CONSISTENTLY DELIVERS

Sep 19, 2017

Tax Policy Update

Quote of the Day:

 

“The group — some have deemed us the Big Six — will not dictate the direction we take in this committee. Any forthcoming documents may be viewed as guidance or potential sign posts for drafting legislation. But at the end of the day, my goal is to produce a bill that can get through this committee.”

Senate Finance Chairman Orrin Hatch (R-UT)
   Sept. 14, 2017

Chairman Hatch’s clapback about not being “anyone’s rubber stamp” when it comes to tax reform has fueled reports that the Big Six is still far from reaching the necessary consensus to produce a substantive unified framework, which is due out the week of Sept. 25.

LEGISLATIVE LANDSCAPE

The Big (Six) Divide. Members of the Big Six are reportedly no closer to reaching an agreement on key aspects of a comprehensive tax overhaul — namely, identifying the necessary offsets to help pay for cuts to the business and individual tax rates. Broadly speaking, at issue is the question of which deductions to keep, modify, and eliminate. Interest deductibility, expensing, and the state and local tax deduction are still causing headaches in the negotiations.

Treasury Secretary Steven Mnuchin has dismissed reports of turmoil within the Big Six, telling POLITICO that the group’s upcoming unified framework for tax reform will contain specifics on rates and deductions. House Ways and Means Chairman Kevin Brady (R-TX) is hoping that the framework will be enough to satisfy …

Look Who’s Coming to Dinner. Since striking the short-term debt ceiling and government funding deal with “Chuck and Nancy,” President Donald Trump appears to be warming up to the idea of cutting future deals with Democrats.

On Sept. 12, Sens. Heidi Heitkamp (D-ND), Joe Manchin (D-WV), Joe Donnelly (D-IN) sat down for dinner with the president as well as Republican Sens. Orrin Hatch (UT), John Thune (SD), and Pat Toomey (PA) to explore potential ways to cooperate on tax reform. According to Sen. Donnelly, Democrats at the dinner reiterated the types of proposals they’d like to see —specifically those that will help to promote domestic job creation and middle-class protections. President Trump also invited a bipartisan group of House members from the Problem Solvers Caucus to take in their views on tax reform.

When asked about the president’s recent flirtations with Democrats, Ways and Means Chairman Kevin Brady admitted that it would not be all too surprising for Trump to look for votes across the aisle if “Republicans aren’t willing to unite and deliver on tax reform.”

White House Director of Legislative Affairs Marc Short has expressed the administration’s thoughts in more blunt terms: “We don’t feel like we can assume that we can get tax reform done strictly on a partisan basis.”

But what kind of proposals could Trump put forward to attract some Democratic support? Based on previous statements and proposals made by Democratic members, the GOP would have to include a robust package of provisions for the middle class — for example …

Healthcare Doublethink.  The GOP is nowhere near having the necessary votes to pass the healthcare bill. The GOP is close to having the necessary votes to pass the healthcare bill. Both these statements are true — reports indicate that Sens. Lindsey Graham (R-SC), Bill Cassidy (R-LA), Dean Heller (R-NV), and Ron Johnson (R-WI) are just a few votes shy of 50 on their proposal. Of course, this is exactly where the GOP was back in July — one vote short of passing a bill to repeal and replace Obamacare. Only this time, the Graham-Cassidy-Heller-Johnson (GCHJ) proposal needs about three more votes for Senate Majority Leader Mitch McConnell (R-KY) to bring the proposal to the floor for a vote.

Media reports indicate that Sen. Cassidy currently has support from all but three GOP senators: Lisa Murkowski (AK), Susan Collins (ME), and Rand Paul (KY). But, top GOP staffers for Senate leadership have noted that Sen. Rob Portman (R-OH) and others have been relatively quiet about the GCHJ proposal. This is in part because the red-state Medicaid expansion senators are trying to cut a deal in exchange for their votes. Sen. Cassidy and his squad are likely counting some senators as a “yes,” without firm confirmation from their offices in the hopes of making last minute alterations to the proposal to win votes.

Spot the Difference. For those who need a quick refresher, the GCHJ proposal preserves the Affordable Care Act’s (ACA) revenue stream (taxes) and redistributes the funding to the states through a block grant system. However, most states would face steep funding cuts based on the formula used in the proposals. A more detailed overview of the proposal is below…

Tug-of-War. The Senate is currently pursuing a dual track on healthcare, which reflects a schism within the party on the issue. One faction, led by Senate Majority Leader McConnell, SFC Chairman Hatch, and those working on the GCHJ proposal, believe that Obamacare must be repealed and replaced in its entirety. The other faction, led by Chairman Alexander believe that the failed healthcare vote was a sign from the American people to work on fixing Obamacare in a bipartisan manner.

This month, Senate HELP Chairman Alexander and Ranking Member Patty Murray (D-WA) convened a series of four hearings on the stabilization of the individual market to hear from state insurance commissioners, governors, and industry stakeholders about solutions to lower premiums and increase coverage. The following suggestions garnered the most support and are under consideration for inclusion in a bipartisan market stabilization bill …

COMMANDER-IN-TWEET

LINE ITEMS

  1. Vice President Mike Pence is joining the House GOP leadership’s cross-country tax reform tour, making his first of three stops in Indiana on Sept. 22. Pence’s trip to his home state is a part of the administration’s efforts to dial up the pressure on Sen. Joe Donnelly (D-IN) and encourage him to support the GOP’s tax reform efforts.
  2. The House approved, 211-198, the FY 2018 omnibus appropriations package (H.R. 3354), which contains $621 billion for defense spending and $510 billion for other non-defense discretionary spending. The spending package also includes a handful of provisions from the Financial CHOICE Act, including a repeal of the Volcker Rule, a rollback of the Fiduciary Rule, and changes to the CFPB’s regulatory authority. The House bill, in its current form, has almost zero chance of passing the Senate. The upper chamber is still in the process of working out its own appropriations bill for fiscal year 2018.
  3. At a Tax Foundation event, Sen. Ted Cruz (R-TX) argued that the GOP should include the repeal of major Dodd-Frank regulations in the reconciliation legislation for tax reform.

IN THE QUEUE

Congressional Activity

Tuesday, 9/19

Senate Finance Committee
Full committee hearing on business tax reform.

Agency Activity

Tuesday, 9/19

Federal Reserve
The Federal Open Market Committee holds a closed meeting from Sept. 19-20.

Friday, 9/22

Financial Stability Oversight Council
FSOC holds a closed meeting to review the council’s systemically important designations and its budget for next year.

Other Activity

Monday, 9/18

CSIS
Discussion on U.S. trade policy priorities with special guest U.S. Trade Representative Robert Lighthizer.

Tuesday, 9/19

U.S. Chamber of Commerce
Event to discuss developments and issues of the 2017 proxy season as well as what could be in store for the next proxy season.

Wednesday, 9/20

Bloomberg Global Business Forum
World leaders and international CEOs will gather at the forum to discuss the most pressing economic issues facing the world. 


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