Update 319: Do Democrats Have Ways & Means
To Pass Real or Just Marginal Tax Reform?
Given the new majority in the House starting next month, the House Ways and Means Committee, with its exclusive jurisdiction over tax legislation, means the end of tax cut mania in Congress. The immediate challenge in this policy area for Democrats will be to decide what, if anything, to do about the Trump tax cut (TCJA) signed into law last year.
Should Democrats seek to repeal TCJA and replace it or restore the status quo ante? Or assume Americans have had enough of tax policy — and the inequitable cuts, corporate breaks and fiscal devastation TCJA represents — and leave it alone? Or identify the worst of the TCJA provisions and reverse those?
Today we look at the choices and agenda before the incoming chair of Ways and Means, Rep. Richard Neal of Massachusetts.
Good weekends all.
In the 116th Congress, the House Ways and Means Committee will be chaired by current Ranking Member Richard Neal. A Springfield, Mass. native, Neal has served on the Committee since 1993 and is a close ally of Speaker -designate Pelosi. His voting record closely mirrors hers; his standing gives him influence and leverage despite a low profile for a senior member. His efforts to achieve a consensus among a diverse set of Committee Democrats will be critical.
The final Committee makeup has not yet been determined, but if the same ratios hold between majority and minority, there will be 24 seats on the Committee for Democrats — 10 of which will be open. Freshmen do not typically get a spot on the Committee, but a few notable new House members are openly jockeying for seats on the panel, including Representative-elect Alexandria Ocasio-Cortez.
Under current Committee Chair Kevin Brady, Republicans forced through a budget-busting $1.5 trillion tax bill and tried to pass a follow-up “tax reform 2.0” package. That bill made it through the House mostly along party lines and died in the Senate. During his tenure, Neal has been a long-standing proponent of simplifying the tax code and a reliable partner against unproductive and inequitable tax cut.
Neal hinted at a few legislative areas for the Committee to focus on in the next Congress during a speech before the New England Council on November 27:
- TCJA: The Committee will likely hold hearings on the GOP’s signature tax bill that passed last year. Major revisions to the law are improbable due to to Republican control of the Senate, but the hearings will likely home in on the TCJA’s fiscal recklessness and closely scrutinize a bill that was pushed through Congress without any public hearings. Public opinion sides with the Democrats. Per an internal poll commissioned by the Republican National Committee, nearly two thirds of respondents believe the TCJA benefits “large corporations and rich Americans” over “middle class families.”
- Infrastructure Finance: Rep. Neal has mentioned that there might be prospects for a bipartisan infrastructure bill in the next Congress. He has had conversations with Treasury Secretary Steven Mnuchin on the subject, but there is still no clear consensus on how both parties can agree on financing legislation that would require significant public spending.
- Retirement: Neal has sponsored or co-sponsored eight retirement bills during this Congress. These bills include investor-friendly bills that would plug 401(k) leakage when workers change jobs and tax credits for small employers to offer retirement plans. As chair, Neal could spearhead a piece of legislation for the 40 percent of Americans who don’t have access to a workplace retirement plan. Last year, Neal introduced two bills that would expand retirement plan coverage for millions of Americans, the Automatic IRA Act of 2017 (H.R. 3499) and the Automatic Retirement Plan Act of 2017 (H.R. 4523).
- Healthcare: Neal recently told reporters he will look to hold a hearings on the Affordable Care Act (ACA), including hearings on the mandate and on pre-existing conditions. He has also been receptive to discussions about Medicare-for-all, a major policy platform of a number of the freshman class and other progressive House Democrats.
There is some ongoing uncertainty within the Democratic Party about how to deal with some of the social programs advocated during the midterms, such as Medicare-for-all and free college tuition.
This week, incoming Chair of the House Rules Committee, Rep. Jim McGovern, announced that he would not advance a rule proposed by Rep. Pelosi and Ranking Member Neal that would have “require[d] a three-fifths supermajority to raise individual income taxes on the lowest-earning 80 percent of taxpayers.” The rejection of this proposed rule potentially puts Neal at odds with members on the party’s left. These members argue that limiting power to raise taxes would make it harder to pay for some of the programs advocated for on the campaign trail.
Bicameral Bickering or Bipartisanship?
Rep. Neal’s agenda will likely conflict with that of Sen. Chuck Grassley, who is poised to take over chairmanship of the Senate Finance Committee from retiring Sen. Orrin Hatch. Grassley will look to shape major tax, health, and trade policies under his Committee’s purview. Though there is major unfinished business on both sides of the aisle in terms of tax policy, cooperation between the respective Committee leaders doesn’t look promising.
Grassley was chair of Senate Finance during the swath of tax cuts under President Bush, while Neal led the Democratic opposition to the 2017 Republican tax plan during his time as Ranking Member of Ways & Means. Similarly, though agreement on infrastructure is badly needed, finding consensus on funding will be tough. Ways and Means and its Senate counterpart are also both likely to undertake significant oversight — but while Neal will be focusing on the IRS and President Trump’s tax returns, Grassley has said he will be keeping a close watch on tax-exempt organizations and Medicare fraud.
Healthcare is an area which may offer some potential for partnership, despite stark divides between the two chairs when it comes to the Affordable Care Act. Grassley voted against the Obama legislation, while Neal led efforts to protect and expand it. Nonetheless, both leaders have listed drug price reduction as a top priority and a possible area of bicameral and bipartisan agreement. Retirement is another area with broad bipartisan support. Neal has expressed that he wants to pass a retirement package that is “palatable to both parties,” and during his time as Senate Finance Chair in the 2000s, Grassley passed the Pension Protection Act, the last major piece of retirement legislation.
Fiscal Black Hole
Ranking Member Richard Neal will finally take the gavel on Ways and Means after over a quarter of a century on the Committee. His leadership on the Committee comes at a time when the annual federal budget deficit is set to hit $1 trillion next year. Yet again, Republicans have left Democrats with a fiscal black hole, putting existing social safety net programs at risk and stymying efforts to fund other much-needed initiatives.
Rep. Neal has the opportunity to change the narrative on Ways and Means and turn the Committee into a bastion of progressive fiscal ideas and proactive policymaking. Although there will be opposition from the Senate, there is hope for some progress as Neal has worked on many bipartisan initiatives in the past. Neal’s long-standing tenure on the Committee demonstrates his depth of experience as a serious and dedicated fiscal legislator; his time with the gavel is long overdue and he is well poised to lead from the front come January.