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Tax Reform 2016: A Dress Rehearsal Worth Watching

Capitol Hill signals suggest a foundation for the coming round of tax reform in 2017, after a new administration and Congress are seated.

By John McKechnie | Updated on February 21, 2016
tax reform and credit union tax exemptionWhile tax reform legislation has undergone several false starts over the past three years, emerging signals from Capitol Hill suggest that credit unions would be well-advised to keep a close eye on developments in 2016 as a prelude to serious efforts to overhaul the code in 2017-2018.

New House Ways and Means Chairman Kevin Brady (R-Texas) returned from the annual agenda-setting committee retreat Feb. 1 saying that, while business tax reform legislation won’t happen in 2016, he intends to lay the groundwork for a comprehensive bill by using international reform as a dress rehearsal. “It is urgent that we move forward on international tax reform; success on that front allows us to focus in 2017 on comprehensive tax reform that includes both the personal and business codes,” Brady commented. The first Ways and Means hearing on the subject will occur Feb. 24.

House Republican staff present at the Ways and Means retreat said members are optimistic an international bill can pass in that chamber, and believed influential Senate Democratic Leader in-Waiting Charles Schumer (D-N.Y.) will help sell legislation to otherwise reluctant Democrats. However (and there always seems to be a however when it comes to tax reform), optimism ends there. The Obama Administration has laid down a marker suggesting it would not support proposals that reduce rates. A Democratic Senate Finance Committee aide was more succinct: “Talk about common ground on international tax reform, is just that, talk. There isn’t even agreement on what reform means in the first place.” Bottom line: Even a modest, piecemeal tax reform package will be hard to pass in the current political environment.

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