November 7, 2017

House Ways & Means Committee Continuation of the Markup of H.R. 1, Tax Cuts and Jobs Act Day 2

Key Takeaways

  • Democrat Amendments: There were 8 Democratic amendments introduced, though none of them were voted favorably.
  • International Tax Reform: Rep. Lloyd Doggett (D-Texas) introduced an amendment that would ensure profits earned overseas will be taxed the same as profit earned on American soil. Democrats supported the amendment, while Republicans opposed it.
  • Bringing American Jobs Home: Joint Committee on Taxation Chief of Staff Thomas Barthold was asked how H.R. 1 will incentivize American companies to bring jobs back to the U.S., to which he replied that the bill lowers the rates on business income, as well as allows for full and immediate expensing of tangible assets. 

Bill Considered

Amendment Offered by Rep. Blumenauer

Rep. Earl Blumenauer (D-Ore.) introduced a “failsafe” amendment, arguing that if after two years the national debt continues to increase, H.R. 1 will be nullified. Other Democrats that supported the amendment included Reps. Richard Neal (D-Mass.), Lloyd Doggett (D-Texas), Ron Kind (D-Wis.), Sander Levin (D-Mich.), Mike Thompson (D-Calif.), Bill Pascrell (D-N.J.), John Larson (D-Conn.), Joseph Crowley (D-N.Y.), Brian Higgins (D-N.Y.), Linda Sanchez (D-Calif.), and John Lewis (D-Ga.).

Rep. Peter Roskam (R-Ill.) voiced his opposition to the amendment, calling it a “poison pill,” and argued that economic growth cannot happen within the two years the amendment calls for, saying that it will happen during the 10-year budget window. Blumenauer stated he was willing to change the window to four years, but Roskam still opposed. Other Republicans that opposed the amendment included Reps. Devin Nunes (R-Calif.), Jim Renacci (R-Ohio), Mike Kelly (R-Pa.), Tom Reed (R-N.Y.), Carlos Curbello (R-Fla.), Pat Meehan (R-Pa.), Erik Paulsen (R-Minn.), and Mike Bishop (R-Mich.).

The amendment was not agreed to in a 23-16 vote.

Amendment Offered by Rep. Pascrell

Pascrell introduced his amendment, which would fully restore the state and local tax (SALT) deduction, including property, state and local income, and sales tax paid, adding that Senate Finance Committee Chairman Orrin Hatch (R-Utah) plans to restore the SALT deduction in the Senate bill. Pascrell argued that the erosion of SALT is a tax increase, and that pairing this with changes to the mortgage interest deduction will cause housing prices to fall and push certain communities into a recession. Democrats who supported the amendment included Reps. Neal, Thompson, Doggett, Larson, Sanchez, Blumenauer, Higgins, Crowley, Judy Chu (D-Calif.), Danny Davis (D-Ill.), Levin, Kind, and Larson.

Rep. Tom Rice (R-S.C.) argued that all taxpayers will continue to benefit under H.R. 1 even with the elimination of the SALT deduction and opposed the amendment. Other Republicans who voiced their opposition included Reps. Tom Rice (R-S.C.), Renacci, Reed, Mike Kelly (R-Pa.), and Roskam.

The amendment was not agreed to in a 23-16 vote.

Amendment Offered by Rep. Kind

Kind introduced his amendment, which would eliminate the SALT deduction that businesses are able to deduct from their taxes, like H.R. 1 does for individuals, arguing that the amendment treats corporations and individuals the same. He continued that the individual SALT elimination is a “revenue grab” to pay for the elimination of the estate tax and alternative minimum tax (AMT). Democrats argued that if the individual SALT deduction is being eliminated, the business SALT deduction should also be, and that it will be a revenue raiser. Other Democratic supporters included Reps. Thompson, Blumenauer, Levin, Larson, Terri Sewell (D-Ala.), Pascrell, Suzan DelBene (D-Wash.), and Chu.

Nunes opposed the amendment, arguing that all businesses take advantage of the SALT deduction and that the deduction keeps them on a level playing field. Republicans argued that the elimination of the deduction would benefit the wealthiest Americans and move businesses to other countries with lower tax rates, and those who opposed the amendment included Reps. Adrian Smith (R-Neb.), Rice, Renacci, David Schweikert (R-Ariz.), and Curbello.

The amendment was not agreed to in a 23-15 vote.

Amendment Offered by Rep. Kind

Kind introduced his amendment that would restore the Work Opportunity Tax Credit (WOTC) that is eliminated under H.R. 1, explaining that it would be offset and paid for by a “commensurate” corporate tax rate increase. Other Democrats who supported the amendment included Reps. Pascrell, Larson, Davis, Pascrell, and Doggett.

Reed argued that the amendment was a way for Democrats to get Republicans to vote against issues they have been supportive of in the past. He asked if Democrats would vote for the overall bill on the House floor if the amendment was adopted, to which Pascrell replied no. Other Republicans in opposition included Reps. Adrian Smith, Renacci, Curbello, Reed, and Meehan.

The amendment was not agreed to in a 23-16 vote.

Amendment Offered by Rep. Sanchez

Sanchez explained that her amendment “fixes” the child tax credit provision and ensures Puerto Ricans qualify for the child tax credit with their first child, not their third, and also makes the family flexibility credit permanent.

Reps. Adrian Smith and Kristi Noem (R-S.D.) opposed the amendment, stating that H.R. 1 already increases the child tax credit, making the amendment unnecessary.

The amendment was not agreed to in a 23-16 vote.

Amendment Offered by Rep. Davis

Davis introduced his amendment, which would reinstate the adoption tax credit with refundability, and expand the child and dependent care tax credit (CDCTC) to address the rising cost of childcare for working families. Kelly also voiced support for the amendment. Democrats supporting the amendment included Reps. Larson, Sewell, and DelBene.

Rep. Adrian Smith opposed the amendment, stating that the adoption tax credit increases the cost of private adoption, leading Americans overseas. Brady noted that while he encourages members to not adopt the amendment, he will work together to find a “good positive direction forward” on the adoption issue.

The amendment was not agreed to in a 23-16 vote.

Amendment Offered by Rep. Doggett

Doggett criticized H.R. 1, explaining that it encourages the outsourcing of American jobs, as well as profit. He continued that under H.R. 1, if a company builds a factory in the U.S., they will pay a 20 percent tax rate on it, but that if the factory is built overseas, they would pay 10 percent, or potentially not pay any tax on it. Doggett stated that while there is a 10 percent tax on high returns of American overseas operations, Brady’s amendment provides several ways to “circumvent” that requirement, and creates even more loopholes than there currently are. He explained that his amendment will ensure profits earned overseas will be taxed the same as profits earned on American soil.

Levin and Neal stated that the Committee should have had a month’s worth of hearings on the international tax system, hearing from expert witnesses on both sides of the issue, and that maybe they could have come to an agreement.

Higgins voiced his support for the amendment, stating that it fights corporate inversion “retroactively and prospectively.”

Chu voiced her support for the amendment, explaining that it maintains a corporate rate for multinational companies that is still lower than OECD rates.

Pascrell asked Joint Committee on Taxation Chief of Staff Thomas Barthold what incentives are in H.R. 1 that will incentivize American companies to bring jobs back to the U.S. Barthold explained that H.R. 1 lowers the rates on business income, as well as allows for full and immediate expensing of tangible assets.

Roskam voiced his opposition to the amendment, explaining that the U.S. needs to “get in sync with the rest of the world” and move to a territorial system. He criticized the amendment for creating a “worse situation” than there currently is, and that it will make the U.S. less globally competitive.

Rep. George Holding (R-N.C.) opposed the amendment, explaining that he supports the move to a territorial system, stating that it is “one of the most common sense” provisions in H.R. 1, and that without the move, American companies are at a disadvantage with global competitors.

Schweikert opposed the amendment, stating that it does the opposite of what it is intended to do.

The amendment was not agreed to in a 23-16 vote.

Amendment Offered by Rep. Sewell

Sewell introduced her amendment, which would provide tax incentives for employers that provide apprenticeship programs by providing a 50 percent tax credit on the first $2,000 of wages paid to an apprentice and a 40 percent tax credit on the first $6,000 of wages paid to an employee who has completed apprenticeship training. Sewell stated the amendment would encourage both the training and hiring of American workers. Sewell discussed the skills gap, citing that the skills shortage is expected to cause 2 million of the expected of 3.5 million manufacturing jobs that are expected to go unfilled in the next decade, and called on the committee to be “proactive and intentional” in how it addresses the effort to provide skills training that can meet market demands. Democrats supporting the amendment included Reps. Davis, DelBene, and Sanchez.

Curbello opposed the amendment, stating that H.R. 1 incentivizes savings in 529 plans, which can be used to pay for apprenticeship programs. Curbello stated he agreed with the goal of the amendment, a new business tax credit was not the way to achieve it. Republicans opposing the amendment included Rep. Meehan.

The amendment was not agreed to in a 23-16 vote.

For more information on this markup, please click here.