- The Senate passed its budget resolution Thursday night, setting up the path to tax reform.
- Indications from the GOP leaders is that Congress may speed up the process to pass tax reform sooner rather than later.
- Challenges still lay ahead, and a tax code overhaul is not guaranteed.
Republicans hit high gear on their plan to reform the US tax code on Thursday night and are aiming to pass their bill “ASAP.”
The Senate passed its 2018 fiscal year budget resolution, clearing a major hurdle on the track to tax reform. The resolution sets up the GOP’s ability to use what is known as budget reconciliation, a legislative procedure that allows Republicans pass a tax bill in the Senate without the legislation being subject to a Democratic filibuster.
With the procedural road nearing it completion, Republicans now face the task of writing and passing the tax bill itself.
A helpful budget deal
Isaac Boltansky, an analyst at the research firm Compass Point, said the budget’s passage was a key marker. But he said Republicans still have a lot of work to do.
“To put this development into football terms, the Congressional GOP converted on a third down, but they are still on their own 30-yard line,” Boltansky wrote in a note to clients Friday.
But based on Republicans’ statements Thursday, the rest of the tax reform process could be a fast and furious drive.
The House now has to approve the Senate budget. The resolution adopted Thursday included key concessions to House conservatives that should avoid a conference committee in which the Senate and House would have to hash out any differences in the two budgets.
Greg Valliere, chief global strategist at Horizon Investments, said avoiding a conference would be a significant step since it would be so time consuming.
“The real eye-opener was the assertion by House Republicans that a conference committee may NOT be required to finalise a final budget resolution — and that would save at least two weeks, allowing debate to begin quickly on a tax bill,” Valliere wrote in a note to clients Friday.
By simply agreeing to the Senate deal, House Republicans would fast-track the tax reform process.
Up next: the House
Rep. Kevin Brady, the chair of the House Ways and Means committee that will oversee the tax reform legislation, said he plans to debut the bill sometime in early November. That would likely get the bill to the full floor for a vote shortly afterward.
Brady “hopes to introduce a tax bill within two weeks; his panel could pass it before Thanksgiving. Full House approval is likely by early December,” Valliere said.
Some potential snags remain, such as disagreement over the state and local tax deduction. But the likelihood of passage in the House is fairly high, analysts say. Republicans can afford to lose up to 22 members on the vote for the bill to pass.
At the same time, the Senate Finance Committee will likely work on their own version of a tax bill that will have to appease all sides of their slim 52-seat majority. Already, a handful of senators have expressed misgivings about various aspects of the tax bill.
Chris Krueger, an analyst at Cowen Washington Research Group, said the Senate is where the real trouble lies ahead.
“We can see a relatively clear path for tax momentum through the end of next month…then quicksand…just like repeal/replace,” Kruger said. “The House carries the ball downfield only to see the bill bleed out in the Senate. The Senate remains the original cooler.”
Still, the budget vote provided positive developments for Republican leaders. All Republicans aside from Sen. Rand Paul voted in favour of the budget resolution, and Paul tweeted that on Friday that despite his vote, he supported tax cuts.
This doesn’t mean there won’t be challenges ahead. Recalcitrant Republican members, a slew of industry lobbyists trying to protect favourable exceptions for their businesses, and possible public pushback could all derail or slow the effort.
For now, however, it appears to be full steam ahead for the GOP plan.
“We’ve been predicting enactment of a bill by spring; now we think late winter is possible,” Valliere said. “These folks are serious — they want a victory, and they want it fast. Avoiding a House-Senate conference committee is a strong signal that they plan to steamroll a bill through Congress ASAP.”
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