Paul Meloan – Vested Interest

Two days ago, the Republican leaders of Congress crafted a series of well-placed leaks indicating that a deal had been made on their signature tax cut legislation.

This would allow for a vote in Congress in time for the bill to be signed by the president before Christmas. It was presented as a “done deal” to try to build momentum for a final vote; a freight train that could not be slowed or forced to change course.

Today, that is far from the case.

Right now we don’t have a tax bill, we have two: the version passed by the House and the version passed by the Senate. The bills need to be reconciled and a single, agreed-upon version returned to both houses for a new vote. In the House, the Republicans have more than enough votes to secure passage without a single Democrat crossing the aisle. While that is true in the Senate as well, the majority there is only 52-48.

With Bob Corker of Tennessee (who is retiring next year) opposed to any bill raising the deficit, this leaves the ruling party with only a one vote margin to get this bill through (since a 50/50 tie would be broken by Vice President Pence, all ties go to the Republicans).

Three Republican senators (Collins, Rubio, Lee) are making noise about provisions that will cost the Repub’s their votes. Collins has a track record of bucking her party on substantial issues. Her vote was obtained in exchange for promises from Mitch McConnell that additional measures would be enacted to strengthen the ACA. Since leaders from the House say those won’t be happening, McConnell will need to scramble to keep her in the fold. Rubio’s reputation is one of falling into line when things get tight. As a commentator said on the news last night, if your life depended on Marco Rubio’s spinal column, you’re already dead. Finally, Jeff Flake of Arizona is also making noise about his position, but his resolve is unknown.

On January 3 a new Democrat will take the place of a sitting Republican in the Senate, so there goes whatever margin of error remained.

The Republican party has given each of its members in the U.S. Senate a veto over this bill just as powerful as the one held in the White House. In any organization, when unanimity is required it means that the craziest person in the room is in control.

As advisors, our firm is trying our best to guide clients on end of year planning, but it’s kind of hard to do that when no one knows what the law will be in 16 days!

Whether you agree or disagree with the principles or effects of tax policy, what is clear is that jamming legislation through Congress as fast as humanly possible doesn’t promote understanding or respect for the law. Making lesgislation (like sausage) is sometimes a messy and inelegant process, but it’s for bills like this that the concept of “regular order” exists.

Instead, it remains more likely than not that we will have a new law of the land with regard to income taxes in less than 15 days time. This will happen only because the leadership of one party cannot and will not have it any other way. Some of our leaders brag about their business acumen but any executive who tried to formulate and implement strategy in this manner would be fired.

Paul Meloan is the co-founder and co-managing member of Aegis Wealth Management, LLC, in Bethesda, Maryland USA. Before Aegis Paul was a practicing attorney as well as working in the tax practice of Ernst & Young, LLP.

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