This week (December 5-9)

Congress in: The House and Senate are in session. A Senate vote to concur with the House on H.R. 34, the 21st Century Cures bill, will occur at 5:30 p.m. on Monday, December 5. The bill will be considered in the form of amendments between houses. The focus of the week will be on a continuing resolution (CR) to extend government funding beyond the current expiration on December 9. Speaker Ryan acknowledged December 1 that lawmakers want to extend funding deeper into the spring given the Senate will spend the early part of 2017 busy with other matters, including hearings and confirmation votes on Cabinet and sub-Cabinet officers, and a likely Supreme Court pick. "We're working with Leader McConnell on their calendar to make sure that we can accommodate some of their … concerns, which I think are legitimate because they have different responsibilities than the House does," he said.

Last week (November 28 - December 2)

Chairman Brady speech: At a Heritage Foundation event December 1, House Ways and Means Committee Chairman Kevin Brady (R-TX) said while budget reconciliation may ultimately may be the only option for advancing tax reform, House Republicans are going to start differently — by inviting Democrats in the House to bring forward their ideas for tax reform. "Our Democratic members of Congress … their communities are suffering too," he said. Brady said while a lot of people are brainstorming the process for tax reform — the sequencing and timing — Ways and Means is focused on the product. He said the Committee will continue to receive feedback on the House Blueprint on tax reform through the end of the year in anticipation of introducing the proposal early in 2017, though it remains to be seen where the issue fits in the "first 100 days" agenda of the incoming Administration. "The Trump team — it's just been a few weeks," Brady said, adding that House members are engaged with the team now and will continue to be. Brady continued to outline the benefits of the Blueprint, including adopting border adjustability to reverse the fact that "Made in America" products are disadvantaged here and abroad. He repeated that the advantages of the proposal, under which "Made in America" products will no longer be taxed and imports will not be subsidized, include:

1. Leveling the playing field for American made products, so that competition is not based on the tax code;
2. Dramatically simplifying the international tax code; and
3. Combined with lower rates and a territorial system, ensuring every incentive to move jobs and headquarters overseas is eliminated.

Brady continued to say the Blueprint is designed to break even with the budget, with consideration of economic growth. Some deductions will be eliminated, including, for business, no longer allowing deductibility of net interest, and there are good reasons for the change, Brady said. Allowing both full expensing and deductibility of net interest expense could result in a negative tax rate. He encouraged stakeholders not to focus on a single feature of the Blueprint like interest deductibility, but to look at the proposal as a whole.

Trump continues call for tax reform. Speaking in Indiana in the wake of news that some Carrier Corporation jobs will not be moved to Mexico as planned, President-elect Donald Trump December 1 warned of consequences for companies moving jobs out of the country and promised rate-lowering tax reform. "Companies are not going to leave the United States any more without consequences. Not going to happen. It's not going to happen, I'll tell you right now. We're losing our — we're losing so much," Trump said. "So one of the things we're doing to keep them is we're going to be lowering our business tax from 35%, hopefully down to 15%, which would take us from the highest taxed nation virtually in the world — this is terrible for business — to one of the lower taxed. Not the lowest yet, but one of the lower taxed." Aside from the warning about offshoring, the President-elect promised "great things" for business. "There's no reason for them to leave anymore because your taxes are going to be at the very, very low end, and your unnecessary regulations are going to be gone," he said. The attention on a single company was met with criticism by some, including Senator Bernie Sanders (I-VT), who suggested in a December 1 op-ed that the development "signaled to every corporation in America that they can threaten to offshore jobs in exchange for business business-friendly tax benefits and incentives." A December 2 Washington Post editorial was equally critical of the exit tax approach proposed by Sanders and Hillary Clinton during the presidential campaign, and said competitive advantages that can be offered by the United States triumph over "selective pressure on politically unpopular business decisions."

Mnuchin sees tax reform in first 90 days: Coinciding with his nomination as the next Treasury Secretary November 30, financier Steven Mnuchin promised early action on tax reform, with tax cuts for corporations and the middle class. "We're already sitting down and discussing this with Congress. And this is going to be something that happens absolutely within the first 90 days of this presidency, we're going to have a major tax reform. Biggest tax reform since Reagan," Mnuchin said on Fox Business News. "And it's not just going to be a cut in corporate taxes but it's also going to be a very large middle income tax cut that's going to help this country." He said the middle income tax cut would be combined with the child care program; during the campaign, Trump proposed allowing those earning $250,000 per year or less ($500,000 for couples) to deduct up to the average cost of care for their state of residence. At the upper end of the income scale, Mnuchin said, the tax rate cut will be offset with a significant reduction of deductions. "So for the upper class it won't be a tax cut but it will be a simplification," Mnuchin said. "It will lower the marginal rate which will spur investment." He pushed back against the notion that business tax reform could be addressed first and more difficult individual changes undertaken later, saying "both the personal income tax and the corporate tax are part of the Trump Plan and that's going to be what we're looking to pass in the first 90 days." Asked about the unrepatriated earnings of CFCs of US companies, Mnuchin said, "the combination of lowering the corporate tax and a one-time 10% repatriation tax [is] absolutely going to get cash back here."

Ryan on reform, reconciliation: During his December 1 news conference, House Speaker Paul Ryan (R-WI) said he was not very familiar with the Carrier situation, but did say more generally, "Comprehensive tax reform … is all about making the tax code far better and more competitive for American businesses to stay in America … We tax our businesses at much, much higher tax rates than our competitors tax theirs." He said that with the US statutory corporate income tax rate of 35% compared with an industrialized world average of 24%, "We are killing jobs and competitiveness in America because of our tax code. Tax reform is central to fixing this problem." Also during the news conference, Ryan did not dispute the possibility of crafting two budget resolutions with reconciliation instructions in the new Congress, but would not comment on a possible timeline or other details. "We haven't written these budgets yet, let alone the reconciliation that follows from it. This is our intention, to use every tool we've got to make progress for the American people." He said that the priority is providing relief from the Affordable Care Act. "With respect to all the other issues, reconciliation is the proper budget tool that you use for budget legislation; health care, tax — these are budget issues that will be dealt with in that way." Bloomberg reported Ryan saying December 2 that the Senate may move first in January to adopt an FY 2017 resolution to set up ACA repeal, possibly to avoid a dispute over spending that kept the resolution from advancing earlier.

Neal set to become Ways & Means ranking member: Rep. Richard Neal (D-MA) is set to become House Ways and Means Committee Ranking Member after his Democratic Steering & Policy Committee nomination for the position December 2, which still must be approved by the Democratic Caucus. Current Ranking Member Sandy Levin (D-MI) announced he would step down from the post in the next Congress, and Rep. Xavier Becerra (D-CA) was to compete with Neal for the position before being tapped to become the next Attorney General of California on December 1. Levin originally supported Becerra as his successor then endorsed Neal after the AG announcement, saying "The Ways and Means Committee will … be in good hands with Rich Neal as the Ranking Member." Becerra accepted the AG nomination from Gov. Jerry Brown, to replace Kamala Harris, who has been elected to the Senate for the next Congress. He must be confirmed by the state Senate and Assembly, though both are controlled by fellow Democrats. Levin said he was stepping down as Ways and Means ranking member in part to allow younger members to "assume the mantle of leadership" and take efforts necessary to confront a new Republican president and Republican-controlled House.

Quote of the Week

"I'm working to assemble a detailed action plan for America. My plan begins with a bold structural reform to create millions of new jobs and rapidly expand our economic growth. And you see what's happening with taxes. You see what's happening with regulations, which are totally out of control. Right now we punish companies for doing business in America. They're actually punished, that's why they're leaving." — President-elect Donald Trump, December 2 rally in Cincinnati, OH

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