Monday May 21, 2018
House Budget Permits Tax Reform
A key issue for Republican Representatives from New York, California, New Jersey and Illinois was a plan to repeal the state and local tax deductions (SALT). While most of the SALT deductions benefit upper-income taxpayers, about 30% of Americans itemize and claim the deduction.
The Chairman of the House Ways and Means Committee is Kevin Brady (R-TX). He indicated that he plans to release a draft of the comprehensive tax reform bill on November 1.
The next step is for the full Ways and Means Committee to "markup" the bill over the next two weeks. If the bill passes the Ways and Means Committee, a vote by the House may take place before Thanksgiving.
Chairman Brady promised to permit all Ways and Means Committee Members an opportunity to submit amendments. He stated, "We obviously wanted to make sure that the minority has plenty of time to offer amendments, to make that case and engage in a positive way on tax reform if that is what they choose to do."
Editor's Note: There still are major provisions to finalize in the draft bill. Brady may include a fourth tax bracket for upper-income taxpayers. He has discussed a possible compromise on the state and local tax deduction. A compromise may allow a partial benefit that will probably be phased out for upper-income taxpayers. There have been discussions about changes to some of the rules that apply to 401(k)s and other retirement plans. It also is possible that the $1 million limit on mortgages qualifying for deductible interest may be changed. The markup process will include a large number of amendments by both parties. Even if the House passes a tax reform act by Thanksgiving, it will be difficult for the Senate to take action before 2018.
House Democrats Announce Tax Reform Principles
On October 25, House Ways and Means Committee Ranking Member Richard Neal (D-MA) published Democratic principles for the proposed tax reform bill. The seven principles generally focus on helping the middle class.
- Tax Relief - Continue the mortgage interest deduction without major changes. Expand the Earned Income Tax Credit (EITC) and Child Tax Credit (CTC).
- Education - Simplify and expand the American Opportunity Tax Credit for post-secondary education.
- Child Care - Expand the Child Care Tax Credit. Help taxpayers who are taking care of elderly parents.
- Retirement - Require automatic enrollment for employees in a 401(k) or other retirement plan. Increase the financial strength of Social Security and Medicare.
- Employee Training - Create a new tax credit to encourage employers to train all employees.
- Infrastructure - Expand the tax-exempt bond options for financing infrastructure projects.
- American Businesses - Create new tax incentives for manufacturing in America. Allow tax reductions for small businesses.