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OUR PERSPECTIVES

Any Tax Bill Has a Long Road to the President's Desk



The House Ways and Means Committee officially kicked off a debate around tax legislation with the passage of a tax package, which is expected to reach the floor of the House of Representatives soon. Not surprisingly, the bill passed with only Republican votes -- something that is likely to happen on the House floor as well. That being said, the package is just the opening salvo in what will likely be a long effort to get tax legislation to the President's desk.


Many view a markup of tax legislation that gained no bipartisan support as a meaningless political exercise, but the modern legislative process is complex and large legislation of this kind rarely (if ever) starts with a bipartisan bill. When Republicans introduced their debt ceiling plan, for example, it similarly passed with only Republican votes and was panned as theatre, but it helped to kick off a broader negotiation that ultimately led to the passage of legislation that was signed into law. This tax measure will not be signed into law, but it will push more policymakers on both sides of the Capitol to begin outlining their own tax priorities and will bring forward a discussion around what is possible in the tax space going forward.


While the content of a tax package is important (i.e. Republicans focused on going after Democratic priorities in the clean energy sector), an ultimate deal -- as it always does -- will look significantly different. Within the life cycle of a tax bill, the first step will be to increase conversation and introduce more proposals, the second would be to foster cross-party discussions (likely behind the scenes), and the third would be to kick off meaningful negotiations (where provisions would start to be drafted). It is not yet clear if this tax discussion will spur a broader movement given other priorities and a looming election, but it certainly will get more policymakers focused in this policy space.


Of course, tax issues are especially politically sensitive, which is why tax packages (i.e. tax extenders) are so tough to pass on time and why successful tax reform efforts are rare, at best. Tax policy always brings two factors that are tough to mitigate through bipartisan compromise: cost (which requires revenue raising measures) and a clear set of priorities (a massively consequential game of picking winners and losers). Combined with narrow majorities in the House and Senate, successfully navigating a tax package will be tough...but not impossible.

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