Trump ad­min­is­tra­tion confident shut­down will be averted.

GOP di­vided over how to im­ple­ment pres­i­dent’s wishes

The Washington Times Daily - - FRONT PAGE - BY DAVID SHERFINSKI

Capi­tol Hill awaits the promised release of Pres­i­dent Trump’s tax plan this week, and law­mak­ers are hop­ing for clar­ity amid a de­bate roiled with myr­iad op­tions — and no clear sense that any of the plans are gain­ing much trac­tion.

Trea­sury Sec­re­tary Steven T. Mnuchin, who’s been meet­ing weekly with House and Se­nate lead­ers on the sub­ject, teased the broad out­lines of their plans Mon­day.

“On the per­sonal side, we’re about a mid­dle-in­come tax cut and sim­pli­fi­ca­tion,” Mr. Mnuchin said Mon­day. “On the busi­ness side, we’re about mak­ing them com­pet­i­tive.”

But there’s sur­pris­ingly lit­tle unity about how to achieve those goals within the GOP, much less when Democrats are in­cluded.

While both ends of Penn­syl­va­nia Ave. have a gen­eral agreement on low­er­ing cor­po­rate in­come tax rates, Mr. Trump has stirred the de­bate by sig­nal­ing he wants a 15 per­cent tax rate, or sig­nif­i­cantly lower than what mem­bers of Congress had been con­sid­er­ing.

House Repub­li­can lead­ers, mean­while, have been fo­cus­ing on a 20 per­cent “bor­der ad­just­ment” tax on im­ports, which pro­po­nents say would help end an un­fair sys­tem that dis­cour­ages man­u­fac­tur­ers from mak­ing their prod­ucts in the U.S.

But op­po­nents, which in­clude many of the na­tion’s re­tail­ers and big com­pa­nies that rely on im­ports for their busi­nesses, say that costs will ul­ti­mately get passed onto con­sumers.

“It’s re­ly­ing on some elu­sive pre­sump­tions,” Rep. Clau­dia Ten­ney, New York Repub­li­can, said Mon­day on Fox Busi­ness Net­work.

Mr. Trump hasn’t defini­tively em­braced the plan, and GOP Rep. Mar­sha Blackburn, who has been a rel­a­tively re­li­able ally of the pres­i­dent, said on the net­work Mon­day she doesn’t ex­pect to see it in the White House pack­age this week.

But with­out the bor­der tax, which is expected to raise some $1 tril­lion over the course of a decade, law­mak­ers would have to find other ways to make up that money in the im­me­di­ate fu­ture.

One po­ten­tial carve-out that’s got­ten some at­ten­tion re­cently is the fed­eral de­duc­tion for state and lo­cal tax pay­ments. Repub­li­cans say ax­ing that de­duc­tion would end ef­fec­tive sub­si­dies that dis­pro­por­tion­ately ap­ply to tax­pay­ers in high-pop­u­la­tion, high-tax blue states like Cal­i­for­nia, New York and Illi­nois.

“The de­ductibil­ity of state and lo­cal taxes has al­ways been used as an ex­cuse by the big-city po­lit­i­cal ma­chines and the Democrats to cover for their tax in­creases,” said Grover Norquist, pres­i­dent of Amer­i­cans for Tax Re­form.

The non­par­ti­san Tax Foun­da­tion has es­ti­mated that elim­i­nat­ing the state and lo­cal de­duc­tion would raise be­tween $1.7 tril­lion and $1.8 tril­lion over a 10year pe­riod.

But New York Gov. An­drew Cuomo said af­ter meet­ing with Mr. Trump in Jan­uary that end­ing the de­duc­tion would be “dev­as­tat­ing” to states like New York and Cal­i­for­nia, and the pro­posal is likely to be met with stiff op­po­si­tion from many Capi­tol Hill Democrats, who want to deny Mr. Trump a win at all costs.

There are also some dif­fer­ences be­tween the House Repub­li­cans’ blue­print and the plan Mr. Trump laid out on the cam­paign trail. Even a small dif­fer­ence in var­i­ous rates can trans­late to billions of dol­lars that a plan needs to make up else­where if it doesn’t end up ad­ding to the deficit.

For ex­am­ple, the House GOP blue­print calls for con­sol­i­dat­ing the seven cur­rent in­di­vid­ual in­come tax brack­ets into three, with a de­crease in the top per­sonal rate to 33 per­cent from 39.6 per­cent.

It also calls for the cor­po­rate tax rate to be low­ered from 35 per­cent to 20 per­cent.

Mr. Trump’s plan, mean­while, had called for the seven brack­ets to be con­sol­i­dated into four, with a top in­di­vid­ual rate of 25 per­cent and a cor­po­rate rate of 15 per­cent.

The House is right to tackle in­di­vid­ual and cor­po­rate tax re­form at once, but Mr. Trump is the one who needs to be driv­ing the train, said Dou­glas Holtz-Eakin, a for­mer di­rec­tor of the Con­gres­sional Bud­get Of­fice (CBO) un­der Pres­i­dent Ge­orge W. Bush.

“We don’t know where the White House is — for, against or what they want if they’re against. And that’s the most im­por­tant thing,” he said. “To get it done, you need an enor­mous amount of pres­i­den­tial lead­er­ship and po­lit­i­cal cap­i­tal.”

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