GOP Tax Planners to Offer a Glimpse of Their Work This Week

Updated on
  • House’s Brady says statement on closed-door talks coming
  • Details scant as House prepares for five-week recess

Congressional leaders and Trump administration officials who have been meeting in secret to try to reach a united plan to rewrite the U.S. tax code intend to issue a kind of progress report this week -- though it may not provide much detail.

Representative Kevin Brady, the Texas Republican who chairs the House Ways and Means Committee, told reporters Wednesday to expect a “statement” about the work of the six-member group before week’s end. He declined to discuss any specifics.

“So read the statement and we’ll come back together,” Brady said.

Brady’s remarks came after the so-called Big Six adjourned an hour-long meeting Wednesday evening -- a session that may be their last one until September, when the White House and congressional Republicans have indicated they hope to release a unified tax plan and begin work on actual legislation. House members are scheduled to leave Washington for a five-week recess Friday.

The six are White House economic adviser Gary Cohn, Treasury Secretary Steven Mnuchin, Senate Majority Leader Mitch McConnell, Senate Finance Committee Chairman Orrin Hatch, House Speaker Paul Ryan and Brady.

Information about the group’s closed-door discussions has been highly guarded. As word of a potential statement from the group spread around the Capitol on Wednesday, people familiar with the matter sought to tamp down expectations about the level of detail.

The information that will be released has been described as a set of broad guidelines or agreed-upon principles.

‘Harmonizes the Discussion’

“My fear though is that some folks might be a little more giddy” than they should be given that there aren’t likely to be any major tax revelations this week, said Representative David Schweikert, an Arizona Republican.

“The statement is our principles,” said Schweikert, a member of the Ways and Means panel. “I can’t imagine it’s much of a divergence from what everyone already knows, but hopefully it harmonizes the discussion between the Senate and the White House also.”

Representative Mark Meadows, a North Carolina Republican, also said he wasn’t counting on new particulars of planned legislation emerging.

“I doubt that it will have the specificity that will give us a clear understanding of what we are doing,” said Meadows, who is chairman of the House Freedom Caucus. That conservative faction has repeatedly sought more details of the Big Six’s tax discussions.

Cohn, asked Wednesday evening whether the group would share any information on Thursday, said “Maybe. Wait and see.” He said members of the group “could not be getting along better. We’re all on one page.”

Border-Adjusted Tax

So far, the most detailed guidance President Donald Trump has released is a one-page document in late April that steered clear of the tough decisions such as how to recover the lost revenue from deep rate cuts. Asked for more detail, the White House has responded that key decisions will be made privately, by the Big Six.

A key dispute is over the proposed border-adjusted tax, which is expected to raise about $1 trillion in 10-year revenue that House GOP leaders want to use to help offset the cuts. That provision, which would impose a 20 percent tax rate on companies’ domestic sales and imports, has faced staunch opposition from Republican senators. Meadows and other conservative House members have demanded that it be ruled out before they consent to move forward. The White House has also been cool to the idea.

Hatch, Cohn and Mnuchin all declined to answer questions about whether the proposal is still alive in their conversations. Brady has previously said he prefers a tax plan that is permanent and revenue neutral, with the savings from unrelated spending cuts going to reduce the deficit. He said the Big Six and the Ways and Means panel have been considering alternatives to the border-adjusted tax for “some time.”

Schweikert said the committee has yet to find a better solution, however. 

‘Doesn’t Work’

“Most of the alternatives, when you really dig into them, don’t solve the problems,” he said. “So sometimes what happens is you get an idea, and once you finally do the math on it, you find out, eh, it still doesn’t work.”

The Republicans’ decision on the border-adjusted tax could provide a window into the eventual philosophy behind their tax bill. It may determine whether they opt for a straight tax cut, without pay-fors, which would have to be only temporary, or whether they’ll go bolder and aim for a long-term, comprehensive overhaul for the first time since 1986.

The ambitious project of a comprehensive rewrite of the tax code faces innumerable obstacles amid divisions within the GOP. While Republicans broadly want to lower rates for individuals and corporations, they lack agreement on fundamental questions such as whether the cuts should be offset in order to make them permanent. If so, there’s disagreement over how to pay for them -- with new revenue alone, or a mix of revenue and spending cuts.

While the White House and Congress generally agree on individual income-tax rates, there’s disagreement on corporate taxes. Trump has also called for a new corporate rate of 15 percent, lower than Ryan’s proposed 20 percent. The current top rate is 35 percent.

Millionaire Tax

Meanwhile, other proposals are competing for attention and support. White House chief strategist Steve Bannon has privately proposed raising the top individual income tax rate to 44 percent on people who earn more than $5 million a year -- a move that at least one conservative Republican lawmaker has said could help add populist appeal to a broader set of tax changes. The current top individual rate is 39.6 percent.

Bannon’s suggestion would be a “nonstarter” in Congress, said economist Stephen Moore, who advised Trump during the presidential campaign on tax issues. Moore and economist Larry Kudlow, another Trump supporter, have suggested backing off the idea of a comprehensive tax overhaul in favor of shorter-term targets.

The plan, which they call “Three Easy Pieces,” would leave individual tax rates unchanged but double the standard deduction, now $6,300 for singles and $12,600 for married couples filing jointly, to provide a middle-class tax break. It would also slash the corporate tax rate to 15 percent from 35 percent -- though the cut might have to be temporary instead of permanent-- and require companies to bring home, or repatriate, untaxed overseas cash at a 10 percent rate. 

Moore said the virtue of the plan is that "it’s cleaner, easier. There’s not enough days on the calendar to get reform done."

Congress has a packed agenda that could get bogged down with must-pass bills to prevent a government shutdown or debt default until mid-October. The to-do list includes approving a budget resolution, a necessary step to advance tax legislation on a partisan basis while avoiding the 60-vote threshold in the Senate.

— With assistance by Lynnley Browning

(Updates with comments from Schweikert of House Ways and Means Committee; economist Stephen Moore and additional details beginning in eighth paragraph.)
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