This week (August 28 - September 1)

Congress out: The Senate and House are out of session for the August recess, returning September 5.

White House push on tax reform: President Trump is set to begin pushing for tax reform in a speech in Springfield, Missouri on Wednesday, August 30.

Last week (August 21-25)

President's push for tax reform to begin next week: President Trump is set to begin pushing for tax reform in a speech in Springfield, Missouri on Wednesday, August 30. Treasury Secretary Steven Mnuchin said during the August 25 White House briefing that he hopes and thinks tax reform can get done by the end of the year, and that it is important that both the House and Senate tax-writing committees have the ability to debate the issue. "I can assure you that the President's #1 objective is now to get tax reform done. He is going to go on the road. We're starting with his first trip next week," he said. "And the President is 100% supportive of us passing legislation this year." Asked later in the briefing whether the President will be announcing new details in his speech next week, White House Press Secretary Sarah Huckabee Sanders said: "If he is, I certainly wouldn't announce that today. I will let the President do that while he is in Missouri next week. I know he is looking forward to really focusing on tax relief on middle-class Americans. As we move into the fall, that is going to be a very big priority for this Administration and something that I think that everyone can expect to hear a lot more about over the coming weeks."

During an event with Senate Majority Leader Mitch McConnell (R-KY) in Louisville, KY, August 21, Secretary Mnuchin said the Administration will end the preferential tax treatment of carried interest for hedge funds but may preserve a lower rate for other firms. "What we are focused on is there are many other types of funds that do create jobs and we want to make sure we don't discourage investment," he said. Mnuchin made similar comments in March, noting carried interest was a Trump campaign issue and that the impact of changes for businesses other than hedge funds would be studied carefully. "On private equity everything is on the table," said Tony Sayegh, a spokesman for the Treasury Department, according to Bloomberg. "I would not say that decision has been made."

Cohn wants Ways & Means bill in a month: National Economic Council Director Gary Cohn hopes the House Ways and Means Committee will draft a tax reform bill over the next three to four weeks, according to an August 25 Financial Times report that also said Cohn indicated the White House does not have a fixed or detailed plan for tax reform and is expecting tax-writing committees to work out the details. Cohn repeated previous comments that the July 27 joint statement on tax reform by the "Big Six" group of Administration and congressional Republican negotiators is the skeleton of an agreement, and said, "Now it is Chairman Brady's time to get the [House] Ways and Means Committee together to put flesh and bone on it, and they will do it next week when the House comes back into session." His comments are consistent with reports suggesting the White House is not planning to release its own detailed tax proposal in September, and that Republican congressional leaders do not expect such a release. The developments contradict an August 10 report regarding White House plans to release a three- to five-page framework document in September. In the interview, Cohn said President Trump will begin strongly advocating the issue: "Starting next week, the president's agenda and calendar is going to revolve around tax reform." An August 25 Axios report cited an Administration official as saying of a tax reform plan, "We need the Ways and Means Committee to own it." Cohn also mentioned the desire to move to a territorial tax system and to impose a one-time tax on the foreign earnings of US companies to encourage them to bring the money back.

Taking tax reform on the road: House Speaker Paul Ryan (R-WI) and Ways and Means Chairman Kevin Brady (R-TX) — part of the Big Six group with Cohn, Mnuchin, McConnell, and Senate Finance Committee Chairman Orrin Hatch (R-UT) — also took the case for tax reform on the road this week, with Ryan speaking at Intel on August 23 and Boeing on August 24, and Brady speaking at UPS August 22 and at AT&T August 23. Ryan August 23 continued to cite the Canadian corporate tax rate of 15% in describing the competitive challenges US companies face, and expressed hope that tax reform can deliver 3% GDP growth. "If we can get our economy growing at 3 plus percent, that means workers have more take-home pay. That means we have higher standard of living. That means we are creating more jobs," he said. "That means there's more confidence in our economy, so that board rooms and businesses leaders are actually saying more expansion, build more, do more." At Boeing on August 24, Ryan called for eliminating the disincentives for companies to manufacture goods in the United States, and for reducing tax rates "so we're at least level with our peers." Brady said August 22: "I think the American public is hungry and starved for a change in the tax code … We believe there's an urgency to do this this year, so we're working closely now — even though we're not in Washington — we're working closely to be ready to bring this forward in the fall when we return, all with the goal of getting this to the President's desk this year."

In a CNBC interview following his speech August 24, Ryan advocated for permanent tax reform. "We really do believe it's got to be permanent. That's something that the Ways and Means Committee, the Finance Committee, is passionate about; I, as well, am passionate about it," he said. "Permanence works, permanence is necessary, and permanence is absolutely doable." Like Cohn, Ryan also said negotiators want to preserve preferences for charitable contributions, homeownership, and retirement savings.

Speculation on details: While appearances by lawmakers and officials yielded little new information about the details of an eventual tax reform plan, there has been plenty of other speculation. An August 21 Politico report painted a fairly optimistic picture of negotiations between the Big Six, citing unnamed sources as suggesting there is consensus about some of the ways to pay for individual and business tax reform. The report said revenue options include capping the mortgage interest deduction, eliminating the deductibility of state and local taxes, eliminating the deductibility of net interest expense, and phasing out the proposal for full expensing, and that, "One idea quietly being discussed would be taxing the money that workers place into their 401(k) savings plans up front." Politico also said the statutory corporate tax rate under tax reform would likely be between 22% and 25%, depending on the degree to which current provisions are eliminated or limited. The New York Post August 24 reported a White House official as saying that the Administration is willing to compromise on the proposal to eliminate the deductibility of state and local taxes, perhaps by adopting a proposal by Rep. Tom Reed (R-NY) to convert the deduction to a credit.

Trump taking on Senate: Senator McConnell and President Trump August 23 released separate statements suggesting unity on their shared agenda after trading criticisms the week of August 7 — McConnell cited Trump's political inexperience in saying there were "excessive expectations" regarding Affordable Care Act repeal, and the President said McConnell should have delivered on repeal after 7 years of promises — and on the heels of an August 22 New York Times report on icy relations and eroding confidence between the two. McConnell said he and the President "are committed to advancing our shared agenda together," and that claims to the contrary are misinformed. "President Donald J. Trump and Senator Mitch McConnell remain united on many shared priorities, including middle class tax relief, strengthening the military, constructing a southern border wall, and other important issues," the White House press secretary said in a statement. "They will hold previously scheduled meetings following the August recess to discuss these critical items with members of the congressional leadership and the President's Cabinet. White House and leadership staff are coordinating regarding the details of those meetings." The controversy didn't end there, however, as President Trump tweeted August 24: "The only problem I have with Mitch McConnell is that, after hearing Repeal & Replace for 7 years, he failed! That should NEVER have happened!" Trump has also leveled criticism at other GOP senators.

Government funding, debt limit: Tax reform will be competing for attention in Congress with must-do items that include funding the government beyond September 30 and addressing the debt limit. In addition, if tax reform is to be done under the budget reconciliation process, the House and Senate must approve a budget resolution that includes reconciliation instructions.

President Trump suggested August 22 that he is willing to shut down the government if lawmakers do not agree to provide funding for a wall along the border with Mexico, which followed a May tweet about the prospect of a September shutdown. "If we have to close down our government, we're building that wall," Trump said in Phoenix. Other Republican lawmakers said they wanted to avoid a shutdown, including Speaker Ryan, who has suggested that a continuing resolution (CR) will likely be necessary to fund the government past September 30. "The fact is though, given the time of year it is and the rest of the appropriations we have to do, we're going to need more time to complete our appropriations process, particularly in the Senate," Ryan said August 23. Some expect a CR would last into December and the border wall controversy could be postponed to that next round of negotiations. Ryan, McConnell, and Mnuchin have all expressed certainty about addressing the debt limit, and President Trump expressed frustration that it had not been done yet in a pair of August 24 tweets: "I requested that Mitch M & Paul R tie the Debt Ceiling legislation into the popular V.A. Bill (which just passed) for easy approval. They … didn't do it so now we have a big deal with Dems holding them up (as usual) on Debt Ceiling approval. Could have been so easy-now a mess!" Ryan said August 24 that Congress will pass legislation to address the debt limit but that, "There are many different options in front of us on how to achieve that."

Quote of the Week

"We have a tax system written in 1986 for the 20th century and we are well into the 21st century and the rest of the world is passing us by. We have such an antiquated, anti-competitive tax system that just dropping rates without fixing the actual system would not be nearly as growth-producing as a permanent reform, which also cuts taxes and lowers rates for workers and families and businesses." — Speaker Paul Ryan (R-WI), August 24

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