Final Ways and Means Roster
Following two rounds of votes, the House Republican Steering Committee elected Rep. Jason Smith (R-MO) to serve as the chair of the House Ways and Means Committee for the 118th Congress. Smith has served on the committee since 2015 and was also the ranking member of the House Budget Committee in the 117th Congress. On the Democratic side, Rep. Richard Neal (D-MA) will serve as ranking member. In the last few weeks, both Smith and Neal have publicly expressed their interest in pursuing bipartisan tax legislation through the committee.
Earlier this month, Smith announced the 10 Republicans who were selected by the Republican Steering Committee to join the Ways and Means Committee: Reps. Claudia Tenney (R-NY), Michelle Steel (R-CA), Mike Carey (R-OH), Blake Moore (R-UT), Brian Fitzpatrick (R-PA), Beth Van Duyne (R-TX), Randy Feenstra (R-IA), Michelle Fischbach (R-MN), Greg Steube (R-FL) and Nicole Malliotakis (R-NY). This roster was largely expected and includes a mixture of tax experts and former small-business owners. With these new additions, Republicans will have 25 total members on the committee.
With Republicans taking over the committee, Democrats lost seven committee slots, bringing their total membership down to 18. Former committee members Reps. Ron Kind (D-WI), Tom Suozzi (D-NY) and Stephanie Murphy (D-FL) did not run for reelection in 2022. Additionally, Rep. Brendan Boyle (D-PA) chose to take a leave of absence from the committee following his election to serve as the top Democrat on the House Budget Committee. This means that the three members with the least seniority on the committee, Reps. Jimmy Gomez (D-CA), Steven Horsford (D-NV) and Del. Stacy Plaskett (D-VI), will no longer have seats on the committee.
Congress is back in session until mid-February, with lawmakers expected to gather soon for the first meetings of the newly formed House committees.
Note: Names in italics denote new appointees.
Jason Smith’s Legislative Agenda – In His Own Words
To date, Rep. Smith has not discussed the details of his legislative agenda for the Ways and Means Committee in the 118th Congress. However, based on recent comments and previously proposed bills, Smith may advocate for targeted support for individuals and small businesses, in contrast to traditional broad tax cuts that have been GOP priorities in recent years. Smith has often described himself as the “product of a working-class upbringing,” and he is likely to pursue legislation that aligns with his more populist leanings.
The policy areas below highlight several statements Smith provided through recent press releases and live interviews that may offer insight into possible tax policy objectives in the next year.
Pro-Small Business and Worker Policy
“Ways and Means Republicans will build an economy that is strong by prioritizing our most valuable economic resource, the American worker. We will build on the success of the Tax Cuts and Jobs Act and examine how our policies can reward working families with a tax code that delivers better jobs, higher wages and more investment in America.” – Smith, Jan. 9
A key element of a Smith legislative agenda will likely be tax incentives that benefit “main street America.” In the 117th Congress, Smith co-sponsored several bills that would have extended or increased Tax Cuts and Jobs Act (TCJA) incentives for small businesses and middle-income families. Items of note include permanence for the temporarily increased standard deduction and section 199A deduction for passthrough businesses, both of which are currently set to expire after 2025. While it is unlikely that these provisions will be extended this Congress, expected hearings and legislative efforts may set the stage for serious extension discussions at the start of the 119th Congress.
In addition, Smith has announced his intention to hold several Ways and Means Committee “field hearings,” in which members would travel across the country to meet with local small businesses and employees. Smith said that he hopes these meetings will provide opportunities for a diverse range of taxpayers to express their opinions on specific provisions included in the TCJA, as well as additional tax policy items under consideration.
As for non-TCJA tax provisions, Smith has supported several bills that would provide targeted incentives for small businesses, individual taxpayers and families. This includes the Death Tax Repeal Act, a bill that ultimately gained 155 co-sponsors in the last Congress and would eliminate the estate and generation-skipping transfer taxes. Also of note, Smith has been supportive of small business Employee Stock Ownership Plans (ESOPs), co-authoring a bill that would have ensured small businesses continue to qualify for certain federal loans, contracting assistance and business development programs if they adopt an ESOP ownership structure.
Increased Scrutiny of Large Corporations
“We must also examine whether it is in the best interests of the American people to continue showering tax benefits on "corporations that have shed their American identity in favor of a relationship with China.” – Smith, Jan. 9
In 2022, several high-profile studies on voter sentiment revealed that Republican support for large corporations, financial institutions and technology companies dropped by nearly half compared to the two preceding years. Aided by this dwindling public support for these three sectors, GOP lawmakers have increased scrutiny over federal incentives provided to industries that are perceived to be overly embedded in the Chinese economy or increasingly “woke” rather than focused on their mission of creating jobs and contributing to a successful economy. Smith appears interested in pursuing Republican inquiries into the practices of major banks, social media platforms, large technology companies and other related industries—especially focusing on those that currently receive large federal grants or tax benefits.
The committee’s work may ultimately result in letters of inquiry to companies of concern—similar to ongoing corporate investigations conducted by Senate Finance Chair Ron Wyden (D-OR), albeit from a Republican perspective. If that happens, corporate executives may be asked to testify before the committee and explain certain tax practices perceived to be harmful to the interests of the U.S. economy. Further cementing Smith’s skepticism of large corporations, he has announced that scaling back or repealing the recently enacted corporate minimum tax will not be a priority for the committee.
Child Tax Credit Expansion
“I do think we can find common ground in many areas, and [the child tax credit] may be one of them. But, I am a true believer in work requirements.” – Smith, Jan. 12
Over the past several years, Smith has remained a strong advocate for extending the increased Child Tax Credit (CTC) enacted in TCJA. In February 2022, Smith introduced the Permanent Tax Relief for Working Families Act, which would have made permanent several TCJA changes to the CTC, including the increased value of the credit to $2,000 per child, the $500 dependent credit for those who are not qualifying children and expanding the amount of the credit that is refundable. In 2022, Smith also proposed the Child Tax Credit for Pregnant Moms Act, a bill that would have extended the CTC to pregnant mothers or mothers who had pregnancies resulting in a miscarriage or stillbirth.
Moreover, while the aforementioned two proposals have only received GOP support, Smith has also been open to working with Democrats to craft a bipartisan CTC proposal. In other interviews, Smith made clear that any expansion of the credit would include a work requirement—a stance that Sen. Joe Manchin (D-WV) also took in 2022 negotiations over a possible CTC provision in the Democrats’ reconciliation bill. While President Joe Biden previously rejected the notion of adding stipulations like a work requirement, comments by the White House in late 2022 suggested that the administration’s position may be softening.
In addition to a work requirement, a possible CTC expansion could borrow elements from the Republican-proposed Family Security Act 2.0. The bill includes a simplified CTC worth up to $350 monthly per child or $4,200 annually, which would be paid for by eliminating several other federal entitlement programs, as well as the child portion of the child and dependent care tax credit. The bill also includes changes to the Earned Income Tax Credit and a repeal of the state and local tax (SALT) deduction to offset the budgetary costs of the credit. Repealing the SALT deduction, as well as certain other elements of the bill, are nonstarters for some Democrats.
Countering China Legislation
“We will examine using both trade policy and our tax code to re-shore and strengthen our supply chains, where products and services vital to our national security are made here at home using American labor, as well as craft policies that help America achieve food and medical security rather than dependence on nations like China.” – Smith, Jan. 9
The past decade has seen a dramatic shift in how many in the United States view China, and some recent legislation has changed the U.S.-Sino relationship from cooperative to more adversarial. In the tax space, Smith and other Republicans could pursue tax legislation designed to incentivize sectors of the U.S. economy perceived to be important to U.S. national security. This effort will likely be aided by the work of the recently created Select Committee on the Strategic Competition Between the United States and the Chinese Communist Party, that was formed through a bipartisan vote of 365-65.
A model for these legislative efforts was seen in the recently passed CHIPS and Science Act, which included a tax incentive to encourage the domestic production of semiconductors—an industry currently dominated by Chinese manufacturing. Both parties have already demonstrated a willingness to pass new tax incentives for specific industries, and this type of legislative effort could be messaged as an attempt to limit Chinese influence in key U.S. production sectors. In addition, Smith has recently suggested legislation involving China should include provisions aimed at improving the efficiency of the supply chain for small businesses that have been hard-hit by persistent shortages over the last three years.
A particular issue with broad national security implications that also will continue to receive significant attention in 2023 is the debate over the amortization of research and development (R&D) expenditures. Bipartisan efforts are likely to continue pursuing legislation that would restore the immediate deductibility of R&D business expenses under Section 174. While this task will be complex in a split Congress, Smith has proven to be a strong supporter of the R&D credit as one of only 18 Republicans to sign onto the bipartisan full-expensing extension in 2020 and one of only 61 Republicans to again sign onto the follow-up bipartisan extension in 2021. If an anti-China bill is negotiated in 2023, Smith and others may insist on the inclusion of immediate R&D deductibility, as was seen in a previous GOP anti-China tax bill, the Countering Communist China Act. Such a bipartisan effort, however, will depend on whether Democrats continue to insist that any business tax provisions must be paired with an expansion of the CTC.
Oversight of Biden Administration
“Americans also expect us to hold the Biden Administration accountable for the crises it has caused and to once again exercise Congress’s oversight authority which has been entirely absent under one-party Democrat rule in Washington.” – Smith, Jan. 9
In recent years, Smith has been at the forefront of Republicans’ efforts to hold Biden accountable for high inflation and wasteful spending. Using the Ways and Means Committee’s oversight powers, Smith will likely support aspects of the GOP investigative agenda targeting various issues, including: tax-exempt entities, such as private universities; tax practices of donor-advised funds; and broad monetization allowances afforded to certain direct pay and transferable credits in the Inflation Reduction Act (IRA). Additionally, House Republicans are likely to open congressional investigations into the alleged criminal tax practices of Biden’s family, as well as to challenge Treasury Secretary Janet Yellen’s representation of U.S. interests in recent negotiations over the proposed global minimum tax.
Smith also has not explicitly ruled out the possibility of using the chairman’s statutory authority to obtain the tax returns of members of the administration. While Smith noted that he would require strong justification for pursuing this course, he also said that Democrats are ultimately responsible for setting the stage for this “dangerous precedent” with the public release of former President Donald Trump’s tax returns late last year.
In conjunction with more frequent investigative hearings, Smith could offer myriad proposals to disrupt the regulatory power of the Biden administration. This process began earlier this month with Smith’s co-introduction of the Reduce Exacerbated Inflation Negatively Impacting the Nation (REIN IN) Act, which would mandate the administration to publish the inflationary impact of certain executive actions before enacting them.
Defunding the IRS
“Our first step is defunding the $80 billion pay increase Democrats gave the IRS to hire 87,000 new agents to target working families.” – Smith, Jan. 9
Smith strongly supports broad GOP efforts to reduce the $80 billion in additional funding provided to the Internal Revenue Service (IRS) through the IRA. Earlier this month, the House passed legislation to repeal most of this funding, with Smith advocating for the bill on the House floor by arguing that “the IRS does not need a raise . . . it needs a reckoning.” In the week prior, the Congressional Budget Office estimated that this proposal would increase the federal deficit by approximately $115 billion over the next decade because of the cut to the agency’s proposed enforcement budget.
Though these targeted efforts will likely fail to garner sufficient support to pass the Senate, in upcoming bipartisan appropriations discussions, Republicans will have several other opportunities to limit IRS funding. Most notably, Smith will likely work with new House Appropriations Chair Kay Granger (R-TX) to advocate for a reduction to IRS baseline funding in FY 2024 budget talks in light of the $80 billion in long-term funding already received by the agency. In comments earlier this month however, Steny Hoyer (D-MD), the ranking member of the Financial Services and General Government Subcommittee, refuted the possibility of Republicans targeting IRS baseline funding, stating that Democrats would refuse to accept any cuts to the agency.
Changes to Tax Administration
“But we are not stopping there. If confirmed, the new IRS Commissioner should plan to spend a lot of time before our committee answering questions about the leaking of sensitive taxpayer information and an agency with a history of targeting conservative Americans. We will make it clear to every IRS employee that the Ways & Means Committee welcomes whistleblower efforts to uncover corrupt behavior at that agency.” – Smith, Jan. 9
Following ProPublica’s leak of sensitive taxpayer data starting in June 2021, several Republican lawmakers requested that the Ways and Means Committee hold investigations into security gaps at the IRS. Now, with control of the committee, Smith is likely to examine the high-profile leak, as well as several security breaches that occurred at the IRS in the year that followed. This will likely involve hearings, with witnesses including IRS Commissioner-nominee Danny Werfel, in an attempt to explain security inadequacies at the agency and the lack of an adequate explanation for the breach despite 18 months of ongoing federal investigations.
In addition to hearings and investigations focused on agency operations, Smith has signaled that he intends to focus on the agency’s shortcomings in interactions with individual taxpayers and small businesses. This could involve taxpayer witnesses appearing before the committee to testify on the status of their delayed returns, especially focusing on the IRS’ mishandling of COVID-19 relief funding (e.g., Employee Retention Tax Credit refunds). In these cases, Republicans will highlight ongoing administrative delays and reports of the agency’s lack of responsiveness to individual taxpayer-service requests.
Energy Legislation
“We must also look at ways to encourage domestic energy production and achieve energy independence through the tax code instead of using it as a tool to punish energy producers as President Biden has suggested.” – Smith, Jan. 9
While Smith is unlikely to seek to repeal renewable-energy tax incentives enacted in the IRA, he could support a reduction in barriers currently imposed on fossil fuel producers. Republicans may also seek to soften the strict labor requirements associated with the new energy credits and deductions. This could remain especially relevant to GOP messaging if energy prices remain high in 2023.
Republicans will also continue to advocate for tax provisions to incentivize greater domestic extraction and refining of oil and natural gas. This may include renewed efforts on investment tax credits for new drilling equipment, additional tax incentives for the use of enhanced oil recovery or an enhancement for current oil and natural gas exploration incentives. Proposals to expand or renew the current TCJA-enacted bonus deprecation for property and equipment will also be a crucial element of Republicans’ support for domestic fossil fuel energy sources.
In addition to general economic concerns, national security considerations will influence GOP energy proposals, as evidenced by the recent House passage of the Protecting America’s Strategic Petroleum Reserve from China Act, which prohibits the sale and export of crude oil from the U.S. Strategic Petroleum Reserve to China. Smith is also a strong supporter of policy to reduce U.S. reliance on foreign sources of critical minerals, having co-authored a letter on the topic to former Interior Secretary David Bernhardt in 2020. In the coming Congress, Smith may support additional domestic content and mineral sourcing requirements for certain energy incentives—possibly attempting to limit the use of material mined or processed by U.S. adversaries in the development of new domestic energy projects.
