This week (January 23-27)

Congress in: The House and Senate are in session early in the week before Republican members head to a January 25-27 retreat in Philadelphia. In the Senate, the focus will be on Trump's nominees. The expectation is that January 20 Senate votes on nominees General James Mattis to be Defense Secretary and General John F. Kelly to lead the Department of Homeland Security would be followed by the beginning of debate on the nomination of Rep. Mike Pompeo (R-KS) as CIA director.

Scheduled nomination hearings include a January 24 (at 10 a.m.) Finance Committee hearing on Rep. Tom Price (R-GA) to be Secretary of Health and Human Services; and a Senate Budget Committee hearing the same day (at 10:30 a.m.) on the nomination of Rep. Mick Mulvaney (R-SC) to be Director of the Office of Management and Budget.

Brady at Chamber: On Tuesday, January 24 (at 10:30 a.m.), Ways and Means Committee Chairman Brady will deliver remarks at the U.S. Chamber of Commerce. Chairman Brady will discuss tax reform and the Committee's pro-growth agenda for 2017.

CBO Outlook: The Congressional Budget Office will release its annual Budget and Economic Outlook on Tuesday, January 24 (at 10:00 a.m.).

Last week (January 16-20)

Trump on border adjustability: Prior to his inauguration as President, Donald Trump criticized border adjustability, a major component of the House Republican Blueprint on tax reform released last June, as "too complicated." In an interview with the Wall Street Journal reported on January 16, President-elect Trump said, "Anytime I hear border adjustment, I don't love it." House Republicans have been strongly advocating the proposal, in part for its potential to contribute $1 trillion over 10 years toward tax reform. "[Y]ou don't need that plus lower taxes and everything else. And it's too complicated. They get credit on some parts and not other parts. Where was the part made? I don't want that. I just want it nice and simple," Trump said. However, Axios reported Trump as saying in a January 17 interview that border adjustability "is certainly something that's going to be discussed." He continued, "I would say, over the next month-and-a-half, two months, we'll be having more concrete discussions. Right now, we're really focused on health care more than anything else."

Speaker Ryan on Charlie Rose: Asked about Trump's initial comments in an interview on PBS's "Charlie Rose" January 18, Speaker Paul Ryan (R-WI) said, "It's a very simple system that is very complicated in the way it's described." He explained that the rest of the world has consumption taxes, "so when they make something in their country and they sell it overseas they take the tax off of it" and then tax imports — the opposite of the US system. "We make a Harley motorcycle in Milwaukee, we tax it. We tax it if it's going to be ridden in Wisconsin," he said. "And we tax it if it's going to be sold into Japan. So it's taxed as it leaves and it's taxed as it enters into Japan." In the case of a motorcycle made by a Japanese competitor, "if it's going to go to America they take the tax off of it because it's being exported. And then, as it comes into America it's not taxed … untaxed twice," he said. "Our motorcycle is taxed twice." The Speaker said, "changing the way we do our taxing based on the destination of consumption" gives US companies "an enormous incentive to stay in America" and "makes it more profitable to stay in business because your foreign competition coming in is now on a level playing field." The Speaker said there are constant conversations with the Trump team about tax reform, and that House Republicans would be happy to bring the corporate rate down to the 15% Trump wants if they can make the numbers work on a revenue neutral basis. He also said the international tax system is "out of sync with the rest of the world" in that "if you sell something overseas and make money overseas you really can't bring the money back because of the tax system."

Brady on border adjustability: In a press statement following the initial Trump report, House Ways and Means Chairman Kevin Brady (R-TX) said: "Unfortunately our current tax code is not only complex, it favors Chinese steel over American steel, Mexican beef and autos over American beef and autos, and foreign oil over American oil. It's time to tax imports and exports equally in America, and end the 'Made in America' tax." He also sought to simplify the explanation of the proposal, saying on CNBC January 18: "At the end of the year a business adds up its export sales and doesn't count it as income. At the end of the year, it adds up its import costs and doesn't count them as expenses. That's the border adjustable tax." Brady went on to say that lawmakers don't expect things to change on a dime, and are working with importers to design the transition to border adjustability. The Chairman predicted, "If we pass this blueprint, working with the Trump Administration in a very bold way, we'll re-establish America as a 21st century magnet for new jobs and new business investment."

Tax bill 'very close' to being assembled: In an interview with the Washington Post reported on January 16, President-elect Trump said that "we're getting very close" to putting together tax legislation. With regard to tax rates under the forthcoming plan, Trump said, "It'll probably be 15 to 20% for corporations. For individuals, probably lower. Great ­middle-class tax cuts." On corporate tax rates, "We may negotiate a little, but we want to bring them down and get as close to 15% as we can so we can see a mushrooming of jobs moving back," Trump said. Trump continued referring to his interactions with individual companies planning to move certain manufacturing outside of the United States and to import goods back into the country, and the promise of a border tax: "If companies think they're going to make their cars or other products overseas and sell them back into the United States, they're going to pay a 35% tax," he said.

Mnuchin hearing at Finance Committee: During a January 19 Senate Finance Committee hearing on his nomination to become Treasury Secretary, banker and financier Steven Mnuchin said he will take the lead in the new Administration on tax reform that provides a middle-income tax cut, tax simplification, lower corporate taxes, and also encourages US companies to bring foreign earnings back to the United States. Mnuchin also expressed interest in narrowing the tax gap, increasing IRS staffing, and improving agency technology. Asked about tax reform by Republican Senators — including Tim Scott (R-SC), Bill Cassidy (R-LA), John Thune (R-SD), and Mike Enzi (R-WY) — Mnuchin's responses largely reflected positions taken by the Trump team during the campaign, including a desire to focus reform on both the personal and business side, and to include pass-through entities with protections to ensure they are not used to avoid higher personal income taxes. Mnuchin agreed that the international tax system is outdated, but focused his comments on reform on facilitating repatriation of foreign earnings. He said lowering the corporate tax rate would have a "huge impact on stopping inversions" by removing the incentive to seek lower taxes elsewhere, but acknowledged that there are other things that may be done. Mnuchin provided assurance that Trump's 35% border tax comments are directed only on a small number of companies that have moved or are moving jobs outside of the United States and are seeking to import products back into the country. Democrats questioned whether Trump's tax proposals would favor higher-income Americans and Mnuchin's involvement in foreclosures and offshore account holdings, following which Chairman Orrin Hatch (R-UT) said Mnuchin handled himself as well as any nominee for Treasury he had seen during his time on the Committee. "We're going to help you get through this ordeal, and also help you when you're there," Hatch said.

Quote of the Week

"We know we get one chance a generation to fix this broken tax code. We are determined to leapfrog into the front, the lead pack, the most pro-growth places on the planet to add that new job or make that new investment. That's why the discussions we're having are so critical … " - House Ways and Means Chairman Kevin Brady (R-TX), January 18

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