The House is “on pace” to get tax reform done by the end of the year, Chief Deputy Majority Whip Rep. Patrick McHenry, R-N.C., said Wednesday, adding that “even the Senate believes” tax reform will be accomplished by year end.
McHenry, speaking at an event held at the Financial Services Roundtable in Washington, said tax reform is needed because the U.S. needs “additional growth; we’ve seen the middle class left behind, we see global competition for our largest players.”
The motivation for tax reform, according to McHenry: “We are certainly at an inflection point, 30 years past our last attempt at tax reform. But we’re at a fundamentally different time” than in 1986, he said. The 1986 plan “was largely driven out of the right and the left seeing a complicated tax code and the economic deterrent that that is to growth.”
Today, while there’s an agreement “on the complexity of the tax code, and a motivation on the left to drive additional revenue into government … we don’t have that cross-party — broadly — alliance” for tax reform now, he explained.
“But we do have the tool of reconciliation, which is a natural ingredient for reforming and changing the tax code,” McHenry continued. “It enables 51 votes in the Senate … everyone knows the benefits of this process, but it’s not a complicated procedure like reconciliation was for changes in entitlement programs or mandatory spending programs. It is a very clear process for the tax code, for revenue measures.”
Lawmakers’ time now has to be driven by “top-line motivation,” McHenry said. “We need additional growth, we’ve seen the middle class left behind over the last 30 years — they’ve not gotten ahead financially; we see global competition for our largest players that are incorporated in the United States.”
The GOP’s unified tax reform framework, released Sept. 27, “was dramatically different than anything we’ve done since we took the majority in 2011,” McHenry said Wednesday. “There’s a sense of real pride that we can do something big and complex,” he said, adding that the "unity" around the framework enabled the House to get the votes (219-206) to pass its budget.
The Senate marked up its budget resolution last week. Getting the Senate budget "knitted up is that entry point for us to have the detailed coversations in tax reform. We're on pace to get this done by the end of the year," McHenry said.
FSR released a study the same day which found that Americans overwhelmingly believe passing a tax reform bill should be a top priority for Congress to help simplify the U.S. tax code, incentivize lending and retirement savings and grow the economy.
According to the study, three in four voters (73%) said passing a tax reform bill should be a top or important priority for Congress, and nearly 9 in 10 (87%) said it’s important to simplify the U.S. tax system.
The national online poll of nearly 2,000 registered voters was conducted by Morning Consult from Oct. 3-5.
A majority of voters said tax objectives such as increasing access to loans and capital (67%) and encouraging public-private partnerships (67%) was a top or important priority, with 59% of those polled saying that small businesses are paying too much in taxes.
The poll also shows great support for tax policies to incentivize retirement savings accounts (80%) and taxing businesses in a way that brings profits back to the U.S. (78%).
Even Morningstar analysts opined that the Republican-controlled Congress will “more likely than not pass tax reform in the coming year,” and that such reform will lead to a “material increase in earnings” at many of the companies the Chicago-based fund research firm covers.
From a procedural perspective, the Morningstar analysts wrote, “Republicans may opt to use a procedure known as budget reconciliation to pass a bill using the simple congressional majority that they possess.”
The Morningstar analysts believe Congress has enough votes to pass tax reform, “especially if budget reconciliation is used,” as with this method only a simple majority in the Senate is needed or the vice president’s vote to break a tie to pass a bill.
While the GOP can garner enough “unity for a simple majority,” this will still require compromise, the analysts say. “Therefore, tax reform will not be as dramatic as many of the existing proposals.”
Furthermore, Morningstar believes that “a corporate tax rate around 25% is more reasonable than a White House proposed 15% or a House Republican tax reform blueprint-proposed 20% rate.”
--- Related on ThinkAdvisor: