GOP Tax Bill Omits 'Rothification' but Repeals Array of Benefits, Compensation Items

Comprehensive tax reform legislation released Nov. 2 by House Republican leaders omits recently floated and controversial proposals to mandate more Roth treatment of retirement savings, change the tax treatment of employer-provided health care, and repeal the Affordable Care Act's individual mandate. But the bill would repeal an array of benefits- and executive pay-related provisions — including largely eliminating nonqualified deferred compensation — as a way to pay for lower individual and corporate tax rates (see GRIST).

The House Ways and Means Committee is considering and making changes to the bill this week and is on track to approve a slightly modified version of the Tax Cuts and Jobs Act today. The full House vote is slated to pass the bill late next week, but more changes could be in store before the vote. Opponents of forced "Rothification," limits on tax incentives for employer-provided health care, and repeal of the ACA’s individual mandate, though relieved that GOP tax-writers have so far avoided these proposals, will continue to fight against them as the legislative process continues.

On the other side of the Capitol, Senate Finance Committee Republicans will likely unveil their tax reform proposal today, and reduced tax incentives for retirement, health, and executive compensation programs, as well as repeal of the ACA’s individual mandate – may be included. But getting these changes through the Senate may be a tall order. Republicans will try to push tax legislation through the chamber under budget "reconciliation" rules that allow for a simple majority vote, but GOP unity is far from a given. Just three GOP defections could leave party leaders looking for Democratic support, and Democrats — like more than a few Republicans — strongly oppose Rothification and are largely unified in their opposition to major health care changes.

If Republicans can agree on how to overcome the even larger political and policy barriers ahead, however, many of the benefits-related changes now in the House bill appear to stand a good chance of surviving in a final deal. Republicans are optimistic they can finish a bill by the end of the year, though that timetable is highly uncertain.

Geoff Manville
by Geoff Manville

Principal, Mercer’s Law & Policy Group

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