Trump’s Tax Overhaul Keeps Congress Waiting as Questions Pile Up

  • Process seen as ‘Celebrity Apprentice, tax-reform style’
  • Conservatives won’t weigh in on border tax ahead of Trump plan

Sen. Thune Says Republicans Are Committed to Tax Reform

Eight weeks ago President Donald Trump said he would be releasing a “phenomenal” tax plan within two or three weeks. But there’s no sign of a plan yet, and mixed signals from the White House are imperiling Republican promises of speedy action.

The administration hasn’t yet publicly answered the most basic questions about what a possible tax reform plan would look like. Will it pay for itself with offsets or add to the deficit? Trump hasn’t said.

White House Press Secretary Sean Spicer has emphasized that job creation and economic growth are priorities -- an indication that controlling costs may not be Trump’s primary concern. That could render any tax cuts temporary, meaning they’d expire after 10 years under Senate budget rules.

If the plan must pay for itself, where will that money come from? That too is unclear.

There’s also broad disagreement among Republicans and within the White House over whether to move forward with a border-adjusted tax on companies’ domestic sales and imported goods. House Speaker Paul Ryan strongly favors such a tax because it would encourage domestic manufacturing, and help pay for lower rates for companies and individuals. It has the backing of Trump’s senior adviser Steve Bannon, but the president himself hasn’t weighed in, and other senior advisers, including Treasury Secretary Steven Mnuchin and National Economic Council head Gary Cohn, are said to oppose it.

Carbon Tax

Amid that disagreement, the administration has begun reaching out to Democrats to seek support -- a move that might only aggravate Republicans’ discontent.

Trump was briefed by his top economic advisers on a variety of potential measures, including a carbon tax.

Photographer: Luke Sharrett/Bloomberg

Last week, Trump was briefed by his top economic advisers on a variety of other potential tax measures, including a carbon tax and a valued-added tax, which are highly unpopular among Republicans. The White House issued a statement this week saying those taxes weren’t really under consideration -- an indication of just how early in the process the administration is.

“I think what we’re trying to sort out is whether the President has a deal in mind or if he wants to cut any deal and declare victory,” said Doug Heye, a former aide for House Republican leadership and the Republican National Committee. “Tax reform is an enormous challenge on its own. More consistent direction from the White House would certainly help Congressional efforts.”

White House spokeswomen didn’t respond to emailed requests for comment.

No Deadline

Initial market euphoria that Trump’s election would lead to a once-in-a-generation opportunity to completely rewrite the tax code has begun to give way to more sober assessments, especially following GOP divisions that thwarted the Obamacare repeal effort. Kevin Brady, head of the tax-writing House Ways and Means Committee, said in November that Congress would be ready to act on tax legislation in the first 100 days of the new administration.

Now, Brady is saying that while his committee still intends to introduce legislation in the spring, there isn’t a specific deadline for action.

“Tax reform is incredibly difficult. It is not easy,” Brady told reporters earlier this week. “It is for lawmakers and Congress and the White House, the challenge of a lifetime.”

‘Celebrity Apprentice’

“I think what they’re going to do is play ‘Celebrity Apprentice,’ tax-reform style,” said Harold Hancock, who served as tax counsel for six years on the Ways and Means Committee before joining law firm McGuireWoods LLP last month. “They’ll see what the House does, see what the Senate does,” then make a decision about what to do, he said.

Spicer has tried to manage tax timing expectations during recent press conferences. “We’re at the first stages of the process” and “beginning to engage with Congress,” he said on March 30, adding that the timeline could be “several months.”

One thing complicating the administration’s tax overhaul efforts is that it’s unclear who’s taking the lead.

“I don’t think there’s clarity yet on who’s running the train,” said Stephen Shay, a senior lecturer at Harvard Law School, who was a senior tax official at Treasury during the last big tax overhaul under President Ronald Reagan. Referring to the current administration, Shay said “there’s nobody inside who has the knowledge base to put together tax reform.”

House Conservatives

GOP at Odds About How Bold to Be on Tax Plans

Trump’s delay on a tax proposal is hurting Ryan’s ability to get support for his plan among his party members. Representative Mark Meadows, who chairs the House Freedom Caucus, said his bloc of three-dozen ultraconservatives is waiting to hear from Trump on a tax plan before endorsing anything. Meadows’s group most recently scuttled Trump and Ryan’s efforts to shepherd an Obamacare replacement bill through the House, arguing that it didn’t hew to conservative principles.

“I think a lot of people are waiting to see which way the president wants to go,” the North Carolina Republican said in an interview Tuesday. “I think on the border-adjustment tax issue, they’re just waiting to see which way he wants to go and how compelling of a case he wants to make on that.”

If Trump decides to impose tariffs -- he has called for tariffs of as much as 35 percent on products made by companies that move their production from the U.S. to other countries -- instead of backing the border-adjusted tax, he could encounter resistance from the House conservatives.

“I’m typically not a tariff fan” because they generally lead to retaliatory tariffs and end up slowing growth, Meadows said.

Bipartisan Efforts

The White House is also said to be in the early stages of gauging Democratic support for a tax overhaul in case it can’t get House Republicans on board. Cohn met on March 21 with Representative Richard Neal, the top Democrat on the Ways and Means panel, to discuss tax measures, according to a person familiar with the meeting who asked not to be named because the details are private. Cohn indicated that the White House wants to write a tax plan that Democrats can support, but didn’t offer specifics other than to suggest that Trump wants no absolute tax cut for upper earners, as Mnuchin has indicated, the person said.

If the White House does pursue a tax plan with bipartisan support, it would mean a radically different approach than the Ryan-backed blueprint, which includes tax cuts for the highest earners -- a non-starter for Democrats.

By crafting their tax blueprint last year, “House Republicans came to consensus on tax policy issues, which gives them a head start on everybody else,” said Michael Steel, a managing director at lobbying firm Hamilton Place Strategies and a former spokesman for Republicans on the Ways and Means committee.

But even with that head start, Ryan reiterated the difficulty of coordinating a tax overhaul during an event in Washington on Wednesday.

“The House has a plan, but the Senate doesn’t quite have one yet,” he said. “They’re working on one. The White House hasn’t nailed it down, so even the three entities aren’t on the same page yet on tax reform.”

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