White House, Koch Network Aligned on Quick-Moving Tax Reform

For over 50 years, Bloomberg Tax’s renowned flagship daily news service, Daily Tax Report® has helped leading practitioners and policymakers stay on the cutting edge of taxation and...

By Laura Davison

The White House is looking to tap Charles and David Koch’s network to sell the idea of a tax bill that would lower rates before the end of the year.

Marc Short, White House director of legislative affairs, laid out an ambitious timeline to begin marking up legislation in the House Ways and Means and Senate Finance committees when lawmakers return to Washington after Labor Day. In the proposed timeline, the bill would pass the House in October and the Senate would approve it in November, Short said at a July 31 event sponsored by Americans for Prosperity and Freedom Partners, both of which receive funding from the billionaire Koch brothers.

To make this happen, the administration needs Americans for Prosperity’s grass-roots membership to reach out to lawmakers regarding the need to overhaul the tax code before the end of the year. Short said he is “excited” to partner with the two groups.

Koch Industries Inc. and groups funded by the Koch brothers have been vocal advocates of tax reform. Until last week, the Koch network pushed to eliminate border adjustability, a provision that would tax imports and exempt exports, and funded research to oppose full expensing for business investments. Both full expensing and the border adjustment tax were included in the House GOP tax plan.

New Focus

GOP lawmakers and administration officials issued tax reform guidelines July 27 that ruled out consideration of the BAT and backed off the idea of full expensing, instead laying out “unprecedented capital expensing” as a goal.

The White House will “probably not” push for full expensing, Short told reporters after the event. “That’s not the hill we want to die on.”

The bill will focus on cutting rates for corporations, small businesses, and the middle class, Treasury Secretary Steven Mnuchin said at the event. It isn’t a tax cut for the wealthy, he said.

The guidelines didn’t mention specific tax rates, but the White House is continuing to back a 15 percent rate for businesses, Short said. The House plan included a 20 percent corporate rate and a 25 percent passthrough rate. Fifteen percent is seen as an ambitious goal, especially if the reform plan isn’t going to increase the deficit. The current corporate tax rate is 35 percent.

“There is a question, particularly as it comes back to us, some of you have asked regarding deficit neutrality, about whether or not that is something that the committees will support,” Short said. “But that is what the administration is pushing for.”

Senate Finance Committee Chairman Orrin G. Hatch (R-Utah) said in a July 31 Reuters interview that he was focused on what’s achievable when it comes to a corporate tax cut, saying “it would be kind of miraculous if we could get it down to 25 percent or less.”

“I’d like to get it down to around 20 percent,” Hatch told Reuters. “I’d love to get it at 15 percent if we could. But I think the odds are, we’re going to be lucky to get it down at all.”

With assistance from Kaustuv Basu.

To contact the reporter on this story: Laura Davison in Washington at lDavison@bna.com

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

Copyright © 2017 The Bureau of National Affairs, Inc. All Rights Reserved.

Request Daily Tax Report