11 September 2017 EY Center for Tax Policy: This Week in Tax Reform for September 8 Finance Committee: The Senate Finance Committee has scheduled a hearing on "Individual Tax Reform" for Thursday, September 14 (at 10 a.m.). "This hearing will give members an opportunity to dive deeper into the policies that are on the books today and examine how we can best update the code to achieve our goal," Chairman Hatch said. Scheduled witnesses are: — Lily Batchelder, Professor Of Law And Public Policy At New York University School Of Law And Affiliated Professor At New York University Wagner School Of Public Service, University of New York Progress on negotiations: Congressional Republican leaders and Administration officials met again September 7 on tax reform, and some involved reported progress in making decisions on key aspects of a plan and the potential for release of more details by the end of September or early October. "There were some very specific items that had been outstanding that were put on the table today and consensus was reached," a White House official said, according to Bloomberg BNA. Politico reported Treasury Secretary Steven Mnuchin as saying the group is "very close" to finalizing an agreement. Speaker Paul Ryan (R-WI) called the meeting productive, said tax-writing committees are working on details, and, "This is our number one priority this fall." President Trump delivered a second speech focused on the issue September 6 and said, "We're going to get into great detail over the next two weeks, but we're working on it with Congress now, and coming up with very exacting numbers." Discussion of corporate rate: The President, who met with the "Big Six" group of negotiators September 5, again said "ideally" the business tax rate would be reduced to 15%. In a New York Times interview September 8, Ryan said the "numbers are hard to make that work" and that the goal is to be at or below the average tax rate for industrialized countries of 22.5%, consistent with National Economic Council Director Gary Cohn's comment last month that the corporate tax rate "cannot be substantially higher than the OECD average tax rate" of 23%. There is already resistance to a rate much higher than that. Rep. Mark Meadows (R-NC), chairman of the Freedom Caucus group of House conservatives, said on MSNBC'S "Morning Joe" September 8 after meetings at the White House and with Speaker Ryan a day earlier: "In terms of lines in the sand, [we've] got to be very, very aggressive in our corporate rates. So if we're looking at a corporate rate of 25%, that's a non-starter for most of us." He previously called for a 16% rate. Republicans anxious to start on tax reform: Republicans are eager to get the legislative process started, including the President himself, who tweeted September 8, "Republicans must start the Tax Reform/Tax Cut legislation ASAP. Don't wait until the end of September. Needed now more than ever. Hurry!" The Freedom Caucus has long pushed for details on tax reform and Meadows said at a Bloomberg event September 7, "It's time to make some decisions and get on with it." Republicans also face pressure to agree to an FY 2018 budget resolution to provide reconciliation instructions allowing a tax bill to pass with the votes of 50 senators (with the Vice President breaking the tie). Budget Committee Chairman Diane Black (R-TN) said on MSNBC September 6 that the House resolution could get a floor vote as soon as next week, and the Wall Street Journal September 8 reported Senate Budget Committee Chairman Mike Enzi (R-WY) as saying his panel could mark up its resolution by the end of September. As was the case in the House, talk of Senate consideration of a budget resolution was met with calls for details about the tax reform plan members will be facilitating through reconciliation. Senator Ron Johnson (R-WI) told reporters that Budget Committee consideration could be held up without more details: "I don't see a real need to rush a budget resolution, get it passed, without that information." Senator Mike Crapo (R-ID), who is a member of both the Budget and Finance committees, said of a tax bill, "I think we need to get [a] work product on the table soon." Trump wants to reverse offshoring trend: During his speech in Bismarck, North Dakota, President Trump again listed four principles for the effort that essentially call for simplicity, lower taxes for the middle class, tax relief for businesses of all sizes, and facilitating repatriation of the foreign earnings of US companies, which were also the focus of his weekly radio address. Trump described the current system as an "offshoring model" under which high tax rates punish companies for doing business in the United States and encourage them to move their operations elsewhere, and said that he wants a new "American model" that reduces the burdens on businesses as long as they do business in the United States. "There has to be a price to pay when that happens; when they let our people go and that happens, and they think they can sell the product right back into the USA," the President said. Similar messages are coming from Congress, as Speaker Ryan September 8 said tax changes are being sought in part because "US companies are quickly becoming foreign companies for tax reasons." Trump also called for switching from a worldwide to a territorial system, and promised tax relief for pass-through businesses. Debt limit deal: President Trump made a deal with Senate Democratic Leader Chuck Schumer (D-NY) and House Democratic Leader Nancy Pelosi (D-CA) that resulted in Congress passing an extension of government funding and the federal debt limit both through December 8, along with $15.25 billion in hurricane relief funding. Republican leaders had argued for a longer-term solution to the debt limit, possibly to last beyond the 2018 midterm elections, to spare members multiple votes on the issue that conservatives continue to want to use to compel spending reforms. The White House said the deal with Democrats, over Republican objections, was meant to clear items requiring action by the end of September to allow a focus on tax reform. Speaker Ryan said there was also a desire to project unity among lawmakers amid the recovery from one hurricane and the threat of another. The bill creates a new slate of deadlines in December, when Republicans hope to be wrapping up tax legislation, though December 8 may not be a hard and fast deadline for the debt limit; Treasury is expected to be able to use "extraordinary measures" to meet obligations beyond then. House Ways and Means Committee Chairman Kevin Brady (R-TX) said members should not "overload the end of the year" with overlapping priorities in light of tax reform. Republicans griped over the debt deal, in part because it will give Democratic leaders leverage over issues under consideration between now and the end of the year. "Chuck Schumer … just made himself the most powerful man in America for the month of December," Senator Ben Sasse (R-NE) said. The President also expressed openness to deals on immigration policy and eliminating the requirement that Congress raise the debt limit, and his sudden willingness to partner with Democrats raised questions about how a number of issues will play out. Prospects for bipartisanship on tax reform: President Trump had already been calling for bipartisan support on tax legislation, and flew Senator Heidi Heitkamp (D-ND) to his speech on Air Force One in a gesture seen as part of a softer approach from the previous week's event during which he called on voters to oust Senator Claire McCaskill (D-MO) if she wouldn't support a tax plan. Both are senators from states Trump won in 2016 and are up for re-election in 2018, and the President still made a general statement about members who vote against tax cuts or tax reforms, saying "you have got to vote against them and get them out of office." The September 8 Wall Street Journal cited second-ranking Republican Senator John Cornyn (R-TX), a member of the Finance Committee, as saying he wanted to get Democratic support for tax reform and, regarding the prospects of doing so, "We're going to try. We're going to start in the Finance Committee, try to do a bipartisan markup, we'll also pass a budget resolution to get reconciliation instructions as a fallback, but we're going to try." That seemed to be a departure from Senate Majority Leader Mitch McConnell's (R-KY) comment last month that reconciliation would be necessary given a letter from Senate Democrats demanding that tax reform neither burden the middle class, benefit the wealthiest, nor add to the deficit. Heitkamp was one of three Democratic senators who didn't sign the letter, in addition to Joe Manchin (D-WV) and Joe Donnelly (D-IN). Finance Committee Chairman Orrin Hatch (R-UT) is among the "Big Six" group of Administration and Hill negotiators, in addition to McConnell, Mnuchin, Cohn, Ryan, and Brady. Ways and Means Ranking Member Richard Neal (D-MA), suggested in the Wall Street Journal that reform gets harder as specifics come out, saying, "It's one thing to talk about tax reform. It's quite another to do it … If you keep the conversation general, everybody's on board. Specificity, people find out what they're not going to get." Reichert not running in 2018: Ways and Means member Dave Reichert (R-WA) September 6 announced he would not run for re-election in 2018. Congress was already a second career for Reichert, whose Website bio notes that, as a law enforcement officer, he was "head of the Green River Task Force solving the largest serial murder case in U.S. history." Drop in US-headquartered companies: A September 6 Wall Street Journal op-ed by Clinton administration economist Laura Tyson said "between 2000 and 2016, the number of U.S.-headquartered companies in the Forbes 500 declined more than 25%," and that an outdated tax code with a high corporate rate and worldwide system of taxing foreign earnings is partly to blame. "I'm asking all Americans — Republican, Democrat, and independent — to join with me, with each other, to demand tax cuts and tax reform that will put America first. We're going to put America first. It's time. We no longer have to accept a tax code that lets special interests win at the expense of the middle class. We no longer have to accept a rigged system — you know all about rigged systems; we talked about that plenty of times in the campaign. You think anything is so different? But we're going to make it different. We're going to get that straightened out too — that rewards companies for shipping jobs overseas, and punishes them for investing in America. They actually get punished under the tax code for investing in our country. It's going to all change." — President Trump, September 6
Document ID: 2017-1440 | |||||
