27 March 2017 EY Center for Tax Policy: This Week in Tax Reform for March 24 House cancels health care vote: The House cancelled a planned March 24 vote on the American Health Care Act (H.R. 1628), a repeal and replace bill that would have repealed most Affordable Care Act (ACA) tax provisions effective in 2017 and further delayed the Cadillac tax. The development puts the focus on tax reform. "So now we are going to go for tax reform, which I have always liked," President Trump said. Office of Management and Budget Director Mick Mulvaney said on ABC's "Good Morning America" March 24 that the President wants to move on to issues that include tax reform and that "he's not willing to wait the several months that an ordinary President would" for the health care issue to be resolved. He also suggested that the White House would take the lead on tax reform: "When you see tax reform for the first time, it will be the President's plan and we will drive the debate on that." During a March 24 news conference, House Speaker Paul Ryan (R-WI) said Republicans had been close to winning the requisite votes to advance the bill but could not achieve a consensus, and acknowledged that the result was a disappointment. Speaker Ryan said lawmakers will move on to tax reform but it will be made more difficult by the outcome on the health care bill, which would have repealed some ACA tax provisions. "It's about a trillion dollars, but that just means the Obamacare taxes stay with Obamacare; we are going to go fix the rest of the tax code," he said. Under changes announced March 20, tax provisions would have been repealed a year earlier than the original version, effective beginning in 2017 for taxes that include the 3.8% net investment income tax, the medical device excise tax, and the tax on prescription medications, and the health insurance tax. Under a more recent amendment, repeal of the .9% Medicare surcharge tax on individuals earning over $200,000 annually would have been delayed to tax years after December 31, 2022. Mnuchin on border adjustability, carried interest: Treasury Secretary Steven Mnuchin said March 24 that the Administration is "ready to go" on tax reform, will come out with its own plan soon, and will not accept the House border adjustability proposal "as-is." Secretary Mnuchin said during an Axios event he thinks comprehensive tax reform legislation could be completed by the August recess but acknowledged that target is optimistic — they will try to get it done by then but, if not, "right afterwards." Similar to recent comments by Speaker Ryan, Mnuchin suggested that reform legislation could not have been readied in time to precede the health care debate. "We have been working the last two months on tax reform. So, you know, this is something — because we are designing it from scratch and running through a lot of scenarios — we have needed the last two months to work on," he said. "We would not have been ready to go a month ago on tax reform, and now we are." Secretary Mnuchin continued to say there are aspects of the House border adjustability proposal that are attractive and others that are concerning, including the impact of currency changes on exports, and that it is a complicated issue. "You can expect that we are going to come out with a plan pretty soon," Secretary Mnuchin said. On the possibility of obviating the concerns of retailers, he said whatever approach is taken, the Administration wants to make sure it is simple and that it works. Asked about the taxation of carried interest, Mnuchin noted, "The President has said during the campaign that we think that hedge funds should be taxed, and I think that is something that we will put into the plan." Beyond hedge funds, Mnuchin said the Administration would study carefully the impact of a change to other areas so as not to create a disincentive for investments by pension funds, institutional investors, and others. He said it is possible real estate will be taxed differently. On comparing the health and tax debates, a frequent topic of discussion this week, Mnuchin said tax reform is in a way "a lot simpler" because the goals of the effort, which include a middle income tax cut and making US businesses more competitive, allow lawmakers to redesign the tax code. Health care is more complicated in beginning with the ACA and trying to get rid of it and make changes simultaneously, he said. Brady sees border adjustability phase-in, design changes: Ways and Means Committee Chairman Kevin Brady (R-TX) March 21 said he thinks the border adjustability proposal that will be included in the comprehensive tax reform bill he plans to unveil will be phased in, and that House Republicans are "open to design changes" given concerns about imported raw commodities and component parts, as well as uncertainty over exchange rate adjustments. The Chairman was asked in an interview on CNBC's "Squawk Box" about talk of phasing in border adjustability, and whether he is in favor of doing partial border adjustability for a period of time and then phasing it in over a number of years. "I think that will be one of the modifications on this, is to make sure it's done in a way that the economy adjusts efficiently, effectively, so we can see as this moves forward. I also think we are open to design changes so this works well," Chairman Brady said. "We want the most pro-growth tax reform we can muster. We think this is critical to it so we are listening to the import industry and, more importantly, they are engaging on the design part of this." Asked what he means by being open to design changes, Chairman Brady said, "We are looking at — this is within the current tax code — so on the import industry, you have got issues like raw commodities, you have component parts that might go through automobiles, you have finished products that might end up in a retail store." The Chairman said while members backing the proposal know the exchange rates will adjust effectively and efficiently, "A fair concern is, 'What if they don't immediately or completely?' Well, design, in my view, of this tax provision can accommodate those [concerns] in a very good way … So I just see very positive directions in the design, in the phase-in, and in the transition of that provision." Asked about the potential for the White House to support border adjustability, Brady said: "My sense is that border adjustability has become a given, that it will be part of the final tax reform plan. Really, now the discussions are how can it be designed and transitioned in a very positive way for importers." During a Fox News interview the same day, Brady suggested that modifications to the Blueprint proposal to eliminate the deductibility for net interest expense were also under consideration, in addition to changes to border adjustability. Asked on CNBC March 23 whether there will be carve-outs for border adjustability, Chairman Brady said he hopes not, preferring instead to design the proposal to address raw commodities and components. President continues call for 'reciprocity:' In remarks at the National Republican Congressional Committee March Dinner March 21, President Trump continued to call for "reciprocity" between how US products are taxed elsewhere and how foreign products are taxed here. "They will charge us 100% tax in some countries, 100%, and we charge them nothing," he said. "They will make it impossible through regulations for our product to be sold in their country, and yet they will sell their product routinely in our country. Not going to happen anymore." President Trump said after consideration of health care legislation "our Republican majority will pass massive, historic tax reform" — the largest since Ronald Reagan. "That one is going to be fun. That's called the wheelhouse. We're going to do a great job for companies, we're going to bring back could be $3 trillion to $5 trillion from overseas, money that can't be brought back. It's part of our taxes," he said. "And it will lower the business tax rate from one of the highest in the world to one of the most competitive anywhere in the world. Way, way down." Trump said every effort will be made to reduce burdens on businesses, but they in turn will be expected to hire, invest, and grow in America. Judiciary clears Mobile Workforce bill: The House Judiciary Committee March 22 passed 19-2 the Mobile Workforce State Income Tax Simplification Act of 2017 (H.R. 1393), to limit the authority of States to tax certain income of employees for employment duties performed in other States. The bill passed the House last year but was not enacted. Finance Committee member John Thune (R-SD) sponsors the Senate version (S. 540). "Look, your viewers succeed because they know what their competitors are doing. So do we. We know what China, Germany, Canada, Mexico are doing. They're beating us on rates. They're beating us on no longer taxing worldwide. They're beating us on border adjustability. So we're going straight at them. In the world today, because this isn't the '80s where rates alone will do it, we have to go bolder than that. And the border adjustment tax has big benefits. One, it simplifies the international tax code. It levels the playing field here in the U.S. between foreign products and U.S.-made products. It eliminates any tax incentive to move jobs and manufacturing overseas … It re-establishes us for that new business investment. And yes, it helps us lower that business rate dramatically." — House Ways and Means Committee Chairman Kevin Brady (R-TX), March 23 CNBC interview
Document ID: 2017-0531 | |||||
