Tax Reform and the Joint Committee on Taxation

If you are a tax accountant, or provide tax services, it's absolutely essential that you are aware of new regulations and updates in legislation. As the major influencer on such changes, the Joint Committee on Taxation (JCT) is likewise important for any tax professional to understand. 

Learn more about the JCT, what these members of Congress do, and how it impacts your tax services. 

What is the Joint Committee on Taxation? 

The Joint Committee on Taxation (JCT) is a nonpartisan committee of Congress responsible for assigning revenue estimates to all elements of tax legislation. 

The Committee has played a pivotal role in tax legislation since its inception in 1926. Calvin Coolidge signed the Revenue Act as a response to political turmoil around tax fraud and accusations¹. In addition to sweeping tax reforms, the Revenue Act also included the formation of the Joint Committee on Taxation. Ever since, the committee has been charged with investigating, reporting, and improving upon tax administration and operations. 

The JCT is composed of 10 members—five from the Senate and five from the House of Representatives, from a mix of majority and minority parties. The Chairman of the Senate Finance Committee and the Chairman of the House Ways and Means Committee rotate chairing the committee. In addition to members of Congress, the staff consists of Ph.D. economists, attorneys, and accountants who provide expert guidance on tax legislation, bills, and investigation.

For example, these technical gurus may determine a tax credit’s estimated cost over a 10-year budget window, and whether a tax package is revenue neutral reduces, or adds to the federal deficit. Some go as far as saying that these ‘scorekeepers’ can decide whether tax reform lives or dies before it even makes it out of the Committee. 

How the Joint Committee on Taxation works in legislation and reform 

The Joint Committee on Taxation serves as an expert and impartial voice to help inform the best decisions in tax legislation. It completes this function by performing six very important tasks: 

1. Prepare pamphlets and reports 

Before the House and Ways Committee and Senate Finance Committee meet early in the legislative process, the Joint Committee on Taxation prepares a pamphlet providing an in-depth analysis of the revenue topics to be discussed, the current economic environment, and legal implications. Likewise, when a Committee sends a new legislation, the JCT is responsible for producing the legislative explanation and final committee report. 

2. Help draft statutory language 

The JCT works together with the Ways and Means Committee and legislative counsel attorneys to help craft a markup’s statutory language while it’s in progress. 

3. Prepare revenue estimates 

The JCT staff receives between 6,000-7,000 revenue requests per year. These requests ask for in-depth reports analyzing the expected results of any change or update in tax legislation. In this sense, the JCT staff is truly a deciding force in legislation, as their recommendations weigh greatly on expected results. 

The Committee responds to each request, regardless of whether it comes from a member of the majority or minority party. Until recently, the JCT used a “static” economic model to score tax proposals, meaning that the only variable considered in the analysis was the change in tax. However, in 2015, a GOP-controlled House of Representatives changed the rules to evaluate based on a “dynamic” score. This model, on the other hand, incorporates the estimated impact on the wider economy and any projected increases in tax revenue. 

Staff releases completed revenue estimates only to the Member who requested the estimate, which means that it remains confidential unless the Member decides to make such information public. This confidentiality allows the JCT staff to maintain its nonpartisan role in the tax legislation process. 

4. Assist Congress Members in drafting legislative proposals 

As the specialists responsible for the data that informs tax legislation, the JCT plays a major role in helping Congress Members write and edit proposals for legislation. They must take into consideration both the economic analysis they conducted and the policy goals as they effect constituents. 

Recent, significant legislative reforms based on JCT findings include: 

• Tax Cuts and Jobs Acts (TCJA) of 2017: reduced income tax rates and expanded expensing for businesses, reducing major tax expenditures² 
• Tax Reform Act of 1993: increased taxes and reduced spending in order to reduce the national deficit³ 
• Economic Recovery Tax Act of 1981: implemented a major tax cut designed to boost the economy⁴ 
   

5. Review proposed large income tax refunds 

Tax law can be tricky, and the JCT helps evaluate whether it is functioning as intended. The Committee asses this by reviewing refunds over $2,000,000 and conducting post-refund investigations on large deficiency cases. 

6. Investigate federal tax system 

Joint Committee on Taxation staff experts consult with Treasury and IRS professionals throughout their work in the legislative process, gaining a better understanding of the federal tax system’s processes, administration, and compliance. This helps inform decisions and recommendations to avoid technical corrections and amendments.⁵

Impact of the Joint Committee on Taxation on Accountants and their Clients 

The JCT’s work has a direct impact on accountants and tax professionals’ work. If you offer tax services to your clients— whether tax preparation and filing or tax resolution—you must be in touch with yearly updates to regulation. 

It can be tricky to keep up with ever-changing tax laws. However, as a tax practitioner, you should ensure that you’re providing top-notch services—and that your clients remain legally compliant, too—by planning your professional education to stay current each year. 

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