Brady Begins Tax Outreach to Democrats

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By Kaustuv Basu, Anna Edgerton and Laura Davison

House Ways and Means Committee Chairman Kevin Brady (R-Texas) will get an earful when he meets with committee Democrats to discuss tax reform, including questions on a timetable, an open process and whether Republicans truly want a bipartisan bill.

For months, Brady has talked about getting Democrats on board to support the GOP tax reform plan. He is to meet with committee Democrats April 5, after having had a lunchtime meeting April 4 with the New Dems—the New Democratic Coalition, a group of about 60 moderate Democrats who call themselves “pro-growth.”

The outreach from Brady comes as House Republican leaders, under pressure from their own members, try to avoid mistakes that prevented them from having enough votes to pass a replacement for the Affordable Care Act. Moderate Republicans in the House such as Charlie Dent (R-Pa.) have been saying that it might be easier to get some Democrats on board for major legislative efforts than to enlist the ultra-conservative House Freedom Caucus, a group that effectively stalled the health care bill.

Questions remain on what tax reform ideas might be palatable to the Trump administration and the areas of common ground between the president’s plan and the GOP blueprint. The Washington Post reported April 4 that a carbon tax and a value-added tax were among proposals being considered by the White House. A former senior policy adviser to Trump told Bloomberg BNA that the administration was looking at a change similar to a VAT.

The House’s border adjustment plan wasn’t in compliance with World Trade Organization rules, so to make it compliant, the administration considered removing the deduction on the cost of labor in the GOP’s tax blueprint by “abolishing the payroll tax for all intents and purposes,” the source said. Under the plan, the 1.45 percent Medicare tax would have been retained, but the 6.2 percent payroll tax on both employees and employers would have been eliminated, the source said.

The administration said later in the day that neither the VAT nor the carbon tax ideas was under consideration.

Conciliation on Reconciliation?

One of the toughest questions that Brady will likely face from Democrats is his plan to use a fast-track budget process called reconciliation to pass the bill more easily in the Senate. Ways and Means ranking member Richard E. Neal (D-Mass.) told Bloomberg BNA that the use of reconciliation “leaves a bad feeling.”

“We are very interested in the middle class, and what they intend to do with tax reform, what they intend to do with repatriation, what they intend to do with infrastructure,” said Neal, who has expressed frustration in recent weeks that Democrats haven’t been given an opportunity to participate in tax overhaul discussions.

Brady has been taking heat from retailers, industry groups and some Republican senators over a controversial but key provision in the GOP plan called border adjustability, which would tax imports at 20 percent. The tax could raise as much as $1 trillion over 10 years. The meeting with committee Democrats would be a chance to “feel out” whether the border adjustment tax is still the cornerstone of the tax plan, Neal said.

Brady said he would look for guidance from Democrats about how to include them in the process.

But he might not be ready to abandon reconciliation yet. When asked if he would give it up to try getting Democrats on board, Brady said, “in my view they are not mutually exclusive. Democratic ideas and support are welcome in the reconciliation process as well as outside of this.”

“I am encouraging them as I have since last summer to bring their ideas to the table,” Brady said.

House Democratic Whip Steny H. Hoyer (D-Md.) said a bipartisan agreement can’t be reached by “simply appealing to your base.” “And that means, you know, both sides have to give on some things they care about and come to an agreement,” Hoyer told reporters.

Aligning Stars

Ways and Means member Ron Kind (D-Wis.) said he hoped for more regular order and some hearings on a tax bill.

“Obviously we anticipate Secretary Mnuchin playing a very big role, and Treasury is going to have to have their tax team at some point that will be working hand in glove with Congress,’' said Kind, who also is a member of the New Dems. “That’s the only way this will work ultimately. You need to get the three stars aligned between the House, Senate and Treasury,’' which was what got President Ronald Reagan’s 1986 tax reform over the finish line.

Kind said looking at the calendar for the next few months, and where the tax-writing process currently is, he is “very skeptical” that any kind of overhaul will be completed this year. He said it would be ambitious to get a bill out of the Ways and Means Committee by May.

Rep. Jim Himes (D-Conn.), chairman of the New Dems, said one of his members told Brady that “it is easier to be there for the landing when you are there for the takeoff. The chairman totally bought into that.”

Tax policy is an area where the two parties can find common ground, Himes told Bloomberg BNA. “The conversation is not to the point right now, where we say ‘Will we support this tax plan?’” Himes said. “On the contrary, the chairman gave us a commitment to work with us.”

With assistance from Allyson Versprille, Shannon Pettypiece and Jordyn Holman.

To contact the reporters on this story: Kaustuv Basu at kbasu@bna.com, Anna Edgerton at aedgerton@bloomberg.net and Laura Davison at ldavison@bna.com, in Washington

To contact the editor responsible for this story: Meg Shreve at mshreve@bna.com

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