Congress had quite a year in 2015. There were major changes in the Republican Leadership of the House: the resignation of Speaker Boehner, the ascension of Speaker Ryan and Chairman Kevin Brady taking the reins at the Ways & Means Committee. Bipartisan efforts got underway on tax, financial services and telecommunications policies.
Perhaps the biggest accomplishments came at the end of the year. Congress enacted a multiyear highway and infrastructure spending bill as well as a budget agreement that set, and increased, discretionary spending levels for two years. Congress also passed an omnibus spending bill that funds the government until September 30, 2016. A large tax bill that made a number of significant changes to the US tax code was also enacted.
Last year’s congressional activity is a sign that the legislative process is loosening up. Just the act of legislating was an important learning process for many members of Congress who have not been in Congress long enough to see major pieces of legislation enacted into law.
While much attention was paid to the main aspects of these bills, each of them also carried other policy changes that, while small relative to the rest of the package, were important to particular stakeholders. These policy changes represent the successful efforts by the particular stakeholders to educate, and advocate before, Congress for these specific changes.
Last year’s congressional activity also has set the table for further action in 2016 and beyond. Indeed, 2016 is likely to be a very active legislative year, particularly in the House where Speaker Ryan has promised that House Republicans will produce a number of major policy proposals as a means to frame the electoral debate. Some of those proposals have a chance to be enacted into law, but most will serve as the foundation for legislative activity after the presidential election.
Three areas where proposals have a greater chance of enactment include appropriations, reauthorization of the Federal Aviation Administration (FAA) and legislation implementing the TransPacific Partnership (TPP) trade agreement. The appropriations process will start early and be very active in 2016. These appropriations bills can be vehicles to carry smaller, stakeholder-specific policy changes. In particular, appropriations bills serve as a means to influence the regulatory process through the inclusion of riders that require or prohibit certain rulemaking outcomes.
FAA reauthorization legislation is needed by March 31, 2016, when the current authorization expires. The President has signaled that enactment of the TPP is a priority for the Administration. Both of these pieces of legislation are “revenue measures”—legislation that, under congressional rules, can carry changes to the US tax code. Each will also require the inclusion of “payfors”—policies that offset the spending increases or revenue losses associated with the central policies. This is a critical piece of context given another change that occurred in 2015: the acceptance of tax measures as offsets for new spending by House Republicans.
Until 2015, House Republicans had taken a firm stance that increases in income taxes, no matter what the form, could not be used to offset new government spending. However, on three occasions in 2015 (both the short- and subsequent long-term highway legislation and in the budget agreement legislation), House Republicans agreed to use income tax revenue to offset new spending. Taxpayers whose particular tax policies have been identified as “loopholes” or targeted for elimination in other legislative proposals should be particularly aware of this new legislative environment as Congress will be looking for policies to offset the costs of the FAA and TPP bills.
The large tax extenders package that Congress enacted at the end of 2015 likely sets up more activity on tax reform—although enactment into law in 2016 is unlikely. Rather, 2016 may see more legislative proposals, such as new legislation on patent box or broader international tax reform, or even new comprehensive tax reform proposals. This activity will set the foundation for more aggressive action on tax reform following the presidential election. Groups that engage early and aggressively can help shape the contours of the debate with regard to the specifics of a particular policy and how it more broadly fits into the concept of tax reform. Groups that fail to significantly engage may lose existing exemptions or deductions the elimination of which is used as a payfor for some other policy change.
Some political commentators will note that because 2016 is a Presidential election year, Congress is unlikely to be particularly relevant. This presumption fails to note the lessons from 2015 and the new policy-making environment in the House. Thus, in 2016, the legislative process will present new opportunities and risks. Stakeholders will need to engage Congress in a sophisticated manner in order to ensure that they benefit from the opportunities and minimize the risks.