Feb 14, 2017
Tax Policy Update
QUOTE OF THE WEEK
“We’re going to be announcing something I would say
over the two or three weeks that will be phenomenal in
terms of tax.” –
President Donald Trump
In a meeting with U.S. airline executives last week, President Trump
revealed that the White House is planning to unveil its own tax reform plan
soon — one that would be “incentive-based” to lower “the overall tax burden
of American businesses, big league.” The off-the-cuff remark is yet another
plot twist in the GOP’s efforts to enact tax reform this year. Trump’s
comments reportedly caught House tax writers by surprise.
White House Press Secretary Sean Spicer confirmed on Feb. 9 that the
administration would be releasing an outline of its own tax reform plan in
the coming weeks. He also signaled that the administration would utilize
the budget reconciliation process to enact the tax overhaul legislation.
House Ways and Means Chairman Kevin Brady (R-TX) seemed confident that the
administration’s plan would be similar to the House GOP tax blueprint.
Based on a previous meeting with the White House, Brady believes that there
is a lot of common ground and that the discussions are going in the right
direction. But as House GOP leaders struggle to fend off criticisms for the
border adjustment tax (“BAT”), the White House has yet to stake out a firm
position on the controversial proposal.
Gary Cohn, the head of the National Economic Council, is reportedly the
point man for the administration’s tax plan. Cohn said that the
administration’s plan is focused on cutting taxes for both businesses and
individuals. Cohn also appears to support the idea of using revenues
generated through repatriation to pay for certain infrastructure programs.
Kick ‘Em While They’re Down.
The House GOP’s border adjustment tax proposal did not have a good week.
Senate Finance Chairman Orrin Hatch’s (R-UT) and Sen. John Cornyn’s (R-TX)
skepticism for the BAT opened the floodgate of criticisms in the Senate.
Sen. David Perdue (R-GA) has lodged the strongest complaint against the
proposal to date, calling the BAT a “bad idea” outright. His concerns are
three-fold: (1) the BAT could lead to an increase in prices for goods and
services; (2) the price increase would hurt demand; and (3) increasing
prices and decreasing demand could hurt job creation.
Sen. Perdue’s attack on the BAT was flanked by Sen. Mike Rounds (R-SD), who
Don’t You (Forget About Passthroughs).
That was essentially Rep. Vern Buchanan’s (R-FL) message at the Bipartisan
Policy Center last week. The Florida Republican discussed the challenges of
passthroughs in the overall tax reform debate, reiterating his support for
parity between C-corporations and passthroughs. In addition to the
passthrough question, GOP tax writers are also looking at ways to make room
for both full expensing and interest deductibility.
Like Brady, Buchanan is confident that Congress will pass a tax reform bill
this year and that draft legislative language will come before the August
recess. Buchanan also confirmed that tax reform will be enacted via a
single piece of legislation rather than via separate bills as suggested
previously by Stephen Moore of the Heritage Foundation. The lawmaker added
that he would prefer to get tax reform done in a bipartisan fashion through
regular order — this would help ensure the longevity of reform.
What Chu Talking ‘Bout, Judy?
Rep. Judy Chu (D-CA) is the newest Democratic member to join the House Ways
and Means Committee, taking the seat left behind by Rep. Xavier Becerra.
Becerra resigned in December 2016 to step in as California’s new attorney
general. Prior to joining Congress, Chu served on a state tax commission
that regulates tobacco, fuel, and alcohol taxes.
Republicans will have to find a replacement for Rep. Tom Price who was
recently confirmed to be the secretary of the Department of Health and
Human Services. The tax-writing panel will see a flight of Republican
departures in the next couple of years: Reps. Lynn Jenkins (R-KS) and Sam
Johnson (R-TX) are retiring; Reps. Pat Tiberi (R-OH), Jim Renacci (R-OH),
Diane Black (R-TN), and Kristi Noem (R-SD) all have the ambition to run for
Mr. Price Goes to HHS.
After surviving the confirmation process on a party-line vote, Rep. Tom
Price is now the secretary of the Department of Health and Human Services —
the public face of the Affordable Care Act repeal effort. He must
act as the conduit between Congress and the Trump administration, bearing
the burden of transitioning the U.S. healthcare system to whatever the GOP
has in mind to replace the ACA. Of course, the Trump Administration
has vastly different goals for a new healthcare system than main street
Republicans. The success of the GOP, including Trump, will hinge on Price’s
ability to unite GOP lawmakers behind a solution. Of course, it’s no small
feat, considering that no Republican has been up to the task in the past
Price will have to hit the ground running as the stakes are high — insurers
have warned Congress that a failure to act by April will result in …
Big Wheel Keep on Turnin’.
This week, the House is set to continue its rollback of a number of
Obama-era regulations through the Congressional Review Act. The
following disapproving resolutions are ready for action:
H.J. Res 42
– to disapprove the Labor Department’s rule related to drug testing of
unemployment compensation applicants.
H.J. Res 43
– to disapprove the final rule submitted by Secretary of Health and
Human Services related to compliance with title X requirements by
project recipients in selecting subrecipients.
H.J. Res. 66
– to disapprove the Labor Department’s rule related to savings
arrangements established by States for non-governmental employees.
H.J. Res. 67
– to disapprove the Labor Department’s rule related to savings
arrangements established by qualified state political subdivisions for
H.J. Res. 69
– to disapprove the Interior Department’s rule related to
Non-Subsistence Take of Wildlife on National Wildlife Refuges in
Mo’ Money, No Problems?
The Internal Revenue Service is laying the foundation to try to get more
funding from Congress. This time, the IRS may rely on President Trump’s
executive order calling for agency officials to head up cybersecurity
efforts at their respective departments. The draft order, which Trump still
has not signed, indicates that unmet budgetary needs may be addressed as
part of a cybersecurity upgrade. If the order is signed, the IRS can use
this during budgetary discussions to make the case that additional funding
can help the agency make cybersecurity improvements and stop tax refund
fraud. Congress has cut funding for the agency by over $900 million since
2010 leading to shortfalls and cutbacks on taxpayer services.
In a strange twist of events, former secretary of state James Baker, led a
delegation of Republicans to advocate for the creation of a revenue neutral
carbon tax. Baker’s group has proposed a $40-per-ton carbon tax that would
be distributed back to the public on a quarterly basis. In exchange for the
carbon tax, the proposal calls for the Environmental Protection Agency to
eliminate most of its carbon emission regulations. Baker met with Gary
Cohn, Donald Trump’s chief economic adviser, along with senior adviser
Jared Kushner and Ivanka Trump. Baker noted that while he remains a climate
change skeptic, “the risks remain too great to ignore.” Baker added that a
carbon tax would, in his opinion, “make America great again.”
ROAD WORK AHEAD
Commerce Committee Chairman Takes the Wheel on Driverless Cars
On Feb. 13, Senate Commerce Chairman John Thune (R-SD) announced that he
would be working with Sen. Gary Peters (D-MI) on a joint effort to advance
autonomous vehicle technology as part of a major congressional effort to
speed up the deployment of self-driving cars. This effort will likely lead
to the introduction of legislation this spring focused on steering
driverless regulations and standards in the right direction.
the senators pointed to Federal Motor Vehicle Safety Standards which
explicitly require human controls and the presence of a human driver —
standards that don’t conform easily to self-driving cars. Another issue
likely to come up is the increasing concern over states advancing …
The Senate confirmed, 53-47, Steven Mnuchin to be Treasury secretary.
Linda McMahon, nominee to be the administrator of the Small Business
Administration, will get her confirmation vote on Tuesday.
- House Financial Services Chairman Jeb Hensarling (R-TX) is expected to
reintroduce the Financial CHOICE Act in the coming weeks. The so-called
“CHOICE Act 2.0” includes the GOP’s revamped approach to reforming the
Consumer Financial Protection Bureau (CFPB). Under the new bill, the bureau
and its single directorship structure would be retained. However, the bill
would make the director removable by the president at-will.
- Rep. Gohmert (R-TX) introduced a bill (H.R. 928) to clarify that a state
has the sole authority to regulate hydraulic fracturing on federal land
within the boundaries of the state.
- Public Citizen, the Natural Resources Defense Council, and the
Communications Workers of America sued the Trump administration over the
president’s Jan. 20 executive order requiring agencies to repeal two
regulations for each new one adopted. The suit claims that the president’s
order will force the repeal of regulations necessary to protect health,
safety, and the environment.
House Ways and Means Committee
Full committee meeting to organize for the 115th Congress.
Agenda: Adoption of Ways and Means Committee Authorization and Oversight
Plan and views and estimates on the FY2018 budget.
Senate Banking Committee
Full committee hearing on “The Semiannual Monetary Policy Report to
Congress.” Fed Chair Janet Yellen will testify.
House Financial Services Committee
Full committee hearing on “Monetary Policy and the State of the Economy.”
House Small Business Committee
Full committee hearing on “Start-ups Stalling? The Tax Code as a Barrier to
Senate Committee on Aging
Full committee hearing on “Stopping Senior Scams: Developments in Financial
Fraud Affecting Seniors.”
Senate Finance Committee
Full committee hearing on Seema Verma, nominee to be the administrator of
the Centers for Medicare and Medicaid Services.
Senate HELP Committee
Full committee hearing for Andy Puzder, nominee to be the Labor secretary.
House Judiciary Committee
Subcommittee hearing on H.R. 372, the Competitive Health Insurance Reform Act of 2017.
Advisory Committee on Small and Emerging Companies holds a meeting to
discuss matters relating to rules and regulations affecting small and
emerging companies under the federal securities laws.
Bipartisan Policy Center
Discussion on “Infrastructure 2017,” focusing on whether policymakers
reconcile their varying priorities in a bipartisan infrastructure package.
Webinar on “Tackling the Budget: 2017 Resolutions and 2018 Submission,”
focusing on Trump’s first budget request.
National Economists Club
Luncheon discussion on “Destination-Based Cash Flow Taxation.”
Discussion on the Republican strategy to replace Obamacare.
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