On Thursday, the Senate tax reform proposal hit a procedural snag on the chamber floor, delaying action on its final floor vote. The vote is expected to take place on Friday. However, as CNN reports:
Even Republican senators remained unclear about the future of their bill. While most were optimistic the bill would still pass, members acknowledged the uncertainty, joking that they still weren’t set on travel plans to head home for the weekend.
In an effort to assuage Senator Bob Corker’s concerns that the bill would increase the country’s deficit, Senate leadership proposed including a “trigger” in the bill which would automatically increase taxes if the bill failed to generate the economic growth anticipated. However, Thursday evening, the Senate parliamentarian indicated that the proposal violated certain rules and could not be included in the bill as it was. The Senate voted not to recommit the bill to the Finance Committee, but the trigger concept was removed from consideration, placing Senator Corker’s favorable vote in question.
The Senate can afford to lose Senator Corker’s vote – the bill can still pass the Senate even if two Republicans vote against it. It is unclear, however, whether the concern over the deficit will compromise other Republican votes.
Concerns over the costs of the tax cuts further piqued as a new analysis by the nonpartisan Joint Committee on Taxation released Thursday revealed that the tax package would generate significant economic growth, but add $1 trillion to the budget deficit.
From NACo’s Legislative Update from Thursday evening:
The [House and Senate tax reform proposal] versions share broad similarities: both reduce individual and corporate tax rates, revamp the international tax code and eliminate deductions throughout the tax code. Both bills also add between $1.4 and $1.5 trillion to the U.S. deficit, which Republican leadership insists will be offset by economic growth created by the bill and through entitlement reform next year. There are also difference between the bills: the Senate bill sunsets the individual rate cuts, delays implementation of the lower corporate tax rate and has a larger child tax credit.
Following Senate passage, the two chambers will either enter negotiations to address differences between the two packages, or the House will vote on the final Senate package. Final votes could happen as soon as December 6 or 7.
Although negotiations continue, several county priorities are impacted by both bills:
State and local tax (SALT) deduction: The SALT deduction has existed since the federal tax code was founded in 1913, and is a vital tool protecting state and local tax autonomy.
In the House, H.R. 1 eliminated deductibility of state and local income and sales taxes, but retained a capped property tax deduction of up to $10,000.
In the Senate, initial drafts fully eliminated the SALT deduction. This issue remains under consideration, and the final Senate text could mirror the House bill.
Municipal bonds: Tax-exempt municipal bonds are largely unchanged in each bill. However, both bills could impact advance refunding bonds and private activity bonds.
Advance refunding bonds: Advance refunding bonds allow counties to refinance tax-exempt municipal bonds to save taxpayer money on outstanding debt. Currently, counties can issue one advance refunding bond per municipal bond, which saved local taxpayers $12 billion from 2012 to 2016. Both the House and Senate bills would eliminate advance refunding bonds, increasing infrastructure costs for local governments.
Private activity bonds (PABs): Under current law, PABs are tax-exempt and support major infrastructure projects, including hospitals, universities, seaports and airports. The House bill eliminates the tax-exempt status of PABs, while the Senate bill does not make changes to PABs.