06 March 2015

ACR News 08.07.15 – Tax Reform Progress

>> Federal: Washington Roundup
>> Federal: Rubio and Lee Release Tax Reform Proposal
>> Federal: Working Groups Set Timeframe
>> Federal: Senate Hearings Continue
>> Federal: Hatch Discusses Tax Reform Progress
>> Federal: ACR Summit
>> Consider This: The Effect of King v. Burwell on Tax Reform
>> Top Reads: The Lee-Rubio Tax Proposal


 

Washington Roundup

On Tuesday, the House approved a bill to fully fund the Department of Homeland Security (DHS), narrowly avoiding a shutdown. Congressional leaders worked through the weekend to negotiate a “clean bill” – one without unrelated policy items – after Republicans attempted to use the effort to undo components of President Obama’s recent executive actions on immigration. The DHS is now fully funded through September.

On Wednesday, the Supreme Court heard opening arguments in King v. Burwell – a case that will determine whether the Affordable Care Act’s tax subsidies are legal in over 30 states that did not set up their own health insurance exchanges and relied on the federal government’s website to enroll their citizens. This case is shaping up to be a big distraction for key Republicans, specifically House Ways and Means Chairman Paul Ryan (R-WI) and Senate Finance Committee Chairman Orrin Hatch (R-UT). We discuss this case more in our Consider This column below.


Rubio and Lee Release Tax Reform Proposal

Also on Wednesday, Senators Marco Rubio (R-FL) and Mike Lee (R-UT) released a tax reform plan that attempts to create a “flatter tax system.” The plan eliminates almost all tax deductions and credits, but maintains the charitable deduction and a modified home mortgage interest deduction. Additionally, the proposal consolidates the individual income tax rates into two – 15 and 35 percent – and eliminates taxes on capital gains, dividends, and estates.

While neither Senator is a Member of the Senate Finance Committee, this document is important because it reflects the thinking of an influential wing of the Republican caucus in the Senate. It is also a positive development for us as it preserves the charitable deduction.


Working Groups Set Time Frame

The Senate Finance Committee’s bipartisan tax reform working groups continue holding educational meetings as they work toward producing final reports by late May. Roundtable presentations before the full Committee are tentatively scheduled for the last three weeks in April. The groups will present their findings behind closed doors. This process will presumably give everyone a sense of the areas of agreement and disagreement, and where they should focus their efforts regarding final proposals.


Senate Hearings Continue

The Senate Finance Committee held another tax reform hearing Tuesday examining fairness in the tax code. In his opening statement, Chairman Hatch told the Committee, “If our tax reform efforts are going to be successful, it is essential that the final – hopefully bipartisan – product is viewed as fair.” Witnesses presented differing views on how to increase fairness and Ranking Member Ron Wyden (D-OR) highlighted his previous proposal to significantly increase the standard deduction and increase the spending power of middle-class earners. The meeting was cut short due to Israeli Prime Minister Benjamin Netanyahu’s address to Congress and ACR’s issues were not discussed.

The Committee will hold another hearing on simplification next week.


Hatch Discusses Tax Reform Progress

Last weekend, the New York Times interviewed Senate Finance Committee Chairman Orrin Hatch (R-UT) about tax reform and other issues before the Senate. Hatch said there were “some very good concepts” in former House Ways and Means Chairman Dave Camp’s (R-MI) tax reform discussion draft (released last spring), but that the tax reform process is “probably going to take longer than two years.”

However, as you may recall, Ways and Means Chairman Paul Ryan (R-WI) said last month that tax reform must be “done by summer,” otherwise it will be difficult to move. This stands in contrast to Chairman Hatch’s comments, and at this time it is unclear how these timetables will be reconciled.


ACR Summit

There are less than two weeks until the 2015 Alliance for Charitable Reform Summit for Leaders. If you have not already registered, we invite you to join us and learn what we can do to protect private giving and educate lawmakers about the critical role of charitable organizations in a free society.

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Registration: To register for the ACR Summit as well as other events during Philanthropy Week in Washington, click here. Attendance is free.


Consider This: The Effect of King v. Burwell on Tax Reform

Earlier this week, the Supreme Court heard arguments in King v. Burwell, a case that could eliminate tax subsidies for low and middle income people who get their healthcare in states where enrollment is set up by the federal government, not the states. If that happens, an estimated 7.5 million people (some estimates are higher) will lose that assistance.

As a result, behind the scenes this Republican Congress has been consumed with what to do if those subsidies go away. The players that are most involved are those on the tax writing committees: House Ways and Means and Senate Finance. As Senate Finance Committee Chairman Hatch said recently, “We’re going to have to have an approach that will take care of that….I’ve been in meetings all week on, “How do we resolve this problem?””

King v. Burwell is taking most of the air out of the room, leaving little time to pursue other items on the agenda for Ways and Means and Finance – things like trade and tax reform. King v. Burwell could pose a huge political problem for Republicans heading into the 2016 elections and that is why there is such a scramble underway to find a contingency plan.

There is a potential silver lining. A back-up plan could be a positive catalyst for change in other areas both on the tax and healthcare fronts.

We expect a Supreme Court decision in June. In the meantime, we expect this issue to dominate the Ways and Means and Finance Committee agendas.


 

Top Reads


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