democrats, and have been the target of repeal.

I dont think its, Lets just make TCJA permanent. A lot of that would be the plan, but were not going to be in the same situation, Moore said, adding that the debt is higher and majorities are slimmer than they were in 2017.

Republicans had about a 40-seat majority in the House and a narrow majority in the Senate in 2017, compared to the five-seat majority the GOP has in the House today. Democrats control the Senate 51-49, but face a tough election map this fall.

The 2017 law was estimated to cost about $1.5 trillion in foregone revenue at the time. Fully extending the expiring provisions for another decade would cost $4 trillion, not counting debt service costs, according to the Joint Committee on Taxation.

Undoing certain revenue raisers from that law that have either already triggered or are scheduled to would add to the cost, pushing the total including interest payments on the added debt past $5 trillion, according tothe Committee for a Responsible Federal Budget.

Fully extending the law would maintain the $10,000 SALT cap and would add to the deficit, opening the law up to criticism from both more centrist Republicans from blue states and deficit hawks on the right, Moore said.

Rep. Kevin Hern, R-Okla., who chairs the influential Republican Study Committee, as well as the global competitiveness tax team, said debt and deficits loom large as the GOP weighs how to handle next year, if the party is in power.

The Trump tax cuts, they worked perfectly at the time, Hern said. We have to look at whats right for today, just as we did 10 years ago. And economic times are different. Debts 50 percent higher, more than that, actually its almost double. Inflation is high caused by President Biden and his team. And weve got to look at this. Weve got to look at the interest rates and all this is going to impact what we can do now.

Federal debt held by the public, which excludes debt held by government accounts such as the Social Security and Medicare trust funds, was $14.7 trillion at the end of fiscal 2017; the Congressional Budget Office this week said it expects debt at the end of this fiscal year to be $28.2 trillion.

[CBO: Deficits and inflation higher, but so is economic growth]

The Treasury was paying an average interest rate of 2 percent on that borrowed money in 2017; this year, the CBO says the comparable figure is 3.4 percent. Interest payments on the debt have already exceeded Medicare costs and next yearare expected to eclipse defense spending.

Rep. Vern Buchanan, R-Fla., who introduced a bill to make the 2017 law permanent, said he was willing to set that position aside and be open-minded. Buchanan is leading the American manufacturing tax team.

We got to look at the debt and the deficit and what that means, and how were going to pay for it. So its changed in terms of the debt for us five years ago, he said. We have to find a way to create balance between having targeted tax cuts, but at the same time start dealing with our financial wherewithal.

On the Senate side, Republicans on the Finance Committee have begun meeting in their own small working groups, while panel Democratsmet to talk 2025 strategy on Thursday.

Senate Finance Democrats are beginning to compilea menu of possible revenue-raising provisions and vetting proposals that would aid the middle and working classes, such as supporting the construction of more housing and increasing availability of child care.

Continued here:

House Republicans shift message on extending 2017 tax cuts - Roll Call