Brady Unveils Tax Reform 2.0 Framework
The House’s top tax writer has unveiled Republicans’ "Tax Reform 2.0" framework. The framework outlines three key focus areas:
Tax Reform 2.0
- making permanent the individual and small business tax cuts enacted under the Tax Cuts and Jobs Act (TCJA) ( P.L. 115-97);
- promoting family savings by streamlining retirement savings accounts and creating a new Universal Savings Account; and
- spurring business innovation by allowing new businesses to write off more initial start-up costs.
The GOP’s tax reform "phase two" framework—otherwise known as "Tax
Cuts 2.0"—was released by House Ways and Means Committee Chairman Kevin
Brady, R-Tex. on July 24. The outline is expected to be used for
GOP "listening sessions" to be held among lawmakers.
Brady has said that making permanent the TCJA’s individual and small
business tax cuts, enacted last December temporarily through 2025, will
be the "centerpiece" of the next tax reform package. Further, Brady told
reporters on July 24 that he anticipates Tax Reform 2.0 to move forward
as three separate tax bills. A House vote on the package is expected
sometime in September.Preliminary Analysis
Republicans’ Tax Reform 2.0 framework is a "good start," according to
a July 24 report released by the independent, yet widely-considered
conservative-leaning, think tank Tax Foundation. The report praised the
framework’s proposal to streamline retirement savings accounts and make
permanent the TCJA’s individual tax cuts. Additionally, the Tax
Foundation estimates that making permanent the individual tax cuts set
to expire in 2026 would grow the U.S. economy by 2.2 percent while
reducing federal revenue by $165 billion annually on a static basis.Democrats Disagree
However, several Democratic lawmakers began issuing statements
criticizing the Tax Reform 2.0 framework shortly after its release.
Democrats have remained united in their disapproval of the TCJA,
criticizing last year’s tax code overhaul for primarily benefiting the
wealthy and corporations.
"Republicans’ first tax bill exposed the party’s real priorities: big
corporations and people at the top," House Ways and Means Committee
ranking member Richard Neal, D-Mass., said in a July 24 statement. "This
new framework is more of the same – it rewards the well-off and
well-connected, fails to reinstate the state and local tax deduction,
and leaves the middle class behind."
Corporate Tax Cuts
The Tax Reform 2.0 framework did not include a proposal to further
reduce the corporate tax rate. President Trump has called for lowering
the corporate tax rate to 20 percent. The corporate tax rate was lowered
from 35 to 21 percent last December under the TCJA. Brady previously
told reporters that House Republicans and the White House are continuing
discussions on the idea.Tax Reform 3.0, 4.0
"Tax Reform 2.0 is a new commitment to improve the tax code each and
every year for American families and local businesses," the framework
says. Congress will examine the tax code each year to identify areas of
needed improvement, according to the outline. Additionally, Brady has
said he hopes to see a Tax Reform 3.0, 4.0, and so on.Senate
At this time, the Tax Reform 2.0 package is not expected to clear the
Senate in its entirety. It is thought on Capitol Hill that Democrats
may support measures that focus on retirement and education savings and
business innovation. However, several lawmakers view it as unlikely that
Democrats would support a bill that makes permanent the individual tax
cuts under the TCJA.
Brady has reportedly said that extending TCJA’s individual provisions
would increase the deficit by $600 billion over 10 years but would be
offset, at least in part, by beneficial economic factors. Several Senate
Democrats and Republicans have said they would not vote for extending
or creating tax cuts that increase the federal deficit.