TAX TAKE: New Speaker Mike Johnson Takes the Gavel: Are You Ready For It?
Representative Mike Johnson (R-LA) was elected Speaker of the House of Representatives last week, winning the vote of every House Republican member and ending a three-week political power impasse. With the House back in business and a new Speaker at the helm, let's look at this relatively unknown Louisiana lawmaker who now sits second in the line of succession to the presidency.
Known more for his views on social conservative issues than tax policy, Speaker Johnson's tax positions are in line with traditional GOP priorities. He supports repealing the estate tax and, short of that, preserving step-up in basis for inherited assets. He is an original co-sponsor of legislation that would make permanent the deduction for qualified business income for passthrough business, which is set to expire at the end of 2025.
Speaker Johnson is a co-sponsor of the TCJA Permanency Act, which, as the title indicates, would make the Trump-era 2017 tax reforms permanent along with other enhancements. The bill would make permanent the cap on the deduction for state and local taxes (SALT), which is a major point of contention that Johnson appears willing to address, according to the negotiations leading up to his election as Speaker.
"He acknowledges that providing SALT relief is critical for middle-class Americans burdened by double taxation and must be addressed in any tax bill the House considers," Rep. Andrew Garbarino (R-NY) said last week. That willingness to work on a solution was critical in securing support from GOP lawmakers from high-tax states like New York.
The impasse over how to craft a compromise that eases the SALT cap has stymied progress on legislation approved by the House Ways and Means Committee in June that includes the "Big Three" Tax Cuts and Jobs Act (TCJA)-related provisions (research and experimentation (R&E) amortization, section 163(j), and bonus depreciation).
The Ways and Means Committee bill includes an increase in the standard deduction to ease the current SALT cap, but most New York Republicans balked and made it clear that the bill won't advance in the House, where almost every Republican vote is needed to pass legislation. "The fact that the bill was marked up but hasn't come to the floor obviously is an indication that there's not the necessary 218 votes to pass something here," Rep. Mike Lawler (R-NY) said this summer.
Finding a SALT solution isn't the only complicating factor. The legislative calendar and whether the child tax credit can be addressed are key factors that will determine whether Congress can assemble a tax relief package by year-end. Speaker Johnson has laid out a timetable for action on long-stalled appropriations bills that envisions a continuing resolution (CR) through January 15 or April 15 next year. That timeline could dampen expectations that a year-end tax compromise will emerge, although Congress may pivot to another legislative vehicle to add a tax title.
The next decision point on the calendar is November 17, when the current CR expires. The last CR cost former Speaker Kevin McCarthy (R-CA) his job. While that plot line probably won't happen again, more political drama seems likely as we head into November. #TaxTake
Upcoming Speaking Engagements and Events
Today, Loren will speak at the IBA Annual Conference on a panel titled, "How Do the OECD and the U.N. Address International Tax Issues (Past, Present, and Future)?"
Also today, Marc will present a tax legislative outlook at the 58th Annual Southern Federal Tax Institute. George Hani and Rob Kovacev will also present.
Fellow Tax Member Rob Kovacev will interview Loren during the keynote luncheon at the TEI-SJSU High Tech Tax Institute on November 7.
Loren and Tax Department Chair Layla Asali are speaking at the ABA 34th Annual Philadelphia Tax Conference on November 14 and 15.
Loren will present a legislative update and outlook at The Tax Council's Annual Meeting on November 16.
Marc will present at the 2023 Blue Cross Blue Shield National Tax Conference in Austin on November 29.
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