On February 9, 2017, President Trump’s administration announced that it will be releasing an outline of its tax overhaul plans in the coming weeks. Gary Cohn, former Goldman Sachs Group president and presidential economic adviser, is working on the plan. The plan will likely mirror some aspects of the GOP plan favored by Speaker Paul Ryan. All that being said, it’s appropriate to look at how tax laws are made, since the president cannot create a tax law.
First, all revenue bills originate or start in the House. Step one is a proposal, which is forwarded to the powerful House Ways and Means Committee, chaired by Kevin Brady. Ways and Means will start hearings, with testimony usually starting from the Secretary of Treasury for Tax Policy, and then open public hearings. After the hearings, the Committee will mark-up a draft of a bill, usually in conjunction with the Joint Committee. Ways and Means then creates the bill and contacts the House Rules Committee for the rules on debating the bill. The House would debate, amend, then vote to approve the bill. The House-passed bill is sent to the Senate Finance Committee where there are more public hearings and the proposal may be rewritten before being presented to the full Senate for approval. The Senate does not have a rules committee, and has open debate. The Senate-passed bill and the House-passed bill are then sent to the Joint Tax Conference Committee to resolve the differences. The House Conference Committee approved bill is then scheduled for debate in the House and Senate. If it is approved by both bodies in identical form, it is then sent to the President for approval and signature.
Bottom line, it looks like tax reform is about the start. It may be a border adjustment tax, it may be corporate reforms, or it may be full-scale reworking of all the rules. Stay tuned!