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This week (April 24-28)

Announcement on tax reform: President Trump said that he plans a "big announcement" on tax reform on Wednesday, April 26.

Congress in: The Senate and House return to session following a two-week recess. 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.

Ways and Means: There were some indications that the House Ways and Means Committee was preparing to have a tax reform hearing focused on border adjustability on Thursday, April 27, though no hearing notice has been issued and it therefore appears it may be pushed back beyond next week.

The Ways and Means Oversight Subcommittee will hold a hearing on the 2017 tax filing season on Wednesday, April 26 (at 2:00 p.m.).

Border adjustability event: On April 27 (at 8 a.m.), Bloomberg Government will hold an event to discuss the possible economic and political implications of border adjustability and the impact on trade.

Last week (April 17-21)

President Trump says tax plan out Wednesday: President Trump said April 21 that he plans a "big announcement" on tax reform on Wednesday, April 26. His comments came during the signing of an Executive Order on review of tax regulations. Earlier, in an Associated Press interview, the President said the tax reform package will be released on "Wednesday or shortly thereafter" and that businesses and individuals will receive a "massive tax cut" under the plan, "bigger I believe than any tax cut ever." Bloomberg and The Washington Post cited senior officials as saying the announcement may not be a complete legislative proposal, but could provide details and priorities as well as the President's position on border adjustability. Politico cited an official as saying the timing of the announcement could slip past next week.

President Trump earlier suggested that completing health care legislation takes precedence and he expects that the House could revisit that issue as soon as the week of April 24. During a speech in Kenosha, Wisconsin on April 18, the President said, "We're in very good shape on tax reform. We have the concept of the plan. We're going to be announcing it very soon. But health care, we have to get the health care taken care of." He said Treasury Secretary Steven Mnuchin is working to put together a tax reform plan "to make our industry more competitive and also to provide a level playing field for our workers. We don't have a level playing field, believe me. You're going to have one very soon. And our tax reform and tax plan is coming along very well. It's going to be out very soon." President Trump said the Administration is working with Congress on tax reform and simplification, "and we're on time if we get that health care approval. So press every one of your congressmen. Press everybody. Because we want to get that approval. And it just makes the tax reform easier and it makes it better."

During an April 20 press conference, President Trump reiterated that Republicans had never given up on health care legislation and he would "like to say next week" for House consideration of a revised bill, but if not "shortly thereafter." He later downplayed the importance of House action next week, saying there is "no particular rush." The President said the health care proposal has been evolving and improving, and "a lot of people are liking it a lot — we have a good chance of getting it soon." House Speaker Paul Ryan (R-WI) said April 19 that Republicans are putting "finishing touches" on a revised health care proposal. The President's comments followed a question about whether it is more important to get a vote next week on a health bill or on a measure to extend government funding beyond its April 28 expiration. President Trump said he wanted both.

Mnuchin says plan out soon: Secretary Mnuchin April 20 said the Administration's tax plan would be announced "very soon" and it will be "sweeping," significant, and will create a lot of economic growth. Secretary Mnuchin was interviewed by EY Global Chairman and CEO Mark Weinberger at the Institute of International Finance's (IIF) 2017 Washington Policy Summit, and said, "This will be the most significant change to the tax code since Reagan." The tax plan that the Administration envisions will "pay for itself" taking into account dynamic scoring, Secretary Mnuchin said, with some of the rate reduction offset with fewer deductions and simplification and the remainder offset by economic growth. He later said increasing economic growth through tax reform and regulatory reform is his top priority as Treasury Secretary. Asked about the House border adjustability proposal, the Secretary continued to say that there are aspects the Administration likes about it and others they do not like, and that they are particularly concerned about the impact on currency. He clarified that the Administration hopes that enacting tax reform will not take until the end of the year.

His comments followed a Financial Times interview published April 17 in which Secretary Mnuchin said his previously stated target of enacting tax reform by August is "highly aggressive to not realistic at this point." He said the effort was likely delayed by developments related to health care legislation, but that he nonetheless expects to complete the effort in 2017. Secretary Mnuchin said there may be ways to raise $1 trillion toward the effort other than the House border adjustability proposal, which is still being studied by the Administration. "That is not to say we have taken it off the table," he said.

Executive Order on reg review: President Trump April 21 signed an Executive Order calling for the Treasury Department to review all "significant tax regulations" issued on or after January 1, 2016, to identify those that impose undue financial burden or add undue complexity, and to recommend specific actions to mitigate the burden imposed by the regulations. Secretary Mnuchin confirmed that among items to be looked at in the review are final and temporary regulations (TD 9790) under Section 385 to treat as stock certain related-party interests that otherwise would be treated as indebtedness for federal tax purposes; and establish extensive documentation requirements with respect to related-party indebtedness. However, the Executive Order is not specifically targeted toward those regulations, Mnuchin said. During a press briefing, Secretary Mnuchin said Treasury will look at every regulation to "determine whether we think they are needed in the tax code, or whether they are unnecessary and the tax burden and complexity is too much. And if we think it's too much, we will make a recommendation to the President how to change that." During a signing ceremony, President Trump said, "This regulatory reduction is the first step toward a tax reform that reduces rates, provides relief to our middle class, and lowers our business tax, which is one of the highest in the world and has stopped us from so much wealth and productivity." Under the order, an interim report identifying burdensome regulations is to be completed within 60 days, and a report providing recommendations is to be completed within 150 days. A final rule that has already been published in the Federal Register may only be rescinded by going through a new Administrative Procedure Act public notice and comment process. That combined with the timeframe for the report means it could be some time before any regulations are rescinded, if that is what Treasury recommends. "I appreciate the Trump Administration's thorough review of all these regulations and encourage them to work to roll back the section 385 regulations and estate tax regulations that will hurt American workers and their families," House Ways and Means Committee Chairman Kevin Brady (R-TX) said.

Angus on pass-through concerns: At a D.C. Bar conference April 20, Barbara Angus, the Ways and Means Committee's chief tax counsel, said rules may be necessary to address pass-through income mischaracterization concerns resulting from rate disparities under tax reform. Politico reported Angus as saying rules would allow the IRS to identify active owner-operators and distinguish their wage and investment earnings. The Committee is planning a mix of rules "so a simple rule that may apply in the bulk of cases can be backstopped by some alternative rules that would be available when that simple rule doesn't get to the right result for that particular business," she said, according to the report.

Callas on reconciliation: At the IIF conference, George Callas, Speaker Ryan's senior tax counsel, suggested even with a 10-year sunset under the budget reconciliation process there may be revenue losses in out years, so a corporate tax cut may have to end sooner. Under reconciliation rules that afford Senate passage with 51 votes, legislation can't lose revenue beyond the budget window unless it includes a "sunset" after 10 years, like the Bush tax cuts. "You might be able to do two years," Callas said, according to Politico.

Democrats on Trump tax returns: Democrats continued to suggest that President Trump's refusal to release tax returns could impede tax reform. During an April 18 teleconference on Buy And Hire American policies, Senate Democratic leader Charles Schumer (D-NY) said, "it's going to be much harder to get tax reform done if the president doesn't disclose his taxes, for the very simple reason that when there's a provision in the bill, people are going to say, 'Oh, this is for President Trump and his business, not for the benefit of the American people.'" Senator Schumer said that dynamic is particularly true given "the large kind of real estate business he has, there are all kinds of tax laws that affect it."

Advisers urge corporate-only: In an op-ed in the April 19 New York Times, Steve Forbes, Larry Kudlow, Arthur B. Laffer and Stephen Moore said "the primary goal of Mr. Trump's first tax bill should be to fix the federal corporate and small-business tax system" through lowering the statutory corporate income tax rate to 15%, 100% expensing, and a low tax on the repatriation of foreign profits of US companies with a related fund dedicated to rebuilding infrastructure. Individual tax reform should wait until 2018, said the authors, who advised the Trump presidential campaign on economic policy. Kudlow and Moore made a similar recommendation in a January Wall Street Journal op-ed.

Quote of the Week

"The Federal tax system should be simple, fair, efficient, and pro-growth. The purposes of tax regulations should be to bring clarity to the already complex Internal Revenue Code (title 26, United States Code) and to provide useful guidance to taxpayers. Contrary to these purposes, numerous tax regulations issued over the last several years have effectively increased tax burdens, impeded economic growth, and saddled American businesses with onerous fines, complicated forms, and frustration. Immediate action is necessary to reduce the burden existing tax regulations impose on American taxpayers and thereby to provide tax relief and useful, simplified tax guidance." — April 21 Executive Order on Identifying and Reducing Tax Regulatory Burdens

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