Accounting
Senators seek to modify tax plan to require fewer Medicaid cuts
Senate Republicans are working to change a House GOP tax plan to require fewer cuts in Medicaid health benefits for the poor and disabled, seeking to mollify members of the party worried about a public backlash.
The move, which is not finalized, also pares back requirements for other spending cuts but risks alienating deficit hawks in both the Senate and the House. Fiscal conservatives in the party want steep spending cuts to help offset the multitrillion-dollar tax-cut package.
Still, the Senate budget plan being prepared allows the party to side-step for now a potential political uproar and eliminates one of several obstacles to delivering President Donald Trump’s tax cut plan.
Republicans are using a two-step process to enact at least $4.5 trillion in tax cuts without the help of Democrats. To do that, the Senate and House need to agree to a budget plan that outlines the size of both the tax cuts and spending reductions.
The tax cut package includes an extension of Trump’s 2017 cuts for individuals and privately held businesses. Republicans are also aiming to pass additional tax reductions, but narrow majorities in each chamber mean they need to be largely unified on every element of the bill.
Senate Budget Committee Chairman Lindsey Graham told reporters on Thursday that he is not planning to dictate explicit spending cuts in the budget resolution he is writing. That is in contrast to the House-passed version, which instructed the committee in charge of Medicaid and the Children’s Health Insurance Program to cut $880 billion over a decade.
The Senate budget plan could include relatively small levels of minimum cuts — such as $1 billion to each committee involved with the bill, according to a person familiar with the plan, who requested anonymity to discuss the evolving negotiations. That would put off any hard decisions on reductions to Medicaid and other programs like food stamps.
Senator John Hoeven, a North Dakota Republican involved in talks on the budget plan, said the approach offers senate committees “flexibility” on spending cuts.
The change could win the votes of Republican senators representing states with high Medicaid usage who have expressed concern about the House tax blueprint, including Josh Hawley of Missouri and Tommy Tuberville of Alabama.
West Virginia Republican Senator Jim Justice said this week he does not want to see Medicaid benefits cut, although he is open to rooting out fraud and imposing work requirements.
“A whole lot of people are on Medicaid,” in his state, he said, predicting Congress wouldn’t slash their benefits.
Senator Shelley Moore Capito, also a West Virginia Republican, said she is “concerned” about the House budget and the Medicaid cut target is “awfully large.”
In West Virginia, 30% of the state’s residents under 65 years old and 45% of children were covered by Medicaid or the Children’s Health Insurance Program in 2023, the fifth highest share of any U.S. state,
Republicans need 50 of the 53 GOP senators in the chamber to pass the budget. Republican Senator Rand Paul of Kentucky already announced he won’t support the measure because it includes an increase in the nation’s debt limit.
Dialing back the calls for spending cuts could mean other members pull their support.
Senator John Cornyn told reporters he wants more explicit targets in the budget to ensure large spending cuts.
“This may be the last time in our careers we have the chance,” to make such budget savings, he said.
The House unanimously passed four bipartisan bills Tuesday concerning taxes and the Internal Revenue Service that were all
- H.R. 1152, the Electronic Filing and Payment Fairness Act, sponsored by Rep. Darin LaHood, R-Illinois, Suzan Delbene, D-Washington, Randy Feenstra, R-Iowa, Brad Schneider, D-Illinois, Brian Fitzpatrick, R-Pennsylvania and Jimmy Panetta, D-California. The bill would apply the “mailbox rule” to electronically submitted tax returns and payments to allow the IRS to record payments and documents submitted to the IRS electronically on the day the payments or documents are submitted instead of when they are received or reviewed at a later date. The AICPA believes this would offer clarity and simplification to the payment and document submission process while protecting taxpayers from undue penalties.
- H.R. 998, the Internal Revenue Service Math and Taxpayer Help Act, sponsored by Rep. Randy Feenstra, R-Iowa, and Brad Schneider, D-Illinois, which would require notices describing a mathematical or clerical error to be made in plain language, and require the Treasury to provide additional procedures for requesting an abatement of a math or clerical error adjustment, including by telephone or in person, among other provisions.
- H.R. 517, the Filing Relief for Natural Disasters Act, sponsored by Rep. David Kustoff, R-Tennessee, and Judy Chu, D-California. The process of receiving tax relief from the IRS following a natural disaster typically must follow a federal disaster declaration, which can often come weeks after a state disaster declaration. The bill would provide the IRS with authority to grant tax relief once the governor of a state declares either a disaster or a state of emergency and expand the mandatory federal filing extension under Section 7508(d) of the Tax Code from 60 days to 120 days, providing taxpayers with more time to file tax returns after a disaster.
- H.R. 1491, the Disaster related Extension of Deadlines Act, sponsored by Rep. Gregory Murphy, R-North Carolina, and Jimmy Panetta, D-California, would extend the amount of time disaster victims would have to file for a tax refund or credit (i.e., the lookback period) by the amount of time afforded pursuant to a disaster relief postponement period for taxpayers affected by major disasters. This legislative solution would place taxpayers on equal footing as taxpayers not impacted by major disasters and would afford greater clarity and certainty to taxpayers and tax practitioners regarding this lookback period.
“The AICPA has long supported these proposals and will continue to work to advance comprehensive legislation that enhances IRS operations and improves the taxpayer experience,” said Melanie Lauridsen, vice president of tax policy and advocacy for the AICPA, in a statement Tuesday. “We are pleased to work closely with each of these Representatives on common-sense reforms that will benefit taxpayers, tax practitioners and tax administration and we’re encouraged by their passage in the House. We look forward to continuing to work with Congress to improve the taxpayer experience.”
The bills were also included in a recent Senate
The House also passed two other tax-related bills Tuesday that weren’t endorsed in the recent AICPA letter.
- H.R. 1155, Recovery of Stolen Checks Act, sponsored by Rep. Nicole Malliotakis, R-New York, would require the IRS to create a process for taxpayers to request a replacement via direct deposit for a stolen paper check. If a check is determined to be stolen or lost, and not cashed, a taxpayer will receive a replacement check once the original check is cancelled, but many taxpayers are having their replacement checks stolen as well. Taxpayers who have a check stolen are then unable to request that the replacement check be sent via direct deposit. The bill would require the Treasury to establish processes and procedures under which taxpayers, who are otherwise eligible to receive an amount by paper check in replacement of a lost or stolen paper check, may elect to receive such amount by direct deposit.
- H.R. 997, National Taxpayer Advocate Enhancement Act, sponsored by Rep. Randy Feenstra, R-Iowa, would prevent IRS interference with National Taxpayer Advocate personnel by granting the NTA responsibility for its attorneys. In advocating for taxpayer rights, the National Taxpayer Advocate often requires independent legal advice. But currently, the staff members hired by the National Taxpayer Advocate are accountable to internal IRS counsel, not the Taxpayer Advocate, creating a potential conflict of interest to the detriment of taxpayers. The bill would authorize the National Taxpayer Advocate to hire attorneys who report directly to her, helping establish independence from the IRS.
House Ways and Means Committee Chairman Jason Smith, R-Missouri, applauded the bipartisan House passage of the various bills, which had been unanimously passed by the committee.
“President Trump was elected on the promise of finally making the government work better for working people,” Smith said in a statement Tuesday. “This bipartisan legislation helps fulfill that mandate and makes improvements to tax administration that will make it easier for the American people to file their taxes. Those who are rebuilding after a natural disaster particularly need help filing taxes, which is why this set of bills lightens the load for taxpayers in communities struck by a hurricane, tornado or some other disaster. With Tax Day just a few days away, we must look for common-sense, bipartisan ways to make filing taxes less of a hassle.”
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