This week, the House and Senate will vote on the Tax Cuts and Jobs Act (H.R. 1), the most significant tax reform and tax cut legislative initiative since the 1986 tax reform package passed under President Ronald Reagan. The bill would make sweeping changes to the individual and corporate codes, and eliminate Obamacare’s individual mandate penalty.
Today, the Senate will vote on the Tax Cuts and Jobs Act (H.R. 1), the most significant tax reform and tax cut legislative initiative since the 1986 tax reform package passed under President Ronald Reagan. The bill would make sweeping changes to the individual and corporate codes, and eliminate Obamacare’s individual mandate penalty.
The Senate GOP tax reform bill would unleash economic growth, increase wages for American workers, create new jobs, and provide tax relief to all Americans including the middle and working classes, main street businesses, and U.S. corporations. It accomplishes this by 1) cutting the corporate tax rate from 35 percent to 20 percent, 2) allowing pass-through businesses to deduct 23 percent of taxable income, 3) permitting full and immediate expensing of new and capital equipment for five years, 4) moving toward a territorial tax system that incentivizes foreign investment here in America, 5) lowering marginal tax rates for all Americans, 6) doubling the standard deduction, and 7) providing immediate relief from the death tax.
According to Heritage Foundation research, the Senate Finance Committee plan, which retains substantial similarities to the final text, tax plan will increase long-run gross domestic product (GDP) by 2.8 percent, translating into an increase of $4,000 to $4,400 per household. The Tax Foundation estimates the Senate tax plan will increase wages by 2.9 percent and create roughly 925,000 new full-time equivalent (FTE) jobs. This is exactly the kind of economic growth our country needs and what congressional Republicans and President Trump promised on the campaign trail.
Two additional and important provisions contained in the Senate tax plan is the elimination of the state and local tax (SALT) deduction and the Obamacare individual mandate tax penalty. Eliminating the SALT deduction ends the practice of federal taxpayers subsidizing liberal state governments, which will put pressure on state and local governments to be more fiscally responsible. In fact, New Jersey Senate President Steve Sweeney said “We’re going to have to re-evaluate everything” if the bill becomes law. Like the House bill, the Senate bill allow for a $10,000 deduction for property tax. Eliminating the individual mandate provides tax relief to working class Americans who can’t afford expensive Obamacare insurance plans. Additionally, both provisions raise significant revenue needed to lower marginal tax rates under Senate budget reconciliation rules.
It’s been far too long since Congress made lasting positive changes to the U.S. tax code – three decades in fact. Since that time, our convoluted 74,000-page tax code has suppressed American entrepreneurship, driven companies and jobs overseas, and made it harder and harder for American families to leave a better life for their children. Members of Congress justifiably concerned about the national debt should look to cut federal spending to balance the budget, not confiscate hard-earned income from individuals or punish profitable businesses. Congress cannot tax the American people into economic prosperity nor can it raise enough revenue to balance the budget if it continues to spend nearly $4 trillion dollars a year.
Adam Michel, Policy Analyst in the Thomas A. Roe Institute at The Heritage Foundation explains:
“Holding pro-growth tax reform hostage over the deficit unwittingly makes fiscally responsible spending reforms harder. The deficit cannot be eliminated with tax increases. The notion that we can tax our way out of trouble denies the fundamental problem: The deficit is driven by uncontrolled spending. Tax reform that grows the economy can also ease the burden of paying down the debt. Robust economic growth is a necessary component of managing our debt. Pro-growth tax reform that allows for a larger and more robust economy means our debt relative to our output shrinks and makes the necessary spending reforms easier.”
Due to the self-imposed $1.5 trillion dollar deficit tax cut box Senate Republicans elected to put themselves in, the Tax Cuts and Jobs Act is not as robust as tax reform should be under a unified Republican government, but it certainly is what President Reagan would call “half a loaf.” While Congress cannot tax the country into prosperity, it can and should deliver meaningful tax reform that spurs sustainable, long-term economic growth. The Tax Cuts and Jobs Act is a strong step toward that end. The time for pro-growth tax reform is now.
***Heritage Action supports the Tax Cuts and Jobs Act and will include it as a key vote on our legislative scorecard.***
Multiple key votes are possible throughout the amendment process. Because the rules governing the Senate’s budget consideration are complex, amendment votes often occur without notice. As a result, Heritage Action may not release key votes in advance during the vote-a-rama. Follow Heritage Action on Twitter throughout the debate to get information on pending amendments.
Heritage Action supports Toomey-Cruz #1690 to make the underlying bill’s endowment tax applicable only to colleges receiving Title IV money.
Heritage Action will key vote the following amendment(s) to the Senate Tax Cuts and Jobs Act (H.R. 1).
This week, the Senate will vote on the Additional Supplemental Appropriations for Disaster Relief Requirements Act of 2017 (H.R. 2266), a $36.5 billion disaster aid package intended to provide emergency relief funding for victims of hurricanes Harvey, Irma, Maria, and Nate, and for those fighting wildfires across California and other western states. The bill includes $18.67 billion for the Federal Emergency Management Agency’s (FEMA) Disaster Relief Fund (DFR) — $4.9 billion of which could be used to subsidize direct loans to Puerto Rico and are unlikely to be repaid — $576.5 million for federal wildfire suppression, and a $16 billion bailout of the National Flood Insurance Program’s (NFIP) nearly $30 billion debt. Heritage Action key voted against the bill in the House.
In the official disaster supplemental request to Congress, Office of Management and Budget (OMB) Director Mick Mulvaney writes that “the NFIP required immediate financial relief to fulfill its obligations to its policyholders, but the program must also be reformed to place it on a sound financial footing and to enable the private market for flood insurance to expand.” OMB also argued the NFIP’s debt cancellation stems from “unforeseen, unanticipated events … it should be provided as an emergency requirement for budgetary purposes.” Heritage Action critiqued the request in a statement last week from vice president Dan Holler:
“The administration’s request to treat a $16 billion bailout for the failing federal flood insurance program as an emergency is irresponsible. There have been numerous efforts over the past decade to make the NFIP financially and structurally sound, but special interest pushback successfully blunted serious reforms. Put another way, the NFIP’s existing debt stems from poor design and congressional inaction, not an unforeseen crisis.
“If the administration and congressional leaders want to write off the NFIP’s debt it should be paid for and tied with the reforms similar to those recommended by Director Mulvaney. Anything short of that is simply a taxpayer bailout of a failed, big-government program and a victory for the special interests.”
The Heritage Foundation explained last month that emergency spending must meet five criteria: Necessary, sudden, urgent, unforeseen, and not permanent. The five-part test was first created by President George H.W. Bush’s OMB in 1991. In a report to Congress, as required by P.L. 102-55 (June 1991), OMB defined emergency spending as the following:
- Necessary expenditure–an essential or vital expenditure, not one that is merely useful or beneficial;
- Sudden–quickly coming into being, not building up over time;
- Urgent–pressing and compelling need requiring immediate action;
- Unforeseen–not predictable or seen beforehand as a coming need (an emergency that is part of an aggregate level of anticipated emergencies, particularly when normally estimated in advance, would not be “unforeseen”); and
- Not permanent–the need is temporary in nature.
The $16 billion bailout, which the legislation notes will be “treated as public debt of the United States,” fails the five-part test multiple times. The NFIP’s debt obviously built up over time and bailouts are by definition permanent in nature. Some lawmakers have raised concerns that additional bailouts are forthcoming because the bill waives the Stafford Act and allows “the Secretary of Homeland Security, in consultation with the Secretary of the Treasury” to cancel debts “in whole or in part” at their discretion.
Federal relief to victims of hurricanes is warranted, but Congress must act in a fiscally responsible manner by offsetting funding that is not truly “emergency” in nature. As Heritage Action made clear in September, “Any funds that fall outside the strict definition of ‘emergency spending’ should, such as the reported inclusion of small business loans, be offset.”
In the aftermath of Hurricane Katrina in 2005, the Republican Study Committee (RSC) unveiled “Operation Offset,” which was essentially a menu of spending cuts to offset the costs of disaster relief and rebuilding efforts. The Heritage Foundation applauded the effort, writing that “The President and Congress are making huge federal commitments for relief and rebuilding, but these should not translate into an unprecedented expansion of the federal budget at a time when spending is already near an all-time high.”
Unfortunately, lawmakers will not be allowed to offer offsets or reforms because the bill will likely be voted on under a suspension of the rules, which requires a two-thirds vote. Regardless, The Heritage Foundation’s Blueprint for Balance: A Federal Budget for 2017 and Blueprint for Reform: A Comprehensive Policy Agenda offer dozens of offset options should lawmakers wish to revive Operation Offset. More spending is likely on the way, Interior-Environment Appropriations Subcommittee Chairman Mike Simpson (R-Idaho) made clear “This isn’t the last supplemental.”
***Heritage Action opposes the $16 Billion Bailout of National Flood Insurance Program and will include it as a key vote on our legislative scorecard.***
The Senate will vote on an amendment (#1430) offered by Senator Mike Lee (R-Utah) to H. Con. Res. 71 that would repeal Title I of Obamacare. This amendment expands the budget resolution’s existing deficit neutral reserve fund for legislation that repeals Obamacare to specifically include the repeal of Title I of Obamacare.
As Heritage Action has written previously, Title I of the Affordable Care Act is the regulatory architecture of Obamacare that is responsible for the rising cost of health care. It is the beating heart of Obamacare that includes a number of health insurance mandates and regulations including guaranteed issue, community rating, essential health benefits, and actuarial value, among others. Taken together, these mandates and regulations restrict consumer choice and drive up the cost of health care premiums by a national average of 44.5 to 68 percent.
Republicans have promised to repeal Obamacare for over seven years, but despite full control of the federal government, they have failed to do so. This amendment would repeal the heart of Obamacare and begin the process of moving to a patient-centered health care system that works for all Americans.
Heritage Action supports the Lee Amendment and will include it as a key vote on our legislative scorecard.