Tax Reform Bill Approved by House Committee; Senate Tax Plan Unveiled
November 10, 2017|Jeff Davis
November 10, 2017 (updated Nov. 15)
Yesterday afternoon, the House Ways and Means Committee approved a $1.5 trillion tax reform and rate reduction bill after a contentious four-day markup session. Then, last night, the Senate Finance Committee released the outline of its own plan, which the committee will consider on November 13.
The Senate bill does not include the House bill’s elimination of private activity bonds, a type of tax-exempt funding used for local housing and infrastructure projects. But it does include the House bill’s repeal of the deductibility by employers of transportation fringe benefits (parking, mass transit, and bicycle commute costs) for their employees and even goes a step further and ends the exclusion of employer-reimbursed bicycle commute costs from personal income tax.
|Repeal authority to issue tax-exempt private activity bonds (PABs) after 2017?||Yes||No|
|Repeal tax deductibility for employers of all transportation fringe benefits?||Yes||Yes|
|Repeal the tax exclusion for employees of bicycle commute cost reimbursement from employers?||No||Yes|
|Increase deductibility of on-the-job meals purchased by truck and bus drivers to 80%?||Yes||No|
|End the tax credit for purchase of plug-in electric vehicles?||Yes||No|
Links to the relevant documents for the House bill:
- H.R. 1 as introduced – bill text, explanation, score.
- Nov. 3 Modified version (ANS) – text, explanation, score.
- Nov. 9 managers amendment – text, explanation, no score.
- H.R. 1 as amended and ordered reported – bill text, score, committee report, distributional effects.
Links to the relevant documents for the Senate bill:
- Bill explanation.
- Distributional effects by income level.
- List of amendments filed.
- Summaries of each amendment filed.
- Explanation of revised bill (Nov. 15 revision)
- Score of Nov. 15 revised bill.
- Distributional effects of revised bill.
(Unique among Congressional committees, Finance does not mark up legislative text – members offer concepts, and after the markup is over, the Finance staff works with the Legislative Counsel to write a bill implementing those concepts.)
House markup. It became obvious early in the House markup session that the fix was in – having hashed out their issues with chairman Kevin Brady’s (R-TX) bill behind closed doors prior to the introduction of the bill, the panel’s 24 Republicans were going to hold together and vote down all Democratic amendments, no matter their content. Any issues that the majority members wanted to address would be rolled into a Brady “manager’s amendment” at the end of the process.
The knowledge that their amendments were certain to fail did not stop the minority from offering a bunch of them (see the full list here). Only one amendment touched on transportation and infrastructure. Rep. Susan DelBene (D-WA) offered an amendment dealing with private activity bonds – but not from an infrastructure perspective. DelBene’s amendment had two parts – it would have stricken section 3601 from the bill (the section that repeals private activity bonding authority after 2017) and it also would have expanded the existing tax credit for construction of low-income housing.
DelBene and most other Democrats advocated PABs solely in the context of housing projects – not surprising, since stats kept by the Community Finance Development Association show that over 80 percent of all PAB issuances are for housing:
(But that less-than-20-percent includes a lot of big-ticket infrastructure projects for public-private partnerships – see a partial list in last week’s article here.)
Rep. Pat Tiberi (R-OH), a leader on the GOP side on infrastructure financing issues, spoke highly of PABs and said that he was “disappointed” that the bill kills PABs and that he hoped a future iteration of the bill would preserve them. Committee ranking minority member Richard Neal (D-MA) told Tiberi that “if you vote with us on this, I will not tell chairman Brady.”
Rep. David Schweikert (R-AZ) got the Joint Committee on Taxation staff director to point out that most PABs, like all tax-exempt bonds, wind up being owned by rich individuals who need secure, non-taxable income, so to the extent that the provision raises revenue, it is effectively a tax on the wealthy. Only Rep. Earl Blumenauer (D-OR) specifically addressed the fact that PABs are used for infrastructure.
DelBene’s amendment was rejected by a party-line roll call vote of 16 yeas, 24 nays.
Now that the Ways and Means Committee has reported the bill, it goes to the House Rules Committee, which has scheduled a meeting on the bill for noon on Wednesday. Rules will consider the bill report it to the House while also allowing or incorporating any amendments to be offered to the tax provisions that Republican leaders think they might need in order to get 218 Republicans to vote for the bill on final passage.
(Ed. Note: An earlier version of this article indicated that the Budget Committee was going to meet early this week and package together the Ways and Means tax bill with a Natural Resources Committee bill on oil drilling and report the combined reconciliation bill to the House. This is clearly what they were instructed to do by sec. 2002 of the 2018 budget resolution. However, it was later brought to our attention that section 5113 of the resolution provides that sec. 2002 has no force or effect and replaces it with a new Ways and Means-only reconciliation instruction to report the bill straight to the House. Sorry for missing that sneaky bit the first time.)
Senate bill. Last night, Senate Finance Committee chairman Orrin Hatch (R-UT) released his own tax reform plan, estimated by the Joint Committee on Taxation to reduce federal revenues by $1.496 trillion over the next ten years. Where transportation and infrastructure are concerned, the Senate bill is substantially different than the House bill. The only thing they have in common is that both bills eliminate the ability of employers to deduct the cost of transportation fringe benefits (parking, mass transit benefits, and bicycle commute cost reimbursement) as a business expense.
Under both bills, employees would still be able to exclude parking and transit benefits from their taxable income (up to the monthly limits set by the IRS), but the Senate bill would go further and kill the exclusion for bicycle commute benefits.
As mentioned above, the Senate bill does not kill private activity bonds, a major difference from the House bill. Nor does the Senate bill eliminate the tax credit for the purchase of plug-in, electric automobiles, which can knock up to $7,500 off of the price of such cars. And the Senate bill does not appear to contain the House bill’s provision increasing the tax deductibility of meals purchased by truck and bus drivers while on the road from the current 50 percent to 80 percent.
The Finance Committee will begin considering the tax reform bill at a markup session at 3 p.m. on Monday November 13. 355 amendments were filed prior to the markup – a list of all amendments and links to one-page summaries are at the top of this article. Of particular interest are Menendez #9 (removing the cap on private activity bond issuance for water infrastructure projects), Cardin-Bennet #1 (increasing deemed overseas income repatriation and dedicating the proceeds to a new Multi-Modal Trust Fund for infrastructure improvements) and Casey #5 ($500 billion in new tax credit bonds for infrastructure similar to Build America Bonds, with an “offset to be provided”).
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