Senate Passes Historic Tax Bill
On December 2, the Senate passed its U.S. tax code rewrite legislation, the Tax Cuts and Jobs Act, by a vote of 51-49. Sen. Bob Corker (R-TN) joined all Senate Democrats in voting against the bill. The House passed its own version of tax reform, by a vote of 227-205 with 13 Republicans voting with all Democrats against the bill, just before it adjourned for the Thanksgiving recess on November 16.
Now the two congressional bodies must reconcile the difference between the two bills. This could be done by the House simply passing the Senate bill, but for the moment at least, the two chambers are going to attempt craft a compromise bill. A conference committee with select House and Senate members will be meeting this week with the hopes of reporting out a new compromise bill by the end of the week.
The first procedural vote in the House to take the tax bills to a formal conference committee occurred on December 4, beginning the process to potentially pass a final bill as soon as the week of December 11. If all proceeds well with the conference committee, the House can pass the conferenced bill with a simple majority, and the Senate will need 50 votes. Democrats cannot filibuster to stop the bill.
The consideration of the House and Senate tax bills over the last month has happened at a record pace as Republicans are looking for a legislative win in what has been a tough year. They are also anxious to pass the tax legislation quickly, as there are several other priorities in December that could slow or halt Congress’ consideration of tax reform. This week, Congress must also broker a deal to prevent a government shutdown, as government funding expires on December 8. Congress passed a short-term continuing resolution on October 1 through December 8 as it dealt with disaster relief around the country. The latest reports indicate that another short-term extension until December 22 is the most likely scenario.
Other issues needing immediate attention from Congress include the debt ceiling, which will also be hit on December 8; SCHIP (essentially Medicaid for children and pregnant women), as the program’s authorization expired on October 1; a legislative fix for Dreamers; ACA exchange stabilization measures; and further disaster relief, just to name a few.
The rush has also been driven significantly by the uncertainty around the December 12 Alabama Senate special election, and the subsequent December 22 seating of a new senator. However, since Republicans in the Senate were able to get 51 votes for their legislation, the election may not play as much of a role in the passage of a final bill as originally thought. If Roy Moore or Doug Jones, the Alabama candidates for Senate, vote against the bill once seated, the vote would be 50-50, and Vice President Pence can break the tie for passage.
This all assumes that the conference committee is able to come up with an agreement on a bill that does not upset the concessions and changes Republican leaders in the Senate or in the House had to make to get certain members to vote for their respective bills. Therefore, if they are unable to broker a final tax bill that can get sufficient votes for passage in the House and the Senate, the House may still be faced with the reality they will need to pass the Senate bill in order to get a tax reform measure signed into law.
The final bill will likely look substantially similar to the Senate bill, potentially identical. Yet there are several major differences between the House and Senate bills that the conference committee will need to resolve. The Senate bill repeals the ACA’s individual mandate, while the House bill does not. The House bill makes corporate and individual tax cuts permanent, while the Senate, with more restrictive rules, drafted its bill to make the corporate taxes permanent but placed an expiration on the individual tax cuts at the end of 2025. The House bill cuts the corporate tax rate beginning in 2018, while the Senate bill waits until 2019 to begin the new corporate rate. The bills also differ in the changes they make to the estate tax, the child tax credit and the mortgage interest deduction. The Senate bill retains a seven-bracket tax structure, while lowering the top rate to 38.5 percent, while the House bill would collapse the current structure into four brackets but maintain the current top rate of 39.6 percent.
The two bills also differ in the provisions they choose to pay for the tax cuts. The final House bill retained the devastating elimination of important and popular higher ed benefits, like tax-free qualified tuition reduction (IRS code Section 117(d)) and employer-provided tuition assistance (IRS code Section 127). The Senate bill preserved these important provisions, but they are still in jeopardy, as the conference committee could look to them to pay for aspects of a final bill.
To that end, we encourage colleges and universities to continue to weigh in with Congress, through the Contact Congress function of the Tax Reform and Higher Education website, and request that these benefits be preserved. You may also weigh in on other concerning provisions for higher education that would undermine charitable giving, increase taxes on endowments, and create new cost burdens on already strained budgets through the Tax Reform and Higher Education website as well.
