This Week (April 10-14)

President Trump wants health bill done first: President Trump said he now wants to complete health legislation before turning to tax reform. In an April 12 Fox Business News interview, he said it was "very much misreported that we failed with health care" when a House vote on the American Health Care Act was cancelled March 24, after which the President and Speaker Paul Ryan (R-WI) said they would set the issue aside to focus on tax reform. "We haven't failed, we're negotiating and we continue to negotiate and we will save perhaps $900 billion. If you look at the kind of numbers that we're talking about, that's all going back into the taxes and we have to do health care first to pick up additional money so that we get great tax reform," President Trump said. "So we're going to have a phenomenal tax reform but I have to do health care first, I want to do it first to really do it right and after that, we're going to start on tax reform and infrastructure." The Committee for a Responsible Federal Budget, however, released materials to clarify that the health bill stalling does not make tax reform harder because of a baseline issue, but because the bill included spending cuts that would offset the repeal or reduction of most of the tax increases enacted as part of the Affordable Care Act; if the GOP wants to cut the taxes under tax reform, they may have to identify new offsets. Asked about an August target for tax reform, President Trump would not set a deadline. "Health care is going to happen at some point," he said. "Now if it doesn't happen fast enough, I'll start the taxes, but the tax reform and the tax cuts are better if I can do health care first." Asked during a Wall Street Journal interview whether he would lay out principles for tax reform before a health bill is approved, the President said, "No. I want to get health care done … "

Meanwhile, officials asserted that work on tax reform is continuing. Asked on MSNBC April 12 about which of the issues is the current focus, Trump's budget director, Mick Mulvaney, said, "All of the above. We can do more than one thing at a time." On CNBC, Mulvaney agreed that Congress is now looking for more direction from the President, saying "You're going to see a much more policy-assertive White House going forward." As to whether that slows tax reform, with House leaders now waiting to hear from the President, he said, "Well, the House can go and do what they want to do. We are going to formulate our own policies." He added that it's "too early to say" whether the President's plan will resemble the House plan, but asserted that there will be a "Donald Trump tax plan that we are going to take down to the Hill and try and sell." Asked at an April 12 Newseum event why tax reform is not being done now, White House Press Secretary Sean Spicer said the Administration is multitasking on various issues. "We've met with the Ways and Means and Finance Committee and leadership," he said, adding that the White House was criticized first for "rushing" on tax reform weeks ago, then again for laying out a systematic plan. Still, he said, "It's going to take some months to get this done."

'Reciprocal' over 'adjustment' tax: Asked during the Fox interview whether he has made a decision on the House GOP tax reform Blueprint border adjustment tax proposal, President Trump said, "I haven't really wanted to talk about it. I have my own feelings. I don't like the word 'adjustment' because our country gets taken advantage of, to use a nice term, by every other country in the world. So when I hear border adjustment, 'adjustment' means we lose, we lose." Asked whether he would support any tax at the border, the President said, "Let's call it an import tax. Let's call it a reciprocal tax." He continued to say that some countries charge up to 100% tax on US goods but sell their own products into the United States tax-free. "So I love the idea of reciprocal, you can call it reciprocal or a matching tax or a mirror tax. There are numerous terms," President Trump said. "But the reciprocal tax is very important. And you know the funny thing is that nobody gets angry when you say reciprocal tax." The President cautioned that he is not saying he will propose a reciprocal tax. Asked if he would turn to a corporate tax cut if agreement on some form of border tax is elusive, President Trump said, "Yes. Well, we can keep trade and we can keep certain things separate. We may put it in the tax bill or we may keep it separate. We have a lot of different things." He also said he wanted to provide for the repatriation of foreign earnings of US companies with "a very small tax on that money." Following previous statements that he may combine an infrastructure proposal with other priorities, President Trump said, "I see it as part, perhaps, of the health care plan because phase two of the health care plan" may require 60 Senate votes.

Spicer says not back to drawing board: Asked during the April 10 press briefing whether an AP report that the President has essentially gone back to the drawing board on tax reform is accurate, Press Secretary Spicer said it is not and that President Trump's campaign tax plan is still the backbone of what he wants to get done. "But I think that what you're seeing is us going through this process of his economic team — everyone from Secretary Mnuchin to Secretary Ross to Gary Cohn and others sitting down internally and beginning that process of meeting with groups that have been advocating for tax reform since 1986 — kind of [since] the ink of that one dried — and starting to meet with outside groups, industry groups, individuals, members of Congress, to get their input," Spicer said. "This is going to be a major undertaking, and I think we want to make sure that we listen, have their ideas and their input as we move forward. But this is the beginning phases of that process."

Schumer says tax return refusal makes reform harder: Asked during an April 11 teleconference on China trade whether President Trump's refusal to release tax returns could raise possible conflicts of interest and stall the tax reform process, Senate Democratic leader Charles Schumer (D-NY) said the situation makes tax reform much harder because average Americans will assume the President's proposals will be for his own benefit. "So, for his own good, he ought to make them public. And the big mystery is why he hasn't," Schumer said.

Attention on Federal debt: The level of Federal debt has drawn attention as a potential constraint for tax reform. The Congressional Budget Office projects Federal debt held by the public to be 77% of GDP at the end of FY2017 and to be 89% of GDP by 2027; by contrast, at the end of 2007, it was 35% of GDP. An editorial in the April 11 Wall Street Journal expressed concern about rising net interest payments on the national debt, which reflect the size of the debt and interest rates. The editorial placed the blame on President Obama, saying while he doubled the national debt over eight years, the Fed's monetary policies spared him from the fiscal consequences. "All of this is set to explode on President Trump's watch, and it will complicate the task for Republicans as they try to reform the tax code within tighter budget constraints," the editorial said. A story in the April 12 New York Times noted that at the time of the last major tax cut in 2003, Federal debt was 33% of GDP.

An agreement will need to be reached to address the Federal debt limit by sometime later this year.

Next Week (April 17-21)

Congress out: The Senate and House remain out of session until the week of April 24. The next Senate vote will be at 5:30 p.m. on Monday, April 24, on the nomination of Sonny Perdue to be Secretary of Agriculture. Votes will resume in the House on April 25.

Quote of the Week

"We've had internal discussions. We're starting to engage with stakeholders. They have started to engage with members of Congress. But we've gone 30-plus years without comprehensive tax reform. There's a lot of people who have a lot of ideas on two fronts. One is, on the corporate side, we have a big problem with our corporate tax rate, maintaining and growing businesses here in the country. They are fleeing our country. And I think this President is committed, through both tax reform and regulatory reform, to create a better business climate that allows companies to stay here, to want to start here and to grow here. And you're seeing the progress on a lot, especially on the regulatory front. The President has made tremendous progress." - White House Press Secretary Sean Spicer, April 12

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