Five Questions With Top House Tax-Writer

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By Kaustuv Basu, Colleen Murphy and Laura Davison

Now that President Donald Trump has outlined his plan to reform the tax system, House Ways and Means Committee Chairman Kevin Brady (R-Texas) must meld the White House’s priorities with the House GOP plan.

There are several areas, including the border adjustment tax and interest deductibility, where the administration and the Ways and Means Committee need to come to consensus.

Democrats are brushing off Trump’s tax proposal as a hastily produced plan that is a windfall for the rich. Sen. Chris Van Hollen (D-Md.), who serves on the Senate Budget Committee, told Bloomberg BNA that the plan would make current tax policy worse and help the “super-wealthy.”

“The president got very worried about his first 100 days,” Senate Minority Leader Charles E. Schumer (D-N.Y.) told reporters. “So he put together this one-page tax plan so he can say he’s doing something in the first 100 days.”

Brady said Trump’s tax plan is a step forward. Bloomberg BNA sat down with Brady on April 27, the day after the rollout of the president’s proposal, to discuss where the plan goes from here.

1. How does the GOP expect to adjust border adjustment?

Brady and House Speaker Paul D. Ryan (R-Wis.) continue to signal that they plan to keep pushing a controversial 20 percent import tax provision in the House GOP blueprint.

They have acknowledged that the provision needs to be reworked to make it work. But when Brady was asked what border adjustability would look like three months from now, he said, “We’re still developing, you know, the refinements on it.” Asked if he would bring the rate down from 20 percent, Brady said, “we’re looking at a number of provisions.”

Brady continues to drum up support for border adjustability. Leaders of several top unions in the country, including the International Association of Sheet Metal, Air, Rail and Transportation Workers and Laborers’ International Union of North America, met with Brady on April 27 to discuss the Republican plan to rewrite the tax code.

Brady said they discussed how tax reform could help workers. Among ideas discussed were full expensing and “ending the Made in America taxes,” a Republican term for the controversial 20 percent import tax provision in their blueprint. Richard L. Trumka, president of the AFL-CIO, has also spoken in favor of the border adjustment tax.

2. Are you concerned about the potential the Trump plan has to add to the deficit?

The Trump tax plan could add anything from $3 trillion to $7 trillion to the deficit over a decade, according to the Committee for a Responsible Federal Budget. Based on assumptions from prior proposals, the best “rough estimate” is that the plan would cost $5.5 trillion, the group said.

“Without adequate offsets, tax reform could drive up the federal debt, harming economic growth instead of boosting it,” CRFB said.

Brady conceded that the issue is “one of the key decisions” for Congress and the White House.

Brady said he would like to balance the budget “ultimately” and that will require “thoughtful trade-offs to get to the lowest rate possible.”

A permanent overhaul would bring more certainty and lead to twice the economic growth, he said.

Brady said he wants to lower rates and jettison special tax breaks, but he acknowledged that there is a lot of work to be done.

Some of Brady’s Republican colleagues are keen to get to a deficit-neutral tax plan. “We will see, we got to get dynamic scoring. But I’m not interested in building up bigger deficits,” said Rep. Vern Buchanan (R-Fla.) April 26. “We got to find a fine line between lowering rates and looking at the numbers.”

3. If proposed tax changes would add to the deficit, lawmakers may need to look instead at 10-year tax cuts. Do you think this is a possibility?

Brady has repeatedly said he is aiming for lasting tax reform, an answer that didn’t change despite the lack of a pay-for in the Trump plan. House Republicans and the White House can reach agreement on a plan that can be permanent, he told Bloomberg BNA.

“I think the White House is eager to have that discussion as well. I don’t sense they’ve staked out a position one way or another. They’re, like us, just eager to get to the table and begin exchanging ideas,” Brady said.

Permanent tax reform brings certainty that businesses need to make decisions and can bring the economic growth Republicans seek. The issue is a hot topic among members of Ways and Means, lawmakers have said.

4. The Trump administration plans to release a more detailed tax plan in June. What is your timeline going forward?

Brady has struck a balance in recent weeks between saying he hopes to move a plan through his committee this spring, and saying he is more concerned about getting the bill done right rather than getting the bill done quickly. Brady wants to pass tax reform this year, but the month doesn’t matter, he has said.

There will ideally be even more consensus between the House GOP plan and White House plan by June, and some of the missing elements in Trump’s plan could be fleshed out by then, Brady told Bloomberg BNA.

Brady told reporters April 27 that he doesn’t plan to move a bill out of committee before the White House releases an updated proposal, because “we’re working together toward a unified tax reform plan.”

“I am excited that we’re sitting down and working toward one plan rather than having three or four or more plans floating out there. I’m willing to adjust my schedule for the sake of us unifying,” he said.

5. The White House plan talked about preserving retirement savings tax benefits. How does Ways and Means view addressing retirement accounts?

Committee members have been looking at overhauling retirement savings by simplifying the types of accounts offered. The push began from a working group that started meeting over the winter. The retirement working group, which was one of several, has been among the most successful in coming up with proposals that could make it into a tax bill, according to a GOP staffer.

“Our discussions have been focused on how to reward savings with lower rates for those who save, how do you create savings vehicles that are simpler and more user friendly,” Brady said. The committee is looking at “how do you encourage more Americans to save more, especially at that low- and modest-income level, because there is just no savings there?”

Some confusion about whether the White House plan would maintain tax-favored savings accounts was generated April 27, after White House press secretary Sean Spicer said the plan would only maintain tax breaks for charitable giving and mortgage interest deduction on the individual side. The White House later clarified that retirement savings are protected.

With assistance from Cheryl Bolen in Washington.

To contact the reporters on this story: Kaustuv Basu at kbasu@bna.com, Colleen Murphy at cmurphy@bna.com 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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