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The top tax-writer in the House is making it clear that the Trump administration’s tax plan is just the starting point for discussions, and some Republicans on the Ways and Means Committee are echoing his thoughts.
Committee Chairman Kevin Brady (R-Texas) said April 26 that he wants a rewrite of the tax code that is “built to last,” a hint that House Republicans, including Speaker Paul D. Ryan (R-Wis.), would like to pursue a rewrite of the tax code rather than tax cuts. When Rep. Peter Roskam (R-Ill.), chairman of the Tax Policy Subcommittee, was asked if he would fight for the provisions in the blueprint hours after Trump released his one-page plan, he said, “Yes.”
Trump’s plan proposes a corporate tax rate of 15 percent and a similar rate for passthrough businesses, mirroring business tax rates that the president suggested during his campaign. But it remains unclear if the administration has a plan to pay for these tax cuts.
Republican leadership in Congress praised the plan in a news release, saying that the principles outlined by the Trump administration would serve as critical guideposts for Congress and the White House. Lawmakers said they were enthused that the president is taking an interest in tax reform. But behind the voices of agreement will likely come an effort to push and preserve elements of the House GOP tax blueprint which proposes a maximum corporate tax rate of 20 percent, a 25 percent rate for passthroughs and full and immediate expensing.
Brady said he wants to work with the president to get tax rates as low as possible. Asked if he would like a tax reform plan to be revenue-neutral, he said, “We’re going to have that discussion with the Trump tax team.”
Ryan is talking about altering the import tax proposal to make it work. “We all agree that in its present form it needs to be modified,” Ryan said April 26 at a Washington conference hosted by Baker & Hostetler LLP. “What we do not want to do, and we’ve gotten a lot of good feedback on this, is we don’t want to have severe disruptions. if you’re an importer or a retailer heavily dependent on importers, we don’t want to shock the system so much that it ends up being a huge disruption.”
Settling for temporary tax cuts instead of lasting tax changes would be “an underperformance” by House Republicans, Roskam said at the event.
Roskam wouldn’t comment on where the rest of the committee falls on the issue, but said that “there’s no excuse for not trying” to make permanent tax reform happen. “A renaissance of American manufacturing is less likely to happen if you’ve got a tax code that turns into a tax extender,” he said.
Neither House Republicans nor the White House has yet floated alternative pay-fors if the border tax provision, which would exempt exports and impose a 20 percent tax on imports, is scrapped. The full Republican Conference isn’t yet in agreement on whether tax cuts must be paid for at all.
“I’m not sure the White House agrees with that, I’m not sure all Republicans agree with that, so I’m not sure where that ends with respect to a product,” Rep. Pat Tiberi (R-Ohio) told reporters after the event.
Tax cuts that expire in 10 years could also be made permanent, as was done under President George W. Bush, he said. “That’s exactly the debate.”
Other Republicans on the committee expressed concerns about how the tax cuts suggested by the Trump administration would add to the deficit.
Rep. Vern Buchanan (R-Fla.) said he is concerned about a deficit increase that could come with the tax rates proposed by Trump. “We will see, we got to get dynamic scoring. But I’m not interested in building up bigger deficits,” Buchanan said. “We got to find a fine line between lowering rates and looking at the numbers.”
Buchanan is among those who isn’t giving up on the GOP blueprint. “I’m sure at the end of the day, there will be some compromise with the administration,” he said.
Rep. Carlos Curbelo (R-Fla.) said he is fully committed to finding the pay-fors to achieve revenue neutrality. “This is one issue I’m going to insist on,” he said. “Obviously there will have to be some compromise or the rate reductions won’t be as ambitious.”
Much will depend on whether the White House intends to offset the cost of the plan, and if so, can it find sufficient pay-fors that can get enough votes in both chambers, said John Gimigliano, who heads the federal tax legislative group at KPMG LLP.
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