Visiting Professor Rebecca Kysar was quoted in a Tax Analysts article about the GOP’s tax reform bill.
A Senate tax reform bill that initially eschewed budgetary gimmicks finally succumbed to the pressure to play with the numbers so that the bill could pass muster with legislative rules and procedures.
The modified version of the chair’s mark of the Tax Cuts and Jobs Act, released late November 14, would apply a December 31, 2025, expiration date to all the individual income tax changes, except for the shift to the chained consumer price index and the effective repeal of the Affordable Care Act’s individual mandate.
That includes sunsetting the passthrough business tax changes as well as the estate tax repeal. And beginning in 2020, it would sunset several alcohol-related provisions, like a reduced excise tax rate on breweries, and a new tax credit for businesses that offer paid family and medical leave.
The mark also includes an unusual trigger provision, which would repeal six business-oriented revenue-raising provisions starting in 2026 — the same time several of them are set to go into effect — if overall federal revenues exceed a specified level by that point.
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Much like the provisions with sunset dates, the triggered provisions work to make the bill appear more Byrd rule-compliant, though they operate in a different way.
The trigger appears to mirror mechanisms used more frequently at the state level, in which a state phases in tax cuts or other reforms once it meets a designated fiscal target, said Rebecca Kysar, a visiting professor of law at Fordham University School of Law and a professor of law at Brooklyn Law School.
This strategy provides governments with “some degree of predictability in their revenue stream while also letting an increase in revenues be designated for tax relief,” said Kysar, who added that it was interesting to see the approach being discussed at the federal level.
Kysar explained that the trigger applies to provisions that are included in the bill to make it easier to comply with the Byrd rule, because the provisions increase revenue in the out-years after the 10-year budget window. For example, the provision limiting the NOL deduction to just 80 percent of taxable income beginning in 2024 would enable lawmakers to take revenue credit for future tax increases “that you hope never go into effect,” she said, adding, “This is a typical maneuver.”
“Congress is saying that ‘we will undo them if it turns out we don’t need them,’” Kysar said.