It’s been a busy week. First, Ways & Means Chair Paul Ryan yielded to a tremendous amount of peer pressure and agreed to run for Speaker. The Republican Conference vote to replace departing Speaker John Boehner is set for October 28th and appears to be all but decided.
And now Boehner made good on his promise to clear off a bunch of “must pass” items before he left, announcing last night a deal with the White House to 1) raise the debt limit through March of 2017, 2) increase the spending caps on defense and non-defense discretionary for 2016 and 2017, 3) enact longer term reforms to prop up the Social Security disability program and 4) much, much more.
The House will vote on the package tomorrow, where a majority of Democrats are expected to provide the votes necessary to send it to the Senate. The Senate needs to act before the November 3rd, when we run up against the debt ceiling.
The Boehner-White House package is by no means a clean legislative sweep. Missing are the highway reauthorization, tax extenders, and the actual spending bills that make up federal funding. Speaker Ryan will have to deal with those items in the next two months.
The current highway authorization runs out this week, but the House is already acting to extend highway authority through November 20th. At that point, everybody expects them to adopt a 6-year reauthorization together with at least two or three years of funding.
Meanwhile, once the spending levels are set for 2016, the challenge of adopting the actual spending bills becomes much less contentious, so the odds of a government shutdown this winter just dropped sharply. Those bills, or giant omnibus combining them, still need to be adopted, however, prior to December 11th when current funding runs out.
Which leaves extenders. Once again, these tax items are left behind to fend for themselves. With Ryan leaving Ways and Means and the Committee leadership in play – Brady, Tiberi, and Nunes are all vying for the chairmanship – we would be surprised if Congress gets around to extending these tax provisions before December, making this the second year in a row that Congress has allowed 179 expensing, the shorter BIG recognition period, the R&E tax credit and all the other provisions to expire for almost an entire year! That’s unacceptable and a good argument for making as many of these provisions permanent as possible.
Survey of Business Tax Professionals
Last week, we updated you on three leading small business surveys, which sampled business owners from around the country to gauge the national mood on the economy. This week’s survey is a little different; it comes from The Tax Council (TTY) and Ernst & Young and focuses on business tax professionals looking at the tax policy environment. The sample includes 97 tax professionals, assessing their views on a variety of legislative issues. Here’s a snapshot of what they found:
- 63 percent of respondents said that they think tax reform will happen in 2018 or earlier, with a plurality (28 percent) saying 2017 is most likely.
- A plurality (45 percent) think that when reform occurs, it will be comprehensive, and another 21 percent think that it will include all businesses.
- A majority of 54.7 percent believe that reform will be revenue-neutral, while around one-third believe it will raise revenue.
- 91 percent of respondents think that extenders will pass this year, and two-thirds think the package will cover 2015 and 2016.
- Since the survey was taken in early September, it also has an interesting perspective on international reform—65 percent of respondents thought it would hinder the possibility of passing a comprehensive package in the future.
So the EY survey suggests the broad outlook for tax policy is similar to the S-Corp view – expect a two-year extender package adopted this fall together with a window of opportunity for tax reform after the election. There’s also a telling consensus among professionals about what would constitute good tax policy—a comprehensive package that addresses both individuals and businesses, not just the largest corporations or those doing business overseas. That’s good for tax policy and good for Main Street businesses.