December 4, 2017 DTA Legislative Update
Medical Device Tax - End of Year Package
This week Congress will pass a two-week extension of funding authority for the federal government known as a continuing resolution. It will set up an end of the year logjam of legislation that will need to be concluded by December 22nd. It is not clear yet whether the medical device excise tax could be addressed in this package but DTA will continue to press for this to be addressed before the moratorium on the tax expires.
Tax Reform Bill Goes to Conference
Just before 2 a.m. Saturday, the Senate voted 51-49 to approve a 479-page bill that would cut the corporate tax rate to 20 percent from 35 percent in 2019, and would provide temporary tax cuts for individuals that expire in 2026.
House and Senate lawmakers will begin this week to work on compromise tax-overhaul legislation. Last-minute changes to the legislation included additional tax cuts for owners of partnerships, limited liability companies and other so-called “pass-through” businesses. These changes could have the effect of cutting the tax rate by about 10 percentage points for some of the highest earners in the U.S. The measure would provide a 23 percent deduction on business income -- subject to various limitations -- and would reduce federal revenue by an estimated $476.2 billion over the next decade. The House bill provides a different method for cutting taxes for pass-throughs that would reduce revenue by an estimated $596.6 billion over the decade. This represents just one item that will need to be addressed in conference.
The Senate’s individual tax cuts would expire in 2026 -- effectively setting up a slew of future tax increases on individuals. Senate tax writers inserted the time limit to comply with arcane budget rules that prohibit their legislation from adding to federal deficits outside a 10-year budget window. Limiting those breaks -- while changing the corporate tax rate permanently -- has the effect of extending only temporary benefits to wage earners and long-term benefits to investors, based on various analyses of the plan. Another key difference between the Senate and House bills centers on the timing of the corporate tax-rate cut. The House’s version would begin in 2018, the Senate’s a year later.
Another important difference in the bills relates to expensing. The House bill allows for full and immediate expensing on equipment purchases that expires in five years. The Senate bill has a “step-down” approach that phases out the expensing benefit after five years rather than an immediate cliff.
Because Republicans have only a narrow majority in the Senate -- where they hold 52 of the 100 seats -- any compromise is much more likely to resemble their approach than the House’s.
By Patrick Cooney, The Federal Group, Inc.
Legislative Representative, Dental Trade Alliance