Capitol to Capitol | Dec. 4, 2017

Yes, the Tax Bill Is Heading to Conference

“Can you think of any major legislation passed in the last 10 years that was popular? Remember how unpopular Obamacare was? If [tax reform], in conjunction with regulatory relief, gets the country growing more rapidly and creates more jobs and opportunity, I think that will answer the skeptics.”

Senate Majority Leader Mitch McConnell (R) in an interview with Politico

Early Saturday morning, the Senate passed its version of tax reform, the Tax Cuts and Jobs Act, 51-49, with Senator Bob Corker as the lone Republican senator to join every Democrat in opposing the measure. The next step: Reconciling the differences between the House and Senate bills in a conference committee.

Until this weekend, many on Capitol Hill wondered whether the House would simply vote on the Senate passed bill, thus avoiding a conference. In fact, Speaker Paul Ryan (R) had been asked whether the legislation would go to conference so many times that he tweeted out this GIF acknowledging that the House and Senate would indeed conference the bill. Ryan and Senate Majority Leader Mitch McConnell plan to formally name conferees this week.

After the conference committee produces a final bill, both chambers will again vote on the legislation without being able to amend it. Although the House and Senate bills have many differences, the two sides are optimistic that because they agree on key elements of the overhaul, including the scope of corporate tax reform, that they will be able to produce a final product that can pass both chambers.

For a bill to make it to the president’s desk, the House and Senate will have to reconcile the major differences in their two pieces of legislation and navigate these hurdles:

  • Senate Rules: Among the arcane rules in the Senate is the Byrd Rule, which prevents reconciliation bills, such as tax reform, from adding to the deficit in years after the reconciliation bill expires, in this case after 10 years. This constraint has forced the Senate to sunset most all of the individual tax relief provisions by 2025, including the increased child tax credit, the doubled standard deduction, the estate tax cut, and the tax break for pass-through business income. While Republicans are confident that future Congresses will extend the tax cuts for individuals, opponents have argued that ending the tax cuts is a budget gimmick and if extended, will add to the nation’s debt.
  • Individual tax rates: The House bill reduces the number of tax brackets to four, with a top rate of 39.6 percent, while the Senate keeps the current seven that currently exist but lowers top rate of 38.5 percent.
  • Child tax credit: The House bill increases the credit to $1,600. The Senate bill increases it to $2,000.
  • Mortgage interest deduction: The House bill caps the deduction for home values up to $500,000 for new purchases. The Senate bill keeps it at $1 million.
  • Medical expense deduction: Current law allows individuals to deduct qualified medical expenses that cost more than 10 percent of their adjusted gross income (AGI). The House bill repeals this provision while the Senate bill actually expands it by lowering the floor from more than 10 percent to more than 7.5 percent.
  • Education deductions: The House bill repeals deductions for student loans and other education expenses like teachers buying school supplies, while the Senate bill would keep these deductions intact.
  • Corporate tax rate effective date: Both bills cut the corporate rate from the current 35 percent to 20 percent, but the House bill cuts it immediately while the Senate bill delays the cut until 2019.
  • Estate tax: The House bill phases out repeal of the estate tax while the Senate bill expands how much of an inheritance can be exempt from it.
  • Obamacare’s individual mandate: Unlike the House bill, the Senate bill repeals the individual mandate.

But what about SALT? Both the House and Senate versions of tax reform have modified the State and Local Tax (SALT) deduction by eliminating the ability of taxpayers to deduct their state and local income and sales taxes from their federal tax bills, and have capped property tax deductions at $10,000. While full preservation of SALT seems unlikely, Republicans in the House from “high tax” states continue to lobby for reinstating deductibility for income taxes.

In the end, expect the final bill to resemble the Senate bill much more than the House bill, if for no other reason than the Senate’s rules are much more constraining. After the conferees from each chamber are appointed, most all of the work on the final bill will be behind closed doors and the final product may only be made public right before it gets a vote. Even if that is the case, expect the tax bill rumor mill to continue to churn out gossip until the final vote is cast.

NCSL Contacts: Max Behlke, Jake Lestock

Government Shutdown Likely Avoided … For Now

It looks like the government will stay open, at least for a few more weeks.

DYK?

Five U.S. presidents have been elected without winning the popular vote: John Quincy Adams (1824), Rutherford B. Hayes (1876), Benjamin Harrison (1888), George W. Bush (2000), and Donald Trump (2016). However, John Quincy Adams is the only president to have lost both the popular vote and the electoral vote. As no candidate had received the majority of electoral votes in the election of 1824, the House of Representatives ultimately voted Adams into the White House, despite the fact that his main opponent in the election, future president Andrew Jackson, beat him in both the popular vote and in the electoral college.

As government funding is slated to expire this Friday, many in Washington fretted that a budget stalemate could force a government shutdown. However, Republican leaders in the House have proposed a two-week continuing resolution that will keep the government open through Dec. 22  to give them enough time to finish bipartisan talks that will increase both defense and nondefense spending. However, the leaders also expect that they will need a second two-week funding bill later this month to keep the government open during the holidays so that they can iron out the details of the final spending package that will keep the government funded through the remainder of the fiscal year, which ends on Sept. 30, 2018.

At the moment, Republicans do not appear to have enough votes to pass the short-term continuing resolution in the House without the help of Democrats, but they are confident that they will be able to wrangle them in time. The second funding vote, however, could be much more contentious and could lead to a government shutdown if a final budget deal is not close.

NCSL Contacts: Max Behlke, Jake Lestock

SCOTUS Sports Betting Case Has Major Implications for States

Today, the U.S. Supreme Court heard oral arguments in Christie v. NCAA. The case centers around a 2012 New Jersey law that would have rolled-back the state’s ban on sports betting in casinos and racetracks. The law was challenged by the NCAA and other sports leagues on grounds that it violated the federal Professional and Amateur Sports Protection Act (PASPA). The case has major implications for the states and will further define the Supreme Court’s federalism jurisprudence.

At stake in Christie is a state’s ability to legislate without undue coercion by the federal government. This particular case is about sports betting at New Jersey casinos and racetracks. The court’s holding, however, could affect any policy area not expressly pre-empted by the federal government via the Supremacy Clause, nor included in its constitutionally enumerated powers.

NCSL joined the National Governors Association, Council of State Governments, and National League of Cities in signing-on to an amicus brief filed by the State and Local Legal Center (SLLC). The SLLC amicus brief supports New Jersey by arguing that the lower court’s “reading of PASPA would permit Congress to order state and local governments to freeze state and local law” not only on sports betting, but on issues completely unrelated to sports betting. This kind of perverse legislative maneuvering by the federal government would allow it to effectively, but not visibly, control state legislative and regulatory functions.

Want to know more about this issue? NCSL’s Communications, Financial Services and Interstate Commerce Committee is hosting an educational session at the upcoming NCSL Capitol Forum titled: The Future of Sports Betting: State Regulation? The session is slated to host constitutional, legal and gaming experts who will analyze the case’s implications including what states need to be aware of if the court strikes down PASPA in whole or in part. The session will be live streamed on NCSL’s Facebook page on Monday, Dec. 11, at 1:30 – 2:45 p.m. PST.

NCSL Contact: Ethan Wilson

House GOP Introduces Bill to Rewrite Higher Education

DYK?

On July 16, 1790, Congress authorized a federal district, now called Washington, D.C., along the Potomac River as part of a grand compromise reached by three Founding Fathers at a Manhattan dinner party. The deal reached by James Madison, Thomas Jefferson and Alexander Hamilton allowed the southern part of the new nation to host the capital, in exchange for legislation mandating the assumption of all of the states' debts by the federal government. The debt-assumption deal, the brainchild of Treasury Secretary Hamilton, established a foundation for stable trading conditions that powered the fledgling nation’s financial system.

After months of deliberation and work, House Republican education leadership introduced H.R. 4508, a bill to reform the Higher Education Act (The Promoting Real Opportunity, Success, and Prosperity through Education (PROSPER Act)).

The bill’s authors, Representative Virginia Foxx (R-N.C.), chairwoman of the House Committee on Education and the Workforce, and Representative Brett Guthrie (R-Ky.), chairman of the House Higher Education and Workforce Development subcommittee stated, “With 6 million unfilled jobs and over a trillion dollars in student debt, simply reauthorizing the Higher Education Act will help no one. A hard truth that students, families, and institutions must face is that the promise of a postsecondary education is broken. We need a higher education system that is designed to meet the needs of today’s students and has the flexibility to innovate for tomorrow’s workforce opportunities. The PROSPER Act is higher education’s long overdue reform.” 

House Education and Workforce Democrats issued a brief statement via Twitter calling the bill an attack on working families and expressing concern for a lack of consumer protections, supports for students and public reporting. 

There is discussion that the House Committee may mark-up the PROSPER ACT before the end of the year. However, given other competing legislative priorities, it could be a challenge to complete a mark-up in the next three weeks.

NCSL Contact: Joan Wodiska

Controversial Gun Bill Advances in House

As if debate over a tax bill and government funding wasn’t enough, the House this week will take up a controversial gun bill package. The legislation, the Concealed Carry Reciprocity Act, which passed out of committee last week, would treat concealed-carry permits like a driver’s license, allowing concealed carry permit holders to take their weapons into other states that allow such permits.

DYK?

The Origination Clause in the U.S. Constitution requires that “All Bills for raising Revenue shall originate in the House of Representatives; but the Senate may propose or concur with Amendments as on other Bills.” It is generally accepted that the goal of the Origination Clause was to grant the power to tax to the chamber directly elected by the people. 

However, Senate rules place no general limits on the Senate’s power to amend, so the Senate may amend a House bill containing revenues with any other type of revenue provisions. For instance, in the 111th Congress, the Senate amended a House bill that provided tax credits to servicemembers, and inserted in the bill language overhauling the health care system including a number of revenue provisions, which ultimately became the Affordable Care Act.

The Concealed Carry Reciprocity Act will be paired with legislation that:

  • Improves background checks for gun buyers through the National Instant Criminal Background Check System after it was revealed that a mass shooter in Texas was able to purchase a gun despite a domestic violence charge, which has bipartisan support.
  • Requires the Justice Department to rule whether current law allows for more severe criminal penalties for the use of “bump stocks,” an attachment that can dramatically increase the rate of fire for semi-automatic rifles, during a crime. Democrats argue that Congress should pass a bill that outright bans bump stocks, not just ask the attorney general for an opinion. 

The proposal is the first gun-related legislation to move in Congress following the two most deadly mass shootings in U.S. history, in Las Vegas and Sutherland Springs, Texas. While the legislation is expected to pass the House, the bill is unlikely to advance in the Senate.

NCSL Contact: Susan Frederick

Policies Under Consideration at the 2017 NCSL Capitol Forum

Below are links to the policy directives, resolutions and amendments to existing policy directives the NCSL Standing Committees will consider during their meetings on Monday, Dec. 11, and Tuesday, Dec. 12, during NCSL's Capitol Forum in Coronado, Calif. Policy directives and resolutions adopted by the committees will then be considered at the NCSL Capitol Forum Policy Setting (Business) Meeting, scheduled to start at 9:30 a.m. on Wednesday, Dec. 13. 

Copies of Policy Directives, Resolutions and proposed amendments can be found here

NCSL Contacts: Neal Osten, Molly Ramsdell

Also of Note …

  • President Donald Trump voiced his support for controversial Alabama Senate candidate Roy Moore on Monday morning in a tweet that said, “we need Republican Roy Moore to win.” The president wants to ensure that the seat vacated by Attorney General Jeff Sessions stays in Republican hands to help move the president’s agenda. More from Politico
  • The Labor Department is proposing a new regulation that will allow employers to require workers who earn tips, such as waiters, to share that compensation with their co-workers. More from the Wall Street Journal
  • More than half of Washington’s 11,000 active lobbyists have reported working on taxes this year. More from The Hill

Read the November 27, 2017 Capitol-to-Capitol.

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NCSL's Advocacy in Washington

NCSL's Washington staff advocate Congress, the White House, and federal agencies on behalf of state legislatures in accord with the policy directives and resolutions that are recommended by the NCSL Standing Committees and adopted by the full conference at the annual NCSL Legislative Summit Business Meeting. As a result of the advocacy that is guided by these policies positions, NCSL is recognized as a formidable lobbying force in state-federal relations.

NCSL Staff in Washington, D.C.

  • Neal Osten | 202-624-8660 | Molly Ramsdell | 202-624-3584 | Directors
  • Max Behlke | 202-624-3586 | Budgets and Revenue
  • Danielle Dean | 202-624-8698 | Communications, Financial Services
  • Susan Frederick | 202-624-3566 | Law, Criminal Justice, and Public Safety
  • Ben Husch | 202-624-7779 | Natural Resources and Infrastructure 
  • Jon Jukuri  | 202-624-8663 | Labor, Economic Development and International Trade
  • Haley Nicholson | 202-624-8662 | Health
  • Ethan Wilson | 202-624-8686 | Commerce and Financial Services
  • Joan Wodiska | 202-624-3558 | Education