June 19, 2017 - Weekly Legislative Update

Congress now has less than thirty days in session before both chambers are scheduled to adjourn for August recess.  When Congress comes back into session after Labor Day, most of the attention will immediately turn to the budget for the fiscal year 2018 (which starts on October 1, 2017).  In fact, members of the Administration have already been on the Hill this week testifying about the Administration's budget priorities.

With all the excitement in the Senate Intelligence Committee sucking up most of the political bandwidth last week, and in light of the limited days that Congress has before recess, we wanted to take this opportunity to provide a quick status update on a few of the big things that we are watching. 

 

AHCA MEETS SENATE SCRUTINY

With the House's May 4 passage of its Affordable Care Act (ACA) repeal/replace bill (the American Health Care Act or AHCA), the health care ball is now in the Senate's court.  When that proposal will be ready and what will be in it remains to be seen.  A working group of 13 Republican Senators has been formed to work on a Senate Republican health care proposal and has been keeping the details of their drafting largely under wraps, even within their own party.  The only thing that seems more likely than not at this point is that the Senate's proposal will differ markedly from the version of the AHCA passed by the House.

The likelihood of the Senate voting on a health care bill before the August recess is relatively low for several reasons. 

First, the Senate Republicans have not reached agreement among themselves about the content of the bill.  A number of moderate Senate Republicans, whose votes will be needed to pass a bill in the Senate, have publically opposed the House bill's cut to Medicaid expansion. Also, serious concerns and pressure have been coming from both inside and outside Congress surrounding the protections for people with pre-existing conditions, which many felt were inadequate under the House-passed AHCA.  In light of these considerations, we expect that the bill that comes out of the Senate will be considered to be more moderate than the House bill and may keep certain parts of the ACA. According to reports, during a closed-door meeting, Senate Majority Leader Mitch McConnell (R-KY) proposed to retain the Affordable Care Act's protections for people with pre-existing conditions who buy individual coverage.  Additionally, Senator John Thune (R-SD) told the press that, at least for the short term, some of the ACA's revenue raisers like the medical device tax, may be kept in place. Furthermore, unlike the House, which passed the AHCA without waiting for the Congressional Budget Office (CBO) to release its analysis of the bill, the Senate is almost certain to wait for the CBO's report on its bill to come out before a vote is scheduled.  However, a CBO analysis takes time, a commodity that Republicans are already beginning to run short of this year, especially if they are hoping to get to tax reform.

If and when the Senate passes a bill of its own, it will then be necessary to reconcile the House and Senate bills and have both chambers vote on the revised bill.  This may pose challenging in light of the fact that many members in the Senate won't vote for a bill as conservative as will likely be necessary to pass the House and many members in the House won't vote for a bill as moderate as will likely be necessary to pass the Senate. 

With all of this, some members have already raised doubts about the ability of Congress to pass a bill this year and others, like Senator Thune, have suggested that short-term action may be necessary to help stabilize the ACA markets pending the passage of a comprehensive repeal/replace bill (which might not come this year).

For the President, who promised to repeal the ACA on "day one," and Speaker of the House Paul Ryan, who is much more invested in tax reform and budget issues, the dragging pace of health care reform is sure to be a source of frustration.  For the insurance marketplaces, the uncertainty about the future of the ACA and the Administration's hostility towards the ACA is becoming something of a self-fulfilling prophecy, increasing premiums and making advance planning by companies and individuals alike more challenging. 

 

TOO MANY COOKS IN THE KITCHEN ON TAX REFORM

Going into this year, the expectation was that the House would take the lead on tax reform.  After all, last summer, the House released its tax reform blueprint entitled "A Better Way Forward on Tax Reform."

However, sticking points in the House's blueprint and statements out of the Administration have made it unclear as to which branch or chamber will be taking the lead.

The big issue with the House's blueprint is that its primary revenue raiser is the border adjustment tax (or BAT). The BAT would place a heavy cost on imports and has met vehement opposition from a number of big players in the business community who have asserted, among other things, that the increased costs of imports that will be associated with the BAT will be born primarily by the consumers.  [As an aside, if the BAT proposal went through in its current form - which is not likely, a plausible argument could be made that American consumers would in effect be funding their own tax breaks by paying more for most of the items they buy, including those purchased at Walmart, Target and the gas station to name a few.  Interesting concept to think about....] While Speaker of the House Paul Ryan (R-WI) has acknowledged that changes need to be made to the proposal, he has not abandoned the concept of the BAT entirely.  There has been some discussion in the Ways and Means Committee about modifying the BAT proposal to exclude certain types of imported commodities that can't be produced domestically.  However, it remains to be seen if this modification will satisfy most of the BAT's critics. 

The problem is that neither chamber has been able to come up with a better (or less controversial) revenue raiser yet.  While members of the Senate have raised concerns about the BAT, as well as the House blueprint's elimination of the interest deduction, the Senate has not yet offered its own proposal or blueprint.

To complicate matters further, the Administration has now announced that it intends to release its own tax bill this fall but wants to avoid having three different bills out of the House, Senate and White House. The logic behind the White House's approach is a bit unclear.  Leaders on the Hill seem to be wary of getting ahead of the White House in producing legislation (particularly as they still don't have a good funding option), though it is unclear how long they will be willing to wait to take a substantive step forward on tax reform. 

 

HOUSE VOTES TO REPEAL MOST OF DODD-FRANK

On Thursday (June 8), the House passed the Financial CHOICE Act of 2017 (H.R. 10), which, if signed into law, would eliminate large portions of the 2010 Dodd-Frank Act Wall Street Reform and Consumer Protection Act and give Congress more authority over certain government agencies, including the Consumer Financial Protection Bureau (CFPB).

The bill still has to go through the Senate where it seems clear that it will not have sufficient votes to pass in its current form.  However, it still marks a sizable (though less high profile) move by Republicans towards fulfilling their campaign promises and dismantling another piece of complex Obama-era legislation. 

 

WHAT WE'VE BEEN UP TO

*TIA joined a large coalition signing on to a letter to the Senate about the tax treatment of health benefits, including preserving the income exclusion for employer-paid group health premiums.  See attached for this letter. 

*On May 23, 2017, TIA participated in the National Small Business Forum which featured presentations from, and dialogue with, high-level staff from the Internal Revenue Service (IRS).