Prospects for Tax Reform in 2015
Published: May 5, 2015
Updated: May 27, 2015
National Journal Presentation Credits
Producer:Tucker Doherty
Director: Afzal Bari
Tax Reform Was Unworkable in 2014’s Divided Congress
Legislative Process for Advancing Tax-Reform Proposal
House Ways and
Means Committee
House of
Representatives
Senate Finance
Committee
U.S.
Senate
Enacted
Proposal
House Ways and Means
Chair Dave Camp (R-MI)
was an enthusiastic
supporter of tax reform,
and his tax reform proposal
was intended to be a first
step towards bipartisan
compromise
While House Republican
leadership also supported
overhauling the tax code in
principle, they were
ultimately unsupportive of
Camp’s plan and chose not to
consider the legislation in an
election year
With the departure of former
Senate Finance Chairman Max
Baucus (D-MT), the committee lost
its principal advocate for tax
reform, and his replacement Ron
Wyden (D-OR) could not convince
Democratic leadership to support
his committee’s tax reform efforts
Senate Democrats faced a
tough election map in 2014,
and Senate Majority Leader
Harry Reid (R-NV) was
largely unwilling to put
controversial legislation up
for a vote during an
election year
Analysis
• Despite a sustained effort by House Ways and Means Chairman Dave Camp (R-MI), comprehensive tax reform legislation was not
passed in 2014 due to several factors that likely doomed the effort from the start
• Divided control of Congress – with Republicans controlling the House and Democrats controlling the Senate – made it difficult to
reach an acceptable compromise and increased the number of lawmakers with effective veto power over any potential deal
• The timing of midterm elections in Fall 2014 also made reform less likely because leadership in both parties sought to avoid
controversial votes and wanted to focus on other aspects of their platforms
Source: National Journal Research, 2015; Lori Montgomery, “Inside the Collapse of the Year’s Biggest Tax Deal,” Washington Post, December 11, 2014.
Tax Reform May Face Better Odds in 2015
Key Factors Affecting Tax Reform Efforts, 2014 vs 2015
2014
2015
Committees Attempting to
Draft Bipartisan Reform?
✓
✓
Unified Control of Congress?
X
✓
Not an Election Year?
X
✓
Congressional Leadership
Supportive?
X
?
Analysis
• In contrast with 2014, there are a number of factors that make comprehensive tax reform more possible in 2015
• Because Congress was divided in 2014, tax reform legislation needed to be acceptable to majorities in both parties; with both
chambers controlled by the GOP in 2015, tax reform legislation only needs to attract a handful of Democratic votes in the Senate
• Because 2015 is an off-election year, lawmakers are more comfortable taking controversial votes on tax reform
• Although House Speaker John Boehner (R-OH) has called tax reform “doable” this year, it remains to be seen if GOP leadership in
both chambers will allow tax reform legislation to come to a vote
Source: National Journal Research, 2015; Justin Sink, “Tax Reform, Highway Bill ‘Doable,’ Boehner Says,” The Hill, September 28, 2014.
New Committee Leadership Heading Reform Efforts in Senate
Senate Finance Committee Leadership
Chairman Orrin Hatch (R-UT)
•
•
•
•
•
Ranking Member Ron Wyden (D-OR)
Analysis
The Senate Finance Committee has a long history of bipartisanship; expect major pieces of legislation to be the result of negotiations
between Chairman Orrin Hatch and Ranking Member Ron Wyden
Hatch and Wyden’s predecessors, Senators Max Baucus (D-WY) and Chuck Grassley (R-IA), were known for their uncommonly close
relationship throughout their tenure
Wyden, however, is considered closer to his party and further to the left politically than his predecessor, which could make it more
difficult to achieve compromise
Chairman Orrin Hatch is known for being outspoken: if he is frustrated with the pace of progress on tax reform, he is more likely to
speak up, so watch his public statements for hints of progress or frustration
Since the working relationship between Hatch and Wyden is relatively new, early successes on issues such as trade could pave the way
for a productive relationship
Source: National Journal Research, 2015.
Senate Finance Committee Aims to Create Bipartisan Tax Blueprint
Senate Finance Committee Tax Reform Working Groups
Individual Income Tax
Co-Chair Chuck Grassley
(R-IA)
Co-Chair Debbie Stabenow
(D-MI)
Co-Chair John Thune
(R-SD)
Co-Chair Benjamin Cardin
(D-MD)
Co-Chair Mike Enzi (R-WY)
Chuck Schumer (D-NY)
Pat Roberts (R-KS)
Debbie Stabenow (D-MI)
Mike Crapo (R-ID)
Bill Nelson (D-FL)
Richard Burr (R-NC)
Tom Carper (D-DE)
John Cornyn (R-TX)
Bob Menendez (D-NJ)
Johnny Isakson (R-GA)
Bob Casey (D-PA)
Pat Toomey (R-PA)
Michael Bennet (D-CO)
Rob Portman (R-OH)
Mark Warner (D-VA)
Pat Toomey (R-PA)
Bob Menendez (D-NJ)
Dan Coats (R-IN)
Bill Nelson (D-FL)
Savings and Investment
International Tax
Business Income Tax
Co-Chair Mike Crapo
(R-ID)
Co-Chair Sherrod Brown
(D-OH)
Richard Burr (R-NC)
Benjamin Cardin (D-MD)
Johnny Isakson (R-GA)
Bob Casey (D-PA)
Co-Chair Dean Heller
(R-NV)
Co-Chair Michael Bennet
(D-CO)
Dean Heller (R-NV)
Mark Warner (D-VA)
Dan Coats (R-IN)
Maria Cantwell (D-WA)
Tim Scott (R-SC)
Bob Menendez (D-NJ)
Tim Scott (R-SC)
Bill Nelson (D-FL)
Co-Chair Rob
Portman
(R-OH)
Co-Chair Chuck
Schumer
(D-NY)
Pat Roberts
(R-KS)
Sherrod Brown
(D-OH)
Mike Enzi
(R-WY)
Tom Carper
(D-DE)
John Cornyn
(R-TX)
Mark Warner
(D-VA)
Community Development & Infrastructure
Analysis
• In 2014, Democrats argued that Rep. Camp’s tax reform plan was drafted without enough input from Congressional Democrats
• To address these concerns, Chairman Hatch and Ranking Member Wyden agreed to form five working groups in the Senate Finance
Committee focused on different aspects of the tax code
• The committee hopes to compile a report by the end of May based on the working groups’ findings, which will ideally serve as a
bipartisan blueprint for tax reform efforts this year
Source: National Journal Research, 2015; Senate Committee on Finance.
Highway Trust Fund Shortfall Could Create Avenue for Tax Reform
Highway Trust Fund Extension: Scenarios and Outcome
House Ways and Means Chairman Paul Ryan
wants an extension until the end of the year to
give lawmakers time to draft tax reform proposals
Chairman Ryan’s
Proposal
Transportation advocates desire
much longer term funding for the
Highway Trust Fund
Alternate
Proposals
Legislative
Outcome
May 31
Facing a stalemate,
lawmakers enacted a
two month extension
July 31
Dec 31
Analysis
• While the Highway Trust Fund issue might appear unrelated to tax reform efforts, the need to find new revenues for the fund could
incentivize cooperation between Republicans and Democrats
• House Ways and Means Chairman Paul Ryan (R-WI) sought an extension of the Highway Trust Fund until the end of the year to
provide lawmakers with time to draft tax reform proposals, but advocates for a more permanent extension balked, leading to a
compromise two month extension
• The Obama administration has suggested paying for a long term extension with a repatriation holiday, which would encourage U.S.
companies to bring foreign earnings back to the U.S. and pay taxes on them at a temporary lower rate
• Chairman Ryan stated that a repatriation holiday would need to be part of a larger comprehensive tax reform package
Source: National Journal Research, 2015; Eric Pianin, “How Tax Reform Could Help Save U.S. Infrastructure,” The Fiscal Times, February 17, 2015.
More Comprehensive Reforms Less Likely Than Targeted Changes
Likelihood of Hypothetical Tax Reform Packages
More Likely
Less Likely
Repatriation tax holiday, or
other international tax reforms
Repatriation tax holiday, or
other international tax reforms
+
A few bipartisan tax reform
provisions, e.g. closing certain
tax loopholes
Repatriation tax holiday, or
other international tax reforms
+
A comprehensive overhaul of
the corporate tax code
+
A comprehensive overhaul of
the individual tax code
Analysis
• A deal that relies on tax reform to extend the Highway Trust Fund is the most plausible path to comprehensive tax reform in 2015
• If Congress uses tax reform to fund the Highway Trust Fund, a repatriation holiday (or some other change to the international tax
system) is very likely to be included in the reform package
• It is somewhat likely that other provisions, such as closing certain loopholes and moderately lowering corporate rates, would be
included in the reform package
• While not impossible, the least likely outcome is a much larger, truly comprehensive reform of both the individual and corporate sides
of the tax code, which would likely require both parties to make significant concessions and would involve many politically difficult
votes
Source: National Journal Research, 2015.