This week (December 19-23)

Congress out: The House and Senate are out until the New Year. This Week in Tax Reform will resume publishing when Congress returns.

Last week (December 12-16)

Priebus on border adjustability: Incoming White House Chief of Staff Reince Priebus gave the border adjustability concept proposed under the House Republican Blueprint on tax reform a boost December 14, signaling that the new administration is at least interested in the idea. "We can make everything here, or our goal should be to try to make everything we can in the United States so that the money gets put in the pockets of Americans," Priebus said on the Hugh Hewitt radio show. "And we want to see the potential for a change in that border adjustability so that American jobs are protected. That's the point." Priebus agreed that the United States does not want a tariff war and said "border adjustability is something that I'm sure Speaker Ryan and others are going to be looking at and debating very shortly." Border adjustability, under which "Made in America" products will no longer be taxed and imports will not be subsidized, was cited as a subject of concern in a December 13 letter to House Ways and Means Committee Chairman Kevin Brady (R-TX) and incoming Ranking Member Richard Neal (D-MA) from dozens of business groups, many representing retailers. "Companies that rely on global supply chains would face huge business challenges caused by increased taxes and increased cost of goods, which would in turn likely result in reductions in employment, reduced capital investments and higher prices for consumers … " said the letter, which also expressed support for comprehensive tax reform generally. "We believe the Better Way Tax Reform proposal, without the border adjustment provision, can provide the basis for the strong economic growth we all seek without harming our businesses and burdening our consumers with higher prices."

Chairman Brady has repeatedly said he would not exclude that component of the Blueprint as Committee Republicans work toward introducing the proposal early in 2017. "This election, voters made it very clear they want the American economy strong again, they want Americans to be able to compete around the world without one hand tied behind our back, and they want to end the tax on made-in-America products," Brady said at a press availability during a break in a December 14-15 Ways and Means Republican meeting on tax reform and health care legislation, Bloomberg BNA reported. On the C-SPAN Newsmakers program set to air December 18, Brady said, "This is a key part of our built-for-growth tax code. It's going to stay." Committee member Rep. Tom Rice (R-SC) tweeted about the Committee meeting December 15, saying members "want a bill ready for Pres. Trump that'll make America competitive in the world again!" Having the bill ready means developing the Blueprint into legislative language while likely being cognizant of parameters House Republicans set for themselves, like making the plan revenue neutral with consideration of economic growth. "You're turning the Rubik's Cube many times, evaluating the impact, doing it again," Brady said, as reported by the Wall Street Journal December 16. "So it's a continual process."

Plans for health, tax packages: During the December 14 radio interview, Priebus said that following action related to repeal of the Affordable Care Act (ACA), which congressional leaders have said would be the first order of business when they return in 2017, "then we will have tax, you know, we'll have a small tax reform package, and then a bigger tax reform package at the end of April." Most public discussions thus far have focused on a single tax reform package, and the scope of the two packages Priebus referred to is unclear. "So I think what you're looking at is between two tax reform packages and reconciliation in the first nine months, you're looking at what essentially comes down to like three basically different budget packages," he said. "And so it's going to be a ton of work … a busy year starting with the first nine months being very much consumed through Obamacare and tax reform." Asked about those remarks, Chairman Brady said December 14 that the Committee is consulting regularly with the Trump transition team and, "We're anxious to work with them on the timetable, the first 100 days, how we get this economy working." In an end-of-year news conference December 12, Senate Majority Leader Mitch McConnell (R-KY) indicated there would be an initial budget resolution with reconciliation instructions for ACA repeal legislation, then another with instructions for tax. "We anticipate doing two budget resolutions this year. The first will be the Obamacare repeal resolution. And then we will do one later in the spring which will largely be dedicated to tax reform," Senator McConnell said. "So it will be two this year, and they will set up reconciliation follow-on vehicles for us to address two very important issues the president-elect talked about and we all care about; repealing and replacing Obamacare and doing comprehensive tax reform."

While the template for House tax reform is the Blueprint, there is not necessarily a corresponding model in the Senate nor a sense of how a bill from the other chamber will be received. Finance Committee Chairman Orrin Hatch (R-UT) has indicated that the corporate integration proposal he had been readying, expected to pair a dividends paid deduction with a 35% withholding tax for dividends and interest, will not necessarily be the basis for the Senate's work on the issue since "the ground has shifted" following the election. "At the very least, I think it's fair to say that, with the changing circumstances, the assumptions and parameters that have, for some time now, governed the tax reform debate will have to be modified, if not thrown out entirely," Chairman Hatch said in a speech looking back on the 114th Congress. "I believe that corporate integration can and should be part of the comprehensive tax reform discussion that appears to be on the horizon. But, given the current reality, any substantive tax reform proposal will need to be considered and evaluated in the context of what has quickly become a much broader discussion."

Quote of the Week

"When you try to do comprehensive, everybody tries to put their car on the train, and then it becomes something that's very difficult." — Senator Pat Roberts (R-KS), December 16 Wall Street Journal blog post