Housing has the most promise as a topic for bipartisan tax legislation this Congress, but lawmakers must address the debt ceiling before any progress can be made, according to congressional tax staffers.
Staff on the Senate Finance Committee and the House Ways and Means Committee previewed this year’s legislative possibilities for tax during a panel at a Federal Bar Association conference March 3, but they were hesitant to forecast tax legislation without first seeing a solution on raising the nation’s debt ceiling.
Sarah Schaefer, chief tax adviser for the Finance Committee under Chair Ron Wyden, D-Ore., said it’s “hard to see tax legislation” on the horizon with the debt ceiling unaddressed.
And while Congress has historically tacked tax legislation onto larger legislative vehicles, such as omnibus bills, the debt ceiling solutions aren’t likely to serve that purpose in a meaningful way this year, according to Andrew Grossman, minority chief tax counsel of the Ways and Means Committee.
“I really can’t see a world in which any kind of tax legislation arises from any sort of legislation dealing with the debt ceiling,” Grossman said. “It does seem like it’s going to be difficult to define a vehicle to enact tax legislation.”
Putting the debt ceiling aside, Schaefer said Wyden is hoping to move a tax bill on housing this Congress with bipartisan support. The Finance Committee is scheduled to hold a hearing March 7 on increasing the affordable housing supply through tax policy.
Ways and Means Tax Subcommittee Chair Mike Kelly, R-Pa., and committee member Jimmy Panetta, D-Calif., recently reintroduced the bipartisan More Homes on the Market Act to increase the sales gain tax exclusion for homeowners selling their homes.
“There's a lot of support — bipartisan and bicameral support — for housing, so we’ll see what's there,” Jamie Cummins of the Finance Committee’s minority staff said.
While Democrats no longer drive the agenda on the Ways and Means Committee, Grossman said ranking member Richard E. Neal, D-Mass., still hopes to prioritize expanding initiatives from the American Rescue Plan Act, including the child tax credit and earned income tax credit.
Grossman conceded that common ground in those areas may be hard to find and will depend on the amount of deficit spending members are willing to accept. Lawmakers reached across the aisle on tax in last year’s retirement bill, known as SECURE 2.0, which was rolled into the Consolidated Appropriations Act, 2023 (P.L. 117-328).
Oversight of the IRS’s spending of $80 billion in additional funding from the Inflation Reduction Act (P.L. 117-169) is top of mind for Finance Committee ranking member Mike Crapo, R-Idaho — especially money allocated for modernization, according to Cummins. Republican committee members also hope to focus on “pro-growth” tax policies, particularly preventing the upcoming 2025 expiration of provisions from the Tax Cuts and Jobs Act, he said.
Just as they did in the last Congress, negotiations with Democrats on extending TCJA provisions will likely pivot on expanding the child tax credit as well, Schaefer said.
Every conversation on legislative tax proposals this year will be deeply influenced by offsets and deficit concerns, especially given the context of the debt ceiling, according to Thomas Barthold, chief of staff of the Joint Committee on Taxation.
“That's a question that members on both sides of the aisle undoubtedly will have: an aggressive, I think, broader political debate on the budget process,” Barthold said.
The JCT is focused on producing its blue book explanation of tax provisions passed during the 117th Congress, according to Barthold, and welcomes input on technical corrections and areas for clarity on the last Congress’s legislation.
Barthold told Tax Notes in January that the blue book is likely to be out by the end of June.
Anticipating Biden’s Budget
In his State of the Union address February 7, President Biden called for a permanent expansion of the child tax credit, the introduction of a minimum income tax on billionaires, and a quadrupling of the corporate stock buyback excise tax. Biden is scheduled to release his fiscal 2024 budget March 9.
Democrats on the Ways and Means Committee will be looking out for Biden’s proposals related to the child tax credit — in particular, details on offsets and making the credit’s expansions permanent, according to Grossman. Republican Finance Committee members want to be optimistic about Biden’s tax-related proposals, but they expect tax increases that they plan to oppose, Cummins said.
The JCT will release a description, review, and discussion of the president’s proposals once they are released, according to Barthold, and Treasury Secretary Janet Yellen is scheduled to testify in front of the Finance Committee about the budget March 16, according to Schaefer.
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