The U.S. House of Representatives could potentially review draft tax reform legislation as early as next week, and two potential changes could wreak havoc on county finances. Lawmakers and the Administration are still considering eliminating both the deductibility of state and local taxes (SALT) and the tax exemption for municipal bonds to pay for other priorities.
MACo representatives participated in a conference call hosted by tax experts at the National Association of Counties (NACo) to learn more about these potentially very expensive changes.
Where Are We Now?
Earlier this month, President Trump met with the “Big Six” about tax reform: House Speaker Paul Ryan (R-Wis.), House Ways and Means Chairman Kevin Brady (R-Texas), Leader McConnell, Senate Finance Committee Chairman Orrin Hatch (R-Utah), Treasury Secretary Steven Mnuchin and National Economic Council Chairman Gary Cohn.
In order for Congressional leadership to move forward with tax reform in the Senate without Democratic support but with a simple majority vote, the Senate Budget Committee must first pass a budget resolution unlocking the budget reconciliation process.
Note that the Senate Budget Committee Chair is not one of those aforementioned “Big Six.” NACo reported a few weeks ago:
Lawmakers are growing increasingly anxious to see specific details of a tax reform plan. Republicans on the Senate Budget Committee, tasked with crafting the budget resolution that would allow Republicans to pass a tax overhaul without the required 60 votes in the Senate, have grown frustrated about the lack of details as they work on their FY 2018 budget.
Yesterday, U.S. Senators Bob Corker (R-Tenn.) and Pat Toomey (R-Pa.), members of the Senate Budget Committee, announced that a deal had been reached to aim towards a $1.5 trillion tax cut over a period of 10 years. The Hill reports:
Corker said a deal was in the works on the committee to write a significant amount of tax breaks into the reconciliation instructions, in order to increase lawmakers’ flexibility in the legislative process. To take advantage of reconciliation, the Senate will have to both stick to the instructions written by the budget committee and follow other strict rules pertaining to deficits. …
“The only thing it really does is begin the tax reform discussion,” he said.
The instructions, he continued, would use “current law” as the baseline for determining the deficit implications, rejecting a scheme to use “current policy” — an alternative measure that would allow extra deficit spending into the bill.
With a budget resolution in the works, the door is opened for the House Ways and Means Committee and Senate Finance Committee to start working on the meat and potatoes of the tax reform package. Whether that means filet mignon, or Big Mac and fries, remains to be seen.
This is part one in a three part series. Read on: Part 2.