Congress passes tax bill
The Senate late Tuesday voted for the tax bill, but the House has to revote on the measure early today (Wednesday, Dec. 20) because Senate rules required the elimination of a few provisions from the bill that the House approved earlier Tuesday.
Meanwhile, a major accounting firm noted that the bill would provide some benefits to farmers but pointed out that all the benefits – including an estate tax reform – will expire in about eight years.
The Senate vote was 51 to 48, along party lines, with Sen. John McCain, R-Ariz., not voting because he is in Arizona recovering from chemotherapy.
Vice President Mike Pence presided over the vote. Amidst calls from the visitors’ gallery of “kill the bill,” Pence had to call on the sergeant of arms several times to restore order. When Pence announced that the bill had passed, the Republicans applauded.
After the bill passed, House Speaker Paul Ryan, R-Wis., said in a news release, “After years of work, we are going to enact the most sweeping, pro-growth overhaul of our tax code in a generation. Americans are going to see relief almost immediately in the form of bigger paychecks and lower taxes. I commend [Senate Majority] Leader [Mitch] McConnell [R-Ky.] and [Senate Finance Committee] Chairman [Orrin] Hatch [R-Utah] for working closely with the House to produce this historic legislation, and I look forward to joining them to send it to the president.”
Sen. Dianne Feinstein, D-Calif., said in a news release, “Republicans just gave corporations and the richest Americans an early Christmas present at the expense of middle-class families.
“Just days before a potential government shutdown, Republicans have rushed through a tax cut bill written in secret that adds more than $1 trillion to the deficit in order to give the top 1 percent a big tax cut. That’s unconscionable.”
Feinstein said the bill would hurt Californians due to the limitation on the deductibility of state and local taxes and because it limits the deduction for losses suffered during a disaster, such as a wildfire, to only federally declared disasters.
House revote today
Another House vote on the bill is expected this morning. House Majority Leader Kevin McCarthy, R-Calif., advised House members late Tuesday that House leaders expected Senate Democrats to insist on a Byrd Point of Order on the conference report and it was likely to be sustained, necessitating an additional procedural vote in the House to concur with the Senate bill before it can advance to President Donald Trump’s desk.
The Byrd rule, which applies only in the Senate, says that provisions in a budget conference report cannot increase significantly the federal deficit beyond a 10-year term or be “extraneous matter.” The Washington Post reported that three minor provisions had to be changed for the Senate to bill to comply with the Byrd rule.
The House vote was 227-203, with 12 Republicans joining all Democrats in voting against it. All but one of the Republicans voting against it were from New York, New Jersey, and California, including House Appropriations Committee Chairman Rodney Frelinghuysen of New Jersey. The only House Republican from outside the Northeast to vote against the bill was Rep. Walter Jones of North Carolina.
House Agriculture Committee Chairman Michael Conaway, R-Texas, praised the vote, saying, “Today, Congress has delivered the fairer, simpler tax code that American families and small businesses deserve. This historic tax relief package both simplifies our broken system and sets the economy on a course to stimulate growth and create jobs. As chairman of the House Agriculture Committee, I’m pleased that [House Ways and Means Committee] Chairman [Kevin] Brady [R-Texas] and his team have produced a bill that acknowledges the unique tax challenges faced by those in agriculture. From lower marginal rates to the treatment of pass-through income to improved small business expensing, this bill delivers for farmers, ranchers, and all rural America.”
House Agriculture Appropriations Subcommittee Chairman Robert Aderholt, R-Alabama, said he voted for the bill “to give back more money to Alabama taxpayers.”
“Far too many of the people in Washington believe that the government should have a right to a high percentage of everything you earn. Those people are wrong. It is your money, and you should be able to keep even more of it,” Aderholt added.
K-Coe Isom, a major accounting firm, said in a news release Monday that farmers may need to restructure their operations in order to get maximum benefit from the new law, but noted that “rate reductions and estate tax changes beneficial to ag are temporary.”
“The core of this bill is a 21 percent flat rate for C corporations,” said Doug Claussen, a principal and a certified public accountant with K·Coe Isom. “Most farm businesses are not structured as C corps and won’t benefit from this rate unless they restructure. For farms that are structured as C corps, those in the 15 percent tax bracket would actually see a tax increase from this flat rate. The majority of farmers, however, are sole proprietors or structured as pass-through entities. These farmers should see some benefits from the deduction for business and pass-through income, immediate expensing of capital purchases, and to some degree from reductions in individual rates.”
K-Coe-Isom also issued recommendations for farmers and ranchers for year-end strategies to minimize taxes. (See following item.)
The National Cattlemen’s Beef Association and the American Farm Bureau Federation had campaigned strongly for the doubling of the exemption from the estate tax that is in the bill and had hoped Congress would eliminate the estate tax permanently. Farm Bureau and NCBA praised the bill but were muted in their enthusiasm for it, while the Democratic-leaning National Farmers Union urged a vote against it.
Craig Uden, president of the National Cattlemen’s Beef Association, said this week, “The Tax Cuts and Jobs Act makes a number of changes to the current tax code that will benefit family ranchers and farmers, including the expansion of key provisions livestock producers rely on like cash accounting, bonus depreciation and Section 179.
“While it is disappointing that Congress ultimately passed up this once-in-a-generation chance to fully and permanently repeal the unfair and onerous death tax, the final bill does take a sizeable bite out of the death tax by doubling the exemption rates, and we are grateful for the lawmakers who fought so tirelessly on agriculture’s behalf,” Uden continued.
“Unfortunately, in order to keep the cost of the bill within Senate budget rules, all of the positive changes affecting individuals, including the higher death tax exemption rates, are set to expire after 2025. Of course, fourth-, fifth-, and sixth-generation cattle producers tend to think about things in the long-term, and in that tradition, we will continue to fight to reduce the tax burden on family ranchers in the months and years to come,” he concluded.
National Farmers Union President Roger Johnson, who urged Congress to vote against the measure, said, “This final compromise bill is an unfortunate reflection of the partisan and hurried nature of the tax reform debate that has consumed Washington for the past month. What congressional leadership has come up with is a patchwork of handouts for the wealthiest corporations and individuals in our country that will be paid for by family farmers, ranchers, the lower and middle classes, and our future generations. We strongly urge Congress to reject such severely flawed legislation.”
Johnson cited the projected $1.45 trillion deficit increase as a result of the legislation as a primary concern for NFU.
“Past efforts at tax reform have at least begun with the goal of being deficit neutral. We are extremely disappointed such an important goal was abandoned in the crafting of this legislation,” he said.
–The Hagstrom Report
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