top of page

Tax Reform Won’t Happen Without A Budget Resolution

By Ryan Ellis

Summer has turned to autumn in our nation’s capital. Everyone is back to work, Beltway traffic is as bad as normal, and football is on television. Time, as they say, marches on.

Every day that goes by brings us one day closer to the end of the year, the target deadline Congressional Republicans have set to pass a comprehensive tax reform package into law. Every day closer is one day less to pass this very heavy lift. So why the delay?

In Congress, process matters. A lot. In tax reform, the process item that starts the whole ballgame is passing a budget resolution into law. A budget resolution does several things, including create a simple majority vehicle called a “reconciliation package.” A reconciliation package can be written to change mandatory spending and revenues without having to worry about a 60 vote threshold in the U.S. Senate.

If all of that sounds familiar, it should. It’s the process by which we have tried to pass repeal and replace of Obamacare. That effort is in its final attempt at success in the Senate as we speak, as Senators Lindsey Graham (R-S.C.) and Bill Cassidy (R-La.) try to find a 50 vote consensus on their health care plan. They only have that chance because Congress passed a budget resolution with reconciliation instructions. Without it, Obamacare repeal would have been dead on arrival from the House–Senate Minority Leader Chuck Schumer (D-N.Y.) controls 48 votes in the upper chamber, and could have lost as many as seven in his own caucus and still blocked action. Reconciliation is the only way major fiscal legislation happens in this age of hyper-partisanship.

It’s the same with tax reform. If Congress cannot pass the next budget resolution, the one that sets up tax reform via reconciliation, there will simply not be any tax reform bill this year or next. It’s entirely possible that a unified Republican government will go home to the voters next November having promised to repeal Obamacare and reform taxes and done a whole lot of neither.

A vote for a budget resolution is a vote for tax reform. Period. Everything else surrounding this budget resolution doesn’t matter. Ten-year balanced budget figures are aspirational, at best. Promised mandatory spending cuts will never get a majority in the Senate. The fight on discretionary spending is pretty much won, as the non-entitlement, non-interest portion of federal spending is now at the post-Cold War/pre-9/11 low of just about 6 percent of economic output. All that matters is the reconciliation vehicle to set up tax reform.

What would failure to pass a budget resolution mean? It would mean that Congress has given up entirely on governing in general and a reform agenda in particular. When it comes to tax policy, it means losing an opportunity to reduce the highest business tax rates in the developed world. It means not doing “unprecedented expensing” of business investment. It means not ending the double taxation of worldwide income by the IRS. It means not doubling the standard deduction or the child tax credit. It means not eliminating the AMT or killing the death tax. It means not making retirement savings easier for workers and their families. In short, it means being stuck with a tax code everyone hates but can’t bring themselves to quit.

Republicans in Congress have it all in their hands. They either come together–and put aside their differences, their nitpicks, their petty squabbles, and their personality conflicts–or they limp home to voters with broken promises and wasted majorities. In that case, they probably don’t deserve to be in charge.

But what about if they did come together? What if Republicans woke up tomorrow and realized they had a unified House, Senate, and White House for only the second time this century and in nearly the last 100 years? What if they decided to use their majority power to pass a budget resolution and then pass a tax reform bill into law–one that creates jobs, grows the economy, brings companies back to our shores, and cuts taxes and compliance burdens for middle class families?

It’s up to them.

Read here.

2 views0 comments


bottom of page