Ryan pushes sweep­ing tax over­haul as clock ticks

With leg­isla­tive days run­ning out, House speaker is try­ing to speed up the process.

Los Angeles Times - - BUSINESS - By Jim Puz­zanghera

WASH­ING­TON — House Speaker Paul D. Ryan launched a ma­jor push Tues­day to over­haul the tax code this year — in­clud­ing mas­sive cuts — but Repub­li­cans in Congress and the White House are run­ning out of time as they con­tinue to bat­tle over the de­tails.

With the year’s leg­isla­tive days dwin­dling, Ryan (RWis.) tried to jump-start the process with a ma­jor speech about what his staff de­scribed as the “crown jewel” of the Repub­li­can eco­nomic agenda.

“Once in a gen­er­a­tion or so, there is an op­por­tu­nity to do some­thing ab­so­lutely trans­for­ma­tional, some­thing that will have a truly last­ing im­pact long af­ter you and I are gone,” Ryan told the Na­tional Assn. of Man­u­fac­tur­ers. “That mo­ment is here and we are go­ing to meet it. Ladies and gen­tle­man, we are go­ing to fix this na­tion’s tax code once and for all.”

“We are go­ing to get this done in 2017,” he said. “We can­not let this once-in-agen­er­a­tion mo­ment slip by.”

Speak­ing be­fore Ryan, Vice Pres­i­dent Mike Pence made the same prom­ise to the trade group. He down­played the dif­fi­culty of ne­go­ti­a­tions be­tween the Trump ad­min­is­tra­tion and House and Se­nate Repub­li­cans.

“Dis­cus­sions will con­tin-

ue. De­tails are be­ing worked out,” Pence told the man­u­fac­tur­ers, who strongly sup­port a tax over­haul. “But I can as­sure you, with your sup­port and the sup­port of our lead­ers in Congress, we will get tax cuts done and we will get them done this year.” That’s a for­mi­da­ble task. There still is no tax bill in the House or the Se­nate as dis­putes among Repub­li­cans re­main un­re­solved, par­tic­u­larly whether to en­act a con­tro­ver­sial bor­der tax. Trea­sury Secretary Steven T. Mnuchin al­ready has given up on his ear­lier hopes to get the leg­is­la­tion passed be­fore Congress leaves for its Au­gust re­cess.

Ryan now is aim­ing to get leg­is­la­tion up for con­sid­er­a­tion this fall.

If that’s the case, then passing tax re­form this year is “def­i­nitely doable,” said Michael Steel, a for­mer House Repub­li­can lead­er­ship aide.

“Tax re­form is al­ways hard and that’s why we don’t do it very of­ten, but it’s in­cred­i­bly im­por­tant and this is a tremen­dous op­por­tu­nity,” said Steel, now a manag­ing di­rec­tor at Hamil­ton Place Strate­gies, a pub­lic af­fairs con­sult­ing firm in Wash­ing­ton.

But in a tacit ac­knowl­edg­ment of the hur­dles, Ryan did not wade into the pol­icy dis­putes in Tues­day’s speech as he laid out broad prin­ci­ples that echoed those of the White House.

The Trump ad­min­is­tra­tion has called for slash­ing the cor­po­rate tax rate to 15% from 35% and pro­vid­ing more fa­vor­able treat­ment for over­seas earn­ings. Trump also wants to re­duce the num­ber of per­sonal in­come tax brack­ets from seven to three, with rates of 10%, 25% and a top rate of 35%.

The House Repub­li­can blue­print that Ryan helped draft calls for a 20% cor­po­rate tax rate. He told CNBC af­ter his speech that he’d love to cut the tax to 15% “if we can get the num­bers to work.”

To help off­set the cuts, the ad­min­is­tra­tion and House Repub­li­cans want to elim­i­nate most de­duc­tions, in­clud­ing one for the pay­ment of state and lo­cal taxes. Cal­i­for­ni­ans and res­i­dents of other states with high taxes and high earn­ers would lose the most if that de­duc­tion dis­ap­pears.

Repub­li­cans also want to elim­i­nate the al­ter­na­tive min­i­mum tax and the es­tate tax.

But the ad­min­is­tra­tion’s sketchy plan, con­tained on a sin­gle page with 19 bul­let points re­leased in April, still lacks many ba­sic de­tails, in­clud­ing in­come re­quire­ments for the new tax brack­ets and any anal­y­sis of how much it would in­crease the na­tional debt.

The only de­tail to emerge in re­cent weeks is that rich Amer­i­cans might fare bet­ter in the over­haul. Last week, Mnuchin pub­licly backed off of an ear­lier prom­ise he made that the wealthy would not pay less in over­all taxes be­cause lower rates would be off­set by fewer de­duc­tions.

There are a lot of sim­i­lar­i­ties with the House Repub­li­can plan. But the big­gest ob­sta­cle ap­pears to be its push for a con­tro­ver­sial bor­der-ad­just­ment tax, which would sub­ject im­porters to higher taxes than ex­porters or those that pro­duce prod­ucts in the U.S. for do­mes­tic con­sump­tion.

Such a tax could raise $1 tril­lion in rev­enue over 10 years. The money would help off­set a sharp re­duc­tion in the 35% cor­po­rate tax rate.

But the busi­ness com­mu­nity is split on the bor­der-ad­just­ment tax. Ma­jor ex­porters sup­port it. But re­tail­ers that im­port a lot of goods, such as Wal-Mart Stores Inc., op­pose it. Se­nate Repub­li­can lead­ers and Trump ad­min­is­tra­tion of­fi­cials are cool to the tax, which op­po­nents ar­gue would lead to higher prices for con­sumers as re­tail­ers pass on the cost of the tax to them.

David McIn­tosh, pres­i­dent of the Club for Growth, an in­flu­en­tial con­ser­va­tive ad­vo­cacy group, called the tax “a po­lit­i­cal loser.”

“Any mem­ber who cam­paigned on lower taxes should not even en­ter­tain the idea” of a bor­der-ad­just­ment tax, McIn­tosh said Tues­day. He com­plained that the Repub­li­can-con­trolled Congress “has made lit­tle progress to­ward cut­ting taxes.”

Mnuchin dodged a ques­tion on the bor­der tax Tues­day dur­ing an ap­pear­ance on CNBC. But he down­played the ob­sta­cles to get­ting a tax over­haul en­acted.

“We fun­da­men­tally agree on what the prin­ci­ples are and we’re work­ing hard to get the de­tails ironed out,” Mnuchin said.

With­out the rev­enue from a bor­der-ad­just­ment tax, it will be dif­fi­cult to draft tax leg­is­la­tion that does not add to the bud­get deficit af­ter 10 years. If the plan adds to the deficit, Se­nate Repub­li­cans will need Demo­cratic sup­port to over­come a 60vote thresh­old.

The other al­ter­na­tive would be to have the changes ex­pire at the end of 10 years, which would al­low Se­nate Repub­li­cans to pass the bill through a process known as rec­on­cil­i­a­tion that re­quires only a sim­ple ma­jor­ity.

The 2001 Bush tax cuts used that ap­proach. In 2012, Congress al­lowed some of those cuts, for the high­est earn­ers, to ex­pire.

Ryan on Tues­day de­clared that he did not want to pass tax changes that would ex­pire af­ter 10 years.

“These re­forms, these tax cuts, they need to be per­ma­nent,” Ryan said.

Carolyn Kaster As­so­ci­ated Press

“WE ARE GO­ING to fix this na­tion’s tax code once and for all,” House Speaker Paul D. Ryan tells an au­di­ence at a man­u­fac­tur­ing sum­mit on Tues­day.

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