Capitol to Capitol | Nov.13, 2017

The Numbers of Tax Reform

DYK?

On this day in 1789, Benjamin Franklin wrote in a letter to a friend, his famous line, “In this world nothing can be said to be certain, except death and taxes.” The words were actually just the second half of a sentence he’d written in a letter to his friend Jean-Baptiste LeRoy. It was shortly after the United States Constitution had been ratified, and his entire sentence was this: “Our new Constitution is now established, and has an appearance that promises permanency, but in this world nothing can be said to be certain, except death and taxes.”

House Republican leadership is confident the chamber will pass a tax reform package this week and the Senate Finance Committee will begin considering its legislation this afternoon. However, congressional Republicans still have many hurdles to clear if they want to send a bill to President Donald Trump before the end of the year. Below are key numbers for tax reform:

218 – The number of votes needed to pass legislation through the House of Representatives.

  • Last week, the House Ways and Means Committee passed its tax reform bill along a party-line vote of 24-16. House leadership is confident they have the requisite votes for the legislation to pass the chamber, which is why Speaker Paul Ryan has signaled that he does not intend to significantly amend the legislation before the final vote. However, Republican members in “high-tax” states have signaled they plan to vote “no” because of the modification of the State and Local Tax (SALT) deduction, and other Republicans remain uncommitted for various reasons. Therefore, expect the vote before the full House to be very close.

50 – The number of senators needed to vote for a tax reform package (Vice President Mike Pence would be the tie-breaking vote).

  • The Senate Finance Committee will begin consideration of the Senate tax package today. The committee’s website lists more than 350 potential amendments for this week's markup, including the all-important chairman’s mark that would ensure the legislation comports with the budget framework that requires the tax bill not add more than $1.5 trillion to the debt.
  • Given that Republicans can only afford to lose two senators on a tax vote, it’s not yet clear if the Senate bill even has enough votes yet to clear its own chamber. Some Republican senators, including Bob Corker (Tenn.), Jeff Flake (Ariz.), James Lankford (Okla.), and John McCain (Ariz.), are concerned about the bill’s impact on the debt.

$0 – The amount that a tax reform bill can add to the deficit for it to comply with the Senate’s Byrd rule, which stipulates that reconciliation bills cannot add to the deficit after a decade, if not sooner.

  • Given that both the House and Senate bills would need a major rewrite to comply with the Byrd rule, it is likely that Republicans will look to pass a bill that will let the major provisions of tax reform expire after a decade.

$20.5 Trillion – The current U.S. national debt, is now 105 percent of the United States’ Gross Domestic Product (GDP).

  • The Congressional Budget Office (CBO) projects that the national debt could rise to 150 percent of gross domestic product (GDP) by 2047 under current law, which far exceeds the 50-year historical average of approximately 40 percent of GDP. As the Peter G. Peterson Foundation notes, one of the most damaging effects of rising debt is rapidly growing interest costs. Under current law, CBO projects that interest payments on the debt will more than quadruple over the next 30 years, climbing from 1.4 percent of GDP in 2017 to 6.2 percent in 2047. By 2047, CBO projects that interest costs alone could be more than two times what the federal government has historically spent on Research & Development, nondefense infrastructure and education combined.

10, 15, 25, 30, 60 – The Joint Committee on Taxation (JCT), estimates that under the current House bill:

  • 10 percent of taxpayers would see a tax hike of at least $100 in 2019.
  • 15 percent of taxpayers between $75,000 and $100,000 in income would see a tax increase.
  • 25 percent of taxpayers with incomes between $200,000 and $500,000 a year would see a tax increase.
  • 30 percent of taxpayers, including most tax filers with incomes below $30,000 a year, would see basically no change in their taxes.
  • 60 percent of taxpayers would see a tax cut of at least $100, with the group making between a half-million and $1 million a year the most likely to benefit.‚Äč
Next Steps

There are obviously many areas of uncertainty for tax reform and this week will likely shed some light on the prospects of passing a bill this year. Republicans are feeling the pressure to deliver a major legislative achievement and will do whatever they can to get a bill to the president’s desk. But, as the recent failure to repeal and replace the Affordable Care Act proves, passing comprehensive legislation along party-line votes is often easier said than done.

NCSL’s analysis of tax reform in the 115th Congress can be found here.

NCSL Contacts: Max Behlke, Jake Lestock

What Lawmakers Need to Know Over the Next 10 Years

Technology has changed our economy and will continue to do so through the next decade and beyond. The changes that technology brings challenge traditional differences in the roles between federal and state policymakers. State laws are viewed by many in the tech world as barriers to business. John Feland, CEO of Argus Insights, Inc., looks at tech trends and how they will change how we live and conduct business. He is the plenary speaker on Tuesday, Dec.12, during the NCSL Capitol Forum, Del Coronado Hotel, Coronado (San Diego), Calif. taking place Dec. 10-13, 2017. His presentation will focus on what state policymakers need to know and how to stay relevant in the age of “Internet of Things.” For more information on the NCSL Capitol Forum, please visit the meeting’s webpage.

NCSL Contacts: Neal Osten, Molly Ramsdell

Government Shutdown – T-Minus 25 Days

DYK?

In 1845, Congress decided that voting day would be the first Tuesday after the first Monday in November, which was after the fall harvest and before harsh winter conditions made travel too difficult. In the 1800's, most citizens worked as farmers and lived far from their polling place and many traveled at least a day to vote. Weekends were impractical, since most people spent Sundays in church, and Wednesday was market day for farmers.

While Republicans are fast-tracking their tax reform legislation, it is important to remember that Congress has until midnight, Dec. 8 to pass a spending bill or the federal government will shut down. This past September, President Donald Trump made a surprise deal with Democratic leaders to pass a three-month government spending bill, that included aid for hurricane relief and suspended the debt limit until Dec. 8. Now, it looks like another short-term stopgap extension will be likely, pushing the deadline of a deal potentially to New Year’s Eve, if not later, to hammer out final spending details between the House and the Senate. This deal will prove to be challenging, especially in the Senate, where Republicans need at least eight Democrats to vote with them to meet the 60-vote threshold needed to pass a bill.

President Donald Trump has further complicated this task by announcing his administrative plan to sunset the Deferred Action for Childhood Arrivals (DACA) program that protects from deportation nearly 800,000 young illegal immigrants who were brought to the U.S. as children. Prominent Senate Democrats, including Kamala Harris (D-Calif.), have announced that they will not vote for a spending bill if it does not maintain the DACA program.

Another contentious issue will be Trump’s continued request for $1.6 billion to fund a wall along the US-Mexico border. This provides Democrats with a unique position of power. These, among other issues, like funding of Affordable Care Act subsidies, renewal of the Children’s Health Insurance Program (CHIP) and additional disaster relief funding will all lead to difficult partisan negotiations. As Democrats identify priorities needed to obtain their votes, Republicans will be forced to choose to grant the concessions or risk a government shutdown.

NCSL Contacts: Max Behlke, Jake Lestock

Senior Congressional Chairmen Announce Retirements

Three senior members of the House of Representatives who chair the House Financial Services Committee; the House Judiciary Committee; and the Science, Space & Technology Committee announced they will retire at the end of the 115th Congress. All three were also term limited as chairs, serving in their last term as committee chair. House Republicans have self-imposed six-year (three two-year terms) term limits for committee chairs.

Congressman Jen Hensarling (R-Texas), who became chair of the House Financial Services Committee in 2011, through his tenure tried to repeal sections, if not all, of the Dodd-Frank Act, which changed the regulation of the financial services industry as a result of the economic downturn in 2008. Hensarling had hoped that with a Republican Congress and president he would have succeeded this year, but so far has not prevailed. Hensarling also tried to reform the National Flood Insurance Program, but those efforts were stymied by the three recent hurricanes, Harvey, Irma and Maria.

Congressman Bob Goodlatte (R-Va.), chairman of the House Judiciary Committee, had a similar record of not producing much success during his term. He has single-handedly halted any consideration of the Marketplace Fairness Act and the Remote Transaction Parity Act, which would give states the authority to require collection of sales taxes on out-of-state transactions and online sales. Goodlatte has also been criticized for failing to report legislation from his committee on immigration reform, criminal justice reform, patent trolling reform, cybersecurity, and online privacy to name a few.

The third chairman to retire is Lamar Smith (R-Texas), Chairman of the Science, Space and Technology Committee. Smith had served as Chair of the House Judiciary Committee prior to becoming Chairman of his current committee.

Joining these three members of Congress in announcing their retirement in 2018 are nine Republican members of Congress and two Democrats. Another 10 Republican members and eight Democrats are running for other offices and will not seek re-election to the House. Three Republican members have resigned, not counting the three who resigned earlier this year to take positions in the Trump administration.

Two members of the U.S. Senate have also announced they will not seek re-election in 2018, Senators Bob Corker (R-Tenn.) and Jeff Flake (R-Ariz.).

NCSL Contacts: Neal Osten, Molly Ramsdell

State Groups Send Letter on AV START Act

DYK?

Internal Revenue Service (IRS) audits of individuals are at their lowest level in more than a decade. But for two people in the United States, their chance of being audited is 100 percent every year—the U.S. president and vice president. According to the IRS, the practice of doing a "mandatory examination" of the presidential and vice-presidential tax returns has been in the Internal Revenue Manual since the Watergate era.

NCSL joined several state and local government organizations in expressing their appreciation for the Senate Commerce, Science and Transportation Committee’s inclusion of key stakeholders in the development and approval of the AV START Act. However, the groups wrote that while the legislation preserves the historical federal partnership with state and local governments, further definition of certain terms were needed to firmly associate them with federal responsibilities. Additionally, citing concern for public safety upon the deployment of these new technologies, the groups emphasized the need and support for the required, and timely, submission of detailed safety evaluation reports. The organizations will continue to work with the Senate as the bill moves forward.

NCSL Contacts: Ben Husch, Kristen Hildreth

Medicaid Changes on the Way?

Last week the Centers for Medicaid and Medicare Services (CMS) posted a notice regarding changes to the 1115 waiver program. The announcement was a follow-up to a letter sent in March outlining the administration’s work to change what they viewed as a burdensome process for states. Among other changes, the proposal would have CMS work with each state that applies to develop a timeline for approval; provide states expedited approvals if their waiver is highly similar to one previously approved in another state and make the requirements easier for states to use the previous administration’s fast-track approval process. CMS Administrator Seema Verma discussed the changes last week at a meeting of state Medicaid directors, and also spoke about the administration’s willingness to allow states, in their waiver applications, to have work requirements for Medicaid enrollees.

NCSL Contacts: Haley Nicholson, Abbie Gruwell

Also of Note …

  • The next disaster funding request from the White House is expected to released Wednesday or Thursday. Capitol Hill sources guess that it will cost more than $50 billion.
  • Polls for the Alabama U.S. Senate special election show a close race after allegations surfaced of sexual misconduct for GOP nominee Roy Moore. Democrat Doug Jones leads Moore in the JMC Analytics Poll. The last time a Democrat won a U.S. Senate race in Alabama was 1992. Politico
  • President Donald Trump on Monday nominated former pharmaceutical executive Alex Azar to be his next Health and Human Services secretary, replacing Tom Price, who resigned earlier this year after he was criticized for spending roughly $1 million on private and government air travel. CNBC
  • Today, for the first time, the public will be able to access briefs and other case documents on the U.S. Supreme Court’s website. Washington Post

 

Read the Nov. 6 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
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  • Danielle Dean | 202-624-8698 | Communications, Financial Services
  • Susan Frederick | 202-624-3566 | Law, Criminal Justice, and Public Safety
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  • 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