Capitol Hill: Tax Update

Published on December 14, 2017
SGH Insight
There is a general sense among the conferees that Florida Republican senator Marco Rubio will probably get something in his demand for an increase in the child tax credit, but will back off from his threat to vote against the tax bill.

Market Validation
Bloomberg 5/15/17

Marco Rubio will be a ”yes” on tax bill, Fox says in Twitter post, citing unidentified person familiar.
*S&P 500, USD, UST YIELDS RISE AFTER REPORT ON RUBIO TAX VOTE
*USD/JPY FRESH HIGH 112.67 AS USD ADVANCES ON TAX OPTIMISM

As of mid-afternoon today:

  • The Republican leadership is expected to release the details of the latest and perhaps final version of the “Tax Cut and Jobs Act” tomorrow at 9 AM to the staff and then, either at the same time or shortly thereafter, to the public.
  • We understand the conferees received a score back from the Joint Committee on Taxation earlier today that is just over the $1.5 trillion line. They are now working on making adjustments to get a better score.
  • It is expected that in the final version some of the reductions in rates will not be able to be extended throughout the ten-year life cycle of this bill. High on the list of hits will be the tax cuts for individuals that are currently set to expire before the ten-year baseline ends in 2028 being shortened by one more year than in the original eight-year sunset in the Senate proposal, to seven years.
  • There is a general sense among the conferees that Florida Republican senator Marco Rubio will probably get something in his demand for an increase in the child tax credit, but will back off from his threat to vote against the tax bill.
  • Marco’s demands are being met mostly with irritation by his fellow GOP conferees for revisiting his support so late in the negotiations. They also point out that he made his demand after the JCT scoring, which is making new adds even more difficult. He also did not offer an offsetting payfor, which never goes down well with his party colleagues.
  • Conferees need to get the JCT to re-score regardless, but that process is faster than it might seem. In practice, that means that there is little risk of further delay.
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