Trump Plan Said Unlikely to Back Ryan’s Border-Adjusted Tax

Updated on
  • President says he’s going to release tax plan Wednesday
  • Key Senate panel said not to have seen final details yet

Trump Says Regulatory Reduction First Step to Tax Reform

President Donald Trump’s tax plan next week likely won’t include a border-adjusted tax that House Speaker Paul Ryan has proposed, a senior administration official said.

The White House is still debating the idea, according to the official. Trump will release a tax plan for individuals and businesses next week that may not include every component that will go into final legislation, according to a different senior White House official.

The plan -- which Trump said will be released Wednesday -- will contain the administration’s priorities, said one of the officials. Both asked not to be identified because discussions of the plan are private.

Ryan has proposed replacing the 35 percent corporate income tax with the 20 percent border-adjusted tax on U.S. companies’ domestic sales and imports. Exports would be exempt under the plan, which is opposed by retailers, carmakers and oil refiners that rely on imported goods.

White House Budget Director Mick Mulvaney, in an interview with Bloomberg Television, provided few details of Trump’s plan, saying it’s aimed at providing 3 percent annual growth. “We’re trying to backfill from there,” he said -- by incorporating tax policy that would provide for that ambitious growth target. A Bloomberg survey of 73 economists in April showed the median forecast for U.S. economic growth in 2017 is 2.2 percent.

Mulvaney also raised the possibility that the plan might not be revenue-neutral -- meaning that it might provide for only temporary tax cuts that would have to expire after 10 years.

“Deficits are not driving the discussion,” he said.

The Associated Press reported Friday that Trump said the plan will result in “massive” tax cuts for both individuals and businesses. The cuts will be “bigger I believe than any tax cut ever,” he said, according to the AP report.

Later, while signing an executive order related to a broad review of tax regulations from 2016 and 2017, Trump said he wants Treasury Secretary Steven Mnuchin “to begin the process of tax simplification.”

‘Phenomenal’ Plan

Trump, who campaigned on large tax cuts for businesses and individuals, had said on Feb. 9 that he would be releasing a “phenomenal” tax plan to overhaul the tax code within two to three weeks. The word that he’ll release a plan next week comes as he approaches the end of his first 100 days in office on April 29.

Reaction in Congress, which returns from a two-week recess next week, was muted. Senate Majority Leader Mitch McConnell’s office referred questions to the White House.

But the Senate Finance Committee has yet to see final details of a White House plan, a congressional aide said Thursday. And tax-related challenges presented by the 2010 Affordable Care Act remain in place amid Republicans’ disagreement on how to dismantle the health-care law they’ve criticized for years. Mulvaney repeated Friday that Trump would like to see health-care legislation tackled first -- because it could help pave the way for larger tax cuts overall.

In the House, where any tax legislation would have to begin, “our intention has always been and continues to be to coalesce around a unified GOP plan and those conversations continue,” said AshLee Strong, a spokeswoman for House Speaker Paul Ryan.

Border-Adjusted Tax

Mulvaney said only that Trump’s position on the border-adjusted tax is still under discussion. He said administration officials are grappling on how well that portion of Ryan’s plan would contribute to economic growth. The border-tax concept is estimated to raise more than $1 trillion in revenue over 10 years; without that, it may be difficult for any plan to achieve revenue-neutrality.

Revenue neutrality is important, because the GOP controls just 52 of the Senate’s 100 seats., and normal Senate rules impose a 60-vote threshold for legislation to escape potential filibusters from opponents. Senate Republicans could use a process known as budget reconciliation, which would allow for passing a tax bill with a simple majority. But under that process, any legislation that added to the deficit would have to be set to expire after 10 years.

Steve Rosenthal, a senior fellow at the Urban-Brookings Tax Policy Center and a former legislation counsel at Congress’s Joint Committee on Taxation, said Trump’s announcement “almost certainly” signaled that he was abandoning permanent tax reform in favor of temporary tax cuts that would expire in 10 years.

“We will end up with ‘tax cuts for everyone,”’ Rosenthal said. “You just use fantasy scoring. It’s much easier than tax reform and revenue neutrality.”

— With assistance by Steven T. Dennis, Lynnley Browning, Anna Edney, Sahil Kapur, and Anna Edgerton

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