Legislative Activity
House Tax-Writers Hold Two-Day Meeting on Tax Reform
Today, Monday, May 1, House Ways and Means Committee Republicans will continue their two-day meeting to reach a consensus on tax reform – a task that comes amidst the release of the Trump Administration’s tax reform principles (discussed further below). As senior House tax-writer Devin Nunes (R-CA) made clear last week, “[w]e have a lot farther to go in terms of coalescing around all the necessary components to have fundamental tax reform.”
At the top of the agenda: the border adjustable tax (BAT), which was not included in the Trump proposal. Facing opposition from a wide array of stakeholders, both House Speaker Paul Ryan (R-WI) and House Ways and Means Committee Chairman Kevin Brady (R-TX) – who remain committed to BAT – have acknowledged that the proposal needs to be refined, with Chairman Brady noting that “a good solution” can be reached through “changes, modifications, and transitional rules.”
Another issue that will need to be ironed out is whether tax reform should be revenue neutral. While the Trump Administration has suggested its tax reform proposal will “pay for itself” through economic growth, the House is planning to include numerous pay-fors to finance its proposal and increase the likelihood for passage in the Senate. Additionally, tax-writers, while pushing for permanency, will need to closely coordinate with the Administration, which has the “goal” of permanency but has at the same time expressed a willingness to accept tax cuts that sunset after 10 years. Temporary tax cuts, however, are unlikely to receive much support in Congress following a report last week from the Joint Committee on Taxation that such cuts would likely add to the deficit.
In terms of next steps, Chairman Brady has suggested that the Committee may not mark-up tax reform legislation before August recess, though he remains committed to tax reform in 2017. Prior to any mark-up, the Committee is expected to hold several hearings on the tax reform “Blueprint”; per Chairman Brady, we should expect “some announcements in a pretty timely manner.”
This Week’s Hearings:
- On Wednesday, May 3, the House Appropriations Subcommittee on Financial Services and General Government has scheduled a hearing titled “IRS Oversight Hearing.”
Executive Branch Activity
Trump Administration Releases Tax Reform Principles
Last Wednesday, April 26, the Trump Administration released its highly-anticipated tax reform principles. Though lacking in detail, the principles provide insight into where President Trump plans to go in the tax reform debate. Highlights include:
- For businesses:
- 15% business tax rate – on both corporations and pass-throughs;
- A territorial tax system;
- A one-time tax on unrepatriated earnings of U.S. companies; and
- The elimination of “special interest” tax breaks;
- For individuals:
- Reducing the seven tax brackets to three tax brackets of 10%, 25% and 35%;
- Doubling the standard deduction;
- Providing tax relief for families with child and dependent care expenses;
- Preservation of the home ownership and charitable gift tax deductions;
- Elimination of targeted tax breaks that “mainly benefit the wealthiest taxpayers”; and
- Repeal of the Alternative Minimum Tax and the Estate Tax
- Repeal of the 3.8% “Obamacare” tax
With their principles now set forth, the Trump Administration will now begin the work of putting meat on the bones and filling in the substantive policy details – including by holding “listening session” with stakeholder throughout the month of May. As Treasury moves forward with its proposal, it will need to do so keeping in mind the House “Blueprint” and the Senate proposal that is presently being put together, as these proposals will all need to be reconciled if tax reform efforts are ultimately to be successful.
