Congressional leaders and the President hope to make quick action of their tax bill early this week with the House voting Tuesday and the Senate on Wednesday. That timetable could be adjusted slightly depending on the health status of two Senators but Senate Republicans are looking confident in getting almost all 52 votes in support of their bill. It looked like that vote might be endangered due to the health challenges of Senator John McCain (R-AZ) and Senator Thad Cochrane (R-MS) with both Senators missing votes last week. That became less significant because while Cochrane indicated he will be in attendance next week, one hard vote against the original bill—Senator Bob Corker (R-TN) declared his support for the measure despite voting against the Senate bill a few weeks ago due to its budget impact.
The latest version of the tax deal includes a reduction in the corporate tax rate from 35 percent to 21 percent. A doubling of the individual and couple standard deduction to $12,000/$24,000 but it eliminates personnel deductions for adults and children, eliminates or caps numerous deductions including limiting deductions for mortgages, property, state and local income taxes and various other items. It leaves in tact some long standing tax deductions/credits including the Earned Income Tax Credit (EITC) and the Adoption Tax Credit.
The bill attempts to weaken the Affordable Care Act by repealing the individual mandate which the CBO calculates will increase the uninsured by 13 million over ten years either because the healthy will drop coverage and (when the heathy drop coverage) the less healthy people will have to pay for higher premiums. The repeal also reduces the federal support for insurance and that provides a savings of more than $300 billion that is being used to reduce taxes.
The legislation would extend the corporate tax reductions permanently while the individual tax changes would expire by 2025.
One change that would have had an impact on churches and non-profits, a repeal of the Lyndon Johnson amendment, was knocked out in the Senate due to reconciliation rules (the Byrd rule). The House elimination of the 1950s Johnson amendment would have allowed churches and non-profits to step up their political action potentially allowing these non-profits to channel campaign dollars in support or opposition of political candidates.
The tax package will trigger automatic across-the board-cuts of approximately $150 billion a year unless Congress waives the cuts through a separate bill. The across-the-board budget cuts would be so severe as to wipe out the Social Services Block Grant (SSBG) funding and cut Promoting Safe and Stable Families (PSSF) by 85 percent and take $21 million out of Foster Care and Adoption Assistance administration (and approximately $1 to $2 million from Chaffee Independent Living program) A waiver could be a part of another legislative package after the tax bill has passed but at this point it is not clear when or how that will happen.
The Continuing Resolution (CR):
House conservatives are attempting to jam their Senate counterparts with a CR that will fund the Defense Department with significant increases in spending for the rest of FY 2018 while providing flat funding for all non-defenses spending through a short-term funding resolution resulting in another CR for non-defense spending only. For good measure House leaders have attached an extension of CHIP paying for it in ways that Democrats have already rejected. The Senate for their part will reject it since the House bill would require 60 votes and that will require at least 8 Democrats/Independents. The Senate will likely tear up the bill and offer a bill that raises the caps for both defense and non-defense spending.
All this will take place only after they pass the tax package. Some House members would like to pass their CR and adjourn as a way to force Senators to take the House deal. The Senate response could be to pass an additional CR that would run close to January 19 which is the projected date in which across-the-board sequestration cuts imposed through the BCA will take effect.
If and when the tax bill passes and some agreement is reached to extend the December 22 CR there are still a range of other issues that just continue to hang for a resolution…