Slow Start Seen for Tax Revamp on First Day of New Congress

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By Aaron E. Lorenzo

Republican plans to reshape the U.S. tax code won’t come together immediately in the new Congress.

Those writing the legislation are still seeking better stakeholder cooperation and trying to secure broad member buy-in—and the process simply isn’t quick.

Even if House lawmakers act this spring, the Senate is expected to move more slowly. Developing and advancing a bill to repeal the Affordable Care Act through the filibuster-proof reconciliation process will take time, and the Senate Finance Committee will have to process a number of President-elect Donald Trump’s cabinet nominations during the same period.

“There are a lot of procedural moves at the beginning,” the panel’s chairman, Sen. Orrin G. Hatch (R-Utah), told Bloomberg BNA Jan. 3. “We’ll just have to see how we can break through and finally get to the real work of the Senate.”

He and other Senate and House members returned to Capitol Hill with an agenda that includes eventually passing tax legislation that they expect Trump to sign.

But Trump’s campaign tax promises don’t completely match congressional Republican proposals, which presents some question marks. House Ways and Means Committee Chairman Kevin Brady (R-Texas) is fond of saying Trump’s plans have 80 percent in common with House Republicans’ plans and is confident he can bridge the remaining 20 percent after multiple meetings with Trump surrogates.

“Because the Trump transition team is still filling out members, my early meetings with them have been more general in nature about the need to do it, overall discussion on elements of the two plans,” Brady told Bloomberg BNA. “We really haven’t worked through the nitty gritty on everything, but I’m confident we will.”

Timing Being Considered

But Brady has yet to decide when to release bill text.

Ways and Means Republicans last met regarding the legislation Dec. 14-15 before taking a holiday break, over which they only spoke by phone to one another individually rather than via conference calls. The two-day meeting last month settled some issues but others remain outstanding, such as savings, Brady said, so members have formed working groups to focus on matters that remained a bit thorny at the end of the two-day gathering.

“Some of these needed a little bit more thought,” Brady said. “In some cases, we looked at different policy options and combined or expanded on some of them and said let’s go back and do some more work in this area.”

Rep. Tom Reed (R-N.Y.), who is eyeing financial tax issues through one of the working groups, doesn’t expect tax revamp legislation until late in the summer, he told Bloomberg BNA.

Senate Budget Committee Chairman Michael B. Enzi (R-Wyo.) introduced a budget resolution Jan. 3 with instructions for ACA repeal legislation and $1 billion in deficit reduction over 10 years, as well as a Jan. 27 deadline for bills to accomplish those goals. Brady predicted that repeal could be done by February.

A budget resolution with instructions to pass tax changes through the same simple-majority procedure would come later. Questions will persist until then, as various interest groups contemplate changes to tax preferences they aren’t sure they want to surrender.

Import Tax

Vocal opposition to international tax changes Brady has floated has already emerged, and though he might release draft language on those cross-border provisions, he hasn’t yet decided whether or not to do so.

Brady hasn’t wavered in favoring border adjustability, the import tax component of the House GOP plan that has elicited opposition from some retailers, carmakers and other industrial groups. They have pointed to its potential to increase consumer costs, which defenders have said would get blunted by currency appreciation.

Groups concerned about this part of the broader proposal or other elements should continue to raise their voices, Reed said, though he cautioned that they ought to prepare for change.

Stakeholders also have ongoing uncertainties related to transition periods during which any tax changes would occur and the potential budget deficit impact they would have. The non-governmental Tax Policy Center has estimated the House Republican tax plan Brady is developing could cost about $3 trillion over a decade, even accounting for the proposal’s economic impact.

Brady said he wants “to make sure we’re getting the numbers right” to avoid hurting U.S. economic growth with more federal debt.

Ways and Means Committee Republicans, who should get new members Jan. 4 after the House Republican Steering Committee meets to pick them, say they would like to finish their tax bill close to Trump’s inauguration Jan. 20, should he choose to push through tax changes early in his term.

Hatch’s committee added Sen. Bill Cassidy (R-La.) as its new GOP member.

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

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

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