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What to Watch as the Tax Reform Process Unfolds

Oct 30, 2017
From the Tax Governance Institute

What to Watch as the Tax Reform Process Unfolds

By John Gimigliano, Principal in Charge, Federal Legislative & Regulatory Services, Washington National Tax, KPMG LLP

Read more Tracking Tax Reform blog posts

What's on our minds this week:

The House’s approval of the Senate's budget plan was the starting gun that allows tax reform to move forward with a simple majority of 51 (presumably GOP) votes in the Senate. After these many months of waiting for something to happen, things are about to get hectic, likely for the rest of 2017 and perhaps beyond.

Soon we will be poring over thousands of pages of legislative text and hearing much commentary. Here are a few things to keep in mind as you do so:

  • Odds for passage of a tax bill have never been higher—but that’s not the same thing as saying tax reform is a certainty. It's hard to imagine a scenario where a GOP controlled House, Senate, and White House do not take advantage of the $1.5 trillion available in the budget to address taxation. But whether the result is true, permanent tax reform or some other form of tax relief still remains to be negotiated. But a $1.5 trillion tax bill will still give the GOP a win on the legislative scorecard for 2017.
  • The House budget vote could be a sign of things to come. If this week’s vote on the budget was truly the first vote on tax reform, the result of that vote might be a bit troubling for Republican leadership. Twenty Republicans voted against the budget (along with every single Democrat), with their nays centering almost entirely on the repeal of the deduction for state and local taxes. It is clear that getting 216 votes for the tax reform bill itself is going to be a big lift—especially once the other pay-fors in the House bill come to light.
  • This week's expected bill is the opening bid, not the final one, on tax reform. When the House Chairman's mark on tax reform is released, taxpayers, advisers, and lobbyists alike will move into high gear in reading, parsing, evaluating, modeling, supporting, and opposing the proposal. This first legislative effort will be the most aggressive and the most ambitious version of tax reform—almost certain to be diluted as time goes by.
  • Beware of those speaking in absolutes. There is no single thing that we can yet say will definitely happen or is even likely to happen. At least for now, all things remain possible. As bills move through the legislative process, the shape of reform will become clearer in the coming weeks and months—but only slowly, and perhaps frustratingly so.
  • Expect to be surprised. It would be a mistake to assume that the House and Senate bills we are about to see will simply put flesh on the bones of the previously released Unified Framework. There is more, perhaps much more, to come. For example, there are almost certainly several unimagined pay-fors lurking in the legislative text, awaiting the light of day.

If the GOP keeps to its time line, many of the questions we have today may finally be answered this week. But for every question the bill answers, several new ones may arise. So no matter what we do see this week, one thing we won’t have is all the answers.

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This article represents the views of the author only, and does not necessarily represent the views or professional advice of KPMG LLP.

The information contained herein is of a general nature and based on authorities that are subject to change. Applicability of the information to specific situations should be determined through consultation with your tax adviser.

____________________

This article represents the views of the author only, and does not necessarily represent the views or professional advice of KPMG LLP.

The information contained herein is of a general nature and based on authorities that are subject to change. Applicability of the information to specific situations should be determined through consultation with your tax adviser.