By John Gimigliano, Principal in Charge, Federal Legislative & Regulatory Services, Washington National Tax, KPMG LLP
Apr 21, 2017
There was a flurry of activity in Washington late last week:
- President Trump said that his tax plan could be released as soon as this week.
- Treasury Secretary Mnuchin indicated that government revenue lost due to the plan’s tax cuts would likely be offset by increased economic growth.
- Speaker Paul Ryan once again vowed to repeal and replace the Affordable Care Act (ACA), with a vote possibly scheduled as early as this week.
These actions may be a signal that the tax reform process may be getting underway. Let’s take a look at the possible steps to the potential road forward:
- Address healthcare reform: The White House and House leadership still indicate that they want to address healthcare reform before tax reform. One reason for this, as noted by the involved parties, is to repeal a number of ACA-related tax provisions, which would make the math of tax reform more straightforward.
- Release a budget: The Administration remains committed to releasing its full budget in June, which is expected to contain the President’s full tax plan. This should reveal to what extent the Administration supports the House Blueprint and its much debated border-adjustment tax.
- Release legislation: The House Ways and Means committee has been working to convert the Blueprint from a “whitepaper” to fully operational legislation since it was released last June. Once the Blueprint is released as a bill, individual legislators throughout the Hosue can then be expected to make firmer judgments about where they stand.
- Act on the House bill: Once the House has a bill, it will likely try to approve it quickly and then begin discussions with the Senate.
- Move to the Senate: If the bill passes the House by a convincing margin, it’s more likely that the Senate will follow a similar approach to tax reform. But if the House plan passes with only the minimum number of votes, the Senate may pursue its own plan, perhaps not based on the Blueprint. The Senate tends to be the more deliberative body, so in either case, the process will likely take some time.
- Reconcile the House and Senate bills: Assuming the House and Senate each pass tax reform bills, there will almost certainly be differences between the two. Congress would then need to reconcile the differences in the bills. There is no guarantee a compromise bill can be developed that would pass both the House and Senate.
- Signed by the President: Finally, the President must agree to sign the bill.
Conclusion? The path to tax reform enactment is likely to be a long one.
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.