Democrats Making Pitch to Have a Say in Tax Debate

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By Aaron E. Lorenzo and Kaustuv Basu

Congressional Democrats want a seat at the tax reform table.

And they see an opportunity in Senate Republican hesitation over the House GOP tax revamp plan that includes a proposal to tax imports but provide a rebate for exports. Democrats are weighing in against border adjustments and laying down markers on how to make themselves heard as the tax debate moves forward.

Senate Finance Committee ranking member Ron Wyden (D-Ore.), for one, is urging bipartisan compromise.

That is “the prerequisite to doing it right,” he said at an Urban-Brookings Tax Policy Center event on March 3.

But signs that President Donald Trump and congressional Republicans want to reduce taxes on top earners while hurting middle- and lower-income households are problematic to say the least, Wyden said. He criticized Trump for reneging on campaign promises to end the preferred tax treatment of carried interest and calling for an 82 percent tax credit to spur new infrastructure investment.

Republican plans would worsen what Wyden frequently refers to as “a tale of two tax codes,” in which well-heeled taxpayers choose to pay the taxes they want in contrast to the working class.

Wyden is no fan of the House GOP’s border adjustment proposal. He has voiced concern that the plan would raise the cost of groceries and other common consumer goods, as have a number of Senate Republicans.

Even Senate Finance Committee Chairman Orrin G. Hatch (R-Utah) has expressed reservation about border adjustments. But Wyden hasn’t met with Hatch on tax reform, according to Wyden’s spokeswoman, Rachel McCleery.

Nevertheless, Wyden said wants to find common ground across the aisle.

“It’s not about taking each other’s bad ideas,” Wyden said. “It’s about taking each other’s good ideas.”

Reconciliation

Other Democrats think they might have a bigger say in a tax reform bill because of the narrow Republican majority in the Senate, even under the fast-track budget process called reconciliation.

“It might just be as easy or just as difficult to write a 51-vote bill as it might be to write a 60-vote bill,” said Aruna Kalyanam, a tax counsel and staff director for House Ways and Means Committee Democrats.

Republicans currently have 52 members in the Senate. A reconciliation bill requires a simple majority of 51 votes for passage, while other bills require 60 votes to bypass procedural rules.

“Given how narrow your margins are, you could write a proposal where it might be easier to pick up a Democrat than it will to not lose three Republicans,” Kalyanam said March 3 at the Federal Bar Association Tax Law Conference.

But bipartisanship would offer more durability than reconciliation, with the Affordable Care Act serving as an example of something to avoid, some lawmakers have warned. Businesses would like certainty rather than reconciliation legislation that potentially expires after 10 years.

Ways and Means Committee Chairman Kevin Brady (R-Texas) has said he wants Democratic input. But Democrats on his panel have said they remain excluded. Rep. Joseph Crowley (D-N.Y.) told Bloomberg BNA earlier in the week that Brady had not approached him to talk about the blueprint. “Nothing I’m familiar with or aware of,” he said, when asked about outreach from House Republicans.

Wyden, who warned against reconciliation, enjoyed reminding his audience of several Senate Republicans who have publicly aired concerns with Brady’s border adjustment plan.

“It usually promises the movie is not going to end well,” Wyden said.

Currencies

There also remain questions about Trump’s appetite for border adjustments, which supporters believe would strengthen the dollar.

The theory behind border adjustability is that “currencies would readjust and therefore it would be a zero-sum game,” Commerce Secretary Wilbur Ross said March 3 during a CNBC interview. “I’m a little skeptical about the theory that there’s somehow a totally free lunch and that the markets will exactly absorb everything. But we do need to do something to fill that hole.”

The border adjustment plan would raise about $1.2 trillion over a decade, according to a Tax Policy Center estimate, to help offset the cost of lower tax rates Brady and other House Republicans have proposed.

Without it, the revenue gap would widen. Brady has said businesses and individuals would end up with higher rates than proposed in the House GOP plan.

It appears premature to call the idea dead in the Senate, according to Doug Holtz-Eakin, president of the American Action Forum and a vocal backer of border adjustments himself.

Trump’s support would ensure border adjustments’ viability by pressuring hesitant Senate Republicans and opponents, the former Congressional Budget Office director said at the Tax Policy Center event. But absent support from Trump, it could get lost in the shuffle as attention shifts to other policy and confirmation battles in Congress, Holtz-Eakin said.

“You can lose a lot of money betting on something getting done in the Senate,” he said.

To contact the reporter on this story: Aaron E. Lorenzo in Washington at aaron@bna.com and Kaustuv Basu in Washington at kbasu@bna.com

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

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