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dollar billsOver the past few weeks we’ve been closely following the news as Democrats and Republicans are gearing up for an upcoming tax reform battle. Let me tell you, it certainly is an interesting time to be a tax attorney in San Francisco.

Chuck Schumer, the Senate Minority Leader, and his members are having ongoing dialog about how tax reform will be handled. However, for now, the main takeaway is that the Democrat representatives will not blindly consent to a Republican bill that profits the top 1 percent of earners. In an interview with CNN, Schumer stated that the notion that individuals will back large tax cuts for the wealthy when the rest of the population are offered crumbs will no longer work.

In a letter dated August 1, 2017, Democrats highlighted their principles to the White House and Republican leaders. If the latter want assistance in giving tax cuts to Americans or overhauling the tax code, certain conditions had to be met. The conditions outlined include:

• The tax reforms could not increase the deficit
• They could not cut taxes for the ‘1 percent’
• They could not increase taxes on the middle class

However, it does not seem as if the Republicans feel the pressure to meet the demands of the Democrats. After that letter was sent, it was announced by Mitch McConnell, the Senate Majority Leader, that reconciliation will be used to overhaul the tax system. Only 51 votes are required by this process, which is 9 fewer votes than the usual 60. This provides the option for McConnell to pass tax cuts without the help of any Democratic vote.

He said this move is necessary as the letter highlighted that the Democrats are clearly not interested in addressing what is necessary to promote the growth of the country. So, it seems as if Republicans are willing to go it alone where tax reform is concerned; they have 52 chamber seats.

During his CNN interview, Schumer stated that he still wants McConnell to reconsider using reconciliation. Schumer believes that this approach will not be as easy as it seems. Democrats are doubtful that their opponents are as close on tax reform as they claim to be. He further stated that he believes rank-and-file members of the Republican Party have more interest in a bipartisan approach.

It has been widely highlighted that without health care, the governing party has less funds to finance tax cuts. In addition, there is still fighting among Republicans about their budget. The GOP would have to pass this vehicle in order to use reconciliation. A Senate Democratic aide, in an interview with CNN, stated that he is doubtful that congressional Republicans will all come together on tax reforms as there is in-fighting within the party.

However, as it relates to Republican attempts to reform the tax code, Democrats face their own challenges. In contrast to the health care dispute in which it could be clearly pointed out that millions of Americans would lose insurance if Obamacare was repealed, campaigning against tax cuts is more difficult.

Republicans are mindful that their campaign messaging has to be clear on how all Americans, not just the wealthy, can benefit. Evan Bayh, Democrat and former governor of Indiana has advised Democrats to be pro tax cuts; however, it should be the right type.

As tax attorneys in San Francisco we try our best to keep the public educated on matters relating to taxes. If you have a tax related subject you would like us to feature on our blog, send us an email at info@taxhelpers.com today.