House Passes Budget Resolution; Tax Bill Introduction Expected Wednesday

The House passed the fiscal year 2018 budget resolution by a 216-to-212 vote Thursday, opening the door for tax reform legislation. However, the narrow margin suggests that passing the tax bill may not be an easy passage for GOP leaders. Sources reported that the twenty Republicans who voted against it were expressing disapproval of the possible repeal of state and local tax deductions from the tax code.

The budget measure was previously approved by the Senate, and its passage allows tax reform to move through the Senate without the need for any Democratic votes.  House Ways and Means Committee Chairman Kevin Brady (R-TX) announced that the GOP tax bill will be introduced on the House floor Wednesday, with amendments to begin next week.

Reports over the weekend indicated that, bowing to pressure from blue state Republicans, Brady had agreed to retain the deduction for state and local property taxes (but not income taxes). Lawmakers are also at odds over a proposal to free up revenue for tax rate reduction by reducing the amount of annual pre-tax dollars employees can contribute to 401(k) plans.  The current level of $18,000 would be cut to $2,400. Although President Trump wrote on Twitter last Monday that “there will be NO change to your 401(k),” by Wednesday has backed off on that insistence, telling reporters “maybe it is [on the table] and maybe we’ll use it as negotiating.”

Democrats weighed in on both the speed at which Republicans are pushing legislation and the proposals themselves.  Senate Minority Leader Charles Schumer (D-NY) and Senate Finance Committee ranking member Ron Wyden (D-OR) both addresses the matter from the Senate floor Thursday. Wyden said “they are rushing their tax giveaway to big corporations and the wealthy through the Congress so quickly that nobody catches on.”  Schumer stated that eliminating state and local tax deductions “is the equivalent of robbing middle-class families of a tax benefit and handing it over to the wealthiest Americans and biggest corporations.”  Schumer also criticized the 401(k) proposal.