If Congress fails to act on tax legislation this year, Americans across the board “will face a 22% tax increase,” and “everything,” including retirement savings incentives, are being considered in tax reform, House Ways and Means Committee Chairman Jason Smith, R-Mo., said Wednesday.
But the first step is passing a spending bill.
The House passed late Tuesday a bill to fund the government through the end of September. The bill was sent to the Senate, where 60 votes are needed to pass it.
During an event held Wednesday in Washington by BlackRock and the Bipartisan Policy Center, Smith was asked how he sees the process unfolding given the deadline Friday to fund the government.
“I’m extremely proud of the unity of all the House Republicans, because in my 12 years in Congress I have never seen Republicans pass a continuing resolution by themselves,” Smith said. “That’s what it was. It was every Republican but one,” Smith continued, adding that the GOP lawmakers did that “strictly because the Democrats would not play ball with us.”
As to a Senate vote on the CR, “we’ll see if [Senate Minority Leader] Chuck Schumer will close down the government or whether he’ll let seven of his people” vote with the Republicans, he said.
The House passed bill is a “super clean CR — 99 pages,” Smith continued. “It’s as clean of a CR as you possibly can get. There’s hardly anything attached to it.”
Tax Bill Timing
Roughly $4.5 trillion in tax cuts will expire at the end of 2025 as part of the Tax Cuts and Jobs Act of 2017. To get the process started, the House and Senate have to pass budgets, the budgets have to be reconciled and then lawmakers move on to a tax bill.
Both the House and Senate have passed budgets with instructions on tax.
Whether the budgets can be reconciled by Spring “depends on the Senate," Smith said, adding that the chamber "has had a budget resolution for 16 days now, and they haven’t appeared to show any movement.”
“It’s super important that we do not kick the can down the road in looking at tax cuts and tax reform. If we kick the can down the road, it’ll end up like a CR of what’s going on this week, but you’ll never get the votes for a CR because just extending the [2017 tax cuts is] not mathematically possible with the members that I have.”
For the last four years, Smith continued, “Americans have been looking at inflation going up 20% and the last thing they need is for a 22% tax increase on their lives. That’s what it is.”
If no action is taken, every individual tax bracket rate goes up, the child tax credit gets slashed from $2,000 to $1,000, and the standard deductions get slashed in half, Smith said.
The real “sticking points” with the two budget resolutions, Smith added, are the spending cuts.
“If the Senate gets a budget by Easter, we will get it on the President’s desk by Memorial Day, unless the Senate drags its feet.”
As to retirement incentives being considered to help pay for a tax bill, Smith said that “everything is being looked at. Every tax provision, whether it’s an expiring TCJ provision, is being looked at.”
A tax bill “is no home run,” Smith added. “It is going to be the biggest legislative feat we could accomplish this Congress, if we follow through with it.”
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