Early Outlook for Tax Activity in Congress
As Congress returns to Washington, tax writers will prepare to move forward on several different fronts. As anticipated in our prior coverage, lawmakers were able to pass tax extenders legislation before the 113th Congress adjourned. The legislation, however, only provided a one-year retroactive extension of the more than 50 expired tax provisions for the 2014 calendar year. As such, effective January 1, 2015, these tax provisions expired again, leaving it to the 114th Congress to take action on the matter. While incoming Senate Finance Committee Chairman Orrin Hatch (R-UT) has indicated that his committee will debate tax extenders early in 2015, he and incoming House Ways and Means Committee Chairman Paul Ryan (R-WI) have also indicated that they “wish we could get permanency.”
With respect to tax reform, lawmakers will make attempts in the 114th Congress to push through legislation that would overhaul the tax Code. While lawmakers remain divergent on their views as to how to accomplish individual tax reform, they appear to be more closely aligned on corporate tax reform.
Before the 113th Congress adjourned, outgoing House Ways and Means Committee Chairman Dave Camp (R-MI) formally introduced H.R. 1, the Tax Reform Act of 2014 – his comprehensive tax reform legislation, which is expected to serve as the starting point for the debate on tax reform during the 114th Congress. Republican Staff on the Senate Finance Committee also released a nearly 350-page report on the future of comprehensive tax reform, with Senator Hatch noting that he also plans to “reveal additional steps” in the coming weeks and months on how to move forward with tax reform. Moreover, recognizing that Republican leaders appear to be serious about tax reform, President Obama has promised that the Administration will have staff-level conversations on the matter prior to his January 20 State of the Union Address and “put forward some pretty specific proposals, building on what we’ve already put forward.”
House Leadership Releases Proposal to Require Dynamic Scoring, Set to Appoint Director of CBO
House Majority Leader Kevin McCarthy (R-CA) has proposed new rules that would require the Congressional Budget Office (CBO) and the Joint Committee on Taxation (JCT) to use dynamic scoring if a bill is expected to have a “significant impact” on the economy. According to Chairman Ryan, requiring the CBO and JCT to incorporate any macroeconomic effects of legislation into their scoring is “reality-based” and will provide a more accurate picture of the impact that such legislation will have. It is expected that the House Rules Committee and the full House will soon approve these proposed changes.
Additionally, given that Douglas Elmendorf’s term as Director of the CBO expired on January 3, Republicans are poised to appoint a new Director to take his place.