Rewrit­ing tax code, over­haul­ing wel­fare on con­ser­va­tive agenda

The Washington Times Daily - - POLITICS - BY DAVID SHERFINSKI

House con­ser­va­tives say they want to cou­ple the GOP’s at­tempt to re­write the tax code to an even more am­bi­tious over­haul of the fed­eral gov­ern­ment’s wel­fare sys­tem, weigh­ing down what was al­ready a heavy lift for GOP lead­ers.

Mem­bers of the con­ser­va­tive House Free­dom Cau­cus have floated at­tach­ing some $400 bil­lion in re­duc­tions in pro­jected wel­fare spend­ing to the tax de­bate, say­ing they might ac­cept a less gen­er­ous tax cut if they can get bud­get trims else­where.

“Maybe we as the Free­dom Cau­cus can live with a higher bud­get num­ber if, in fact, we do real wel­fare re­form on the tax bill,” said Rep. Jim Jor­dan, Ohio Re­pub­li­can and a past chair­man of the group of about three dozen con­ser­va­tives.

The call comes as other Repub­li­cans have balked at the scope of the GOPs tax plans, which would elim­i­nate a num­ber of pop­u­lar tax breaks, in­clud­ing the de­duc­tion for state and lo­cal taxes.

Elim­i­nat­ing those de­duc­tions could pro­duce about $2 tril­lion in ad­di­tional rev­enue over a decade — money that could then be plowed into low­er­ing tax rates across the board.

But blue-state Repub­li­cans are fight­ing to pre­serve the de­duc­tion, which gen­er­ally ben­e­fits their con­stituents.

“It would be a sig­nif­i­cant chal­lenge for New Jersey if we were not to have the de­ductibil­ity of state and lo­cal taxes,” Rep. Leonard Lance, New Jersey Re­pub­li­can, told The Wash­ing­ton Times.

New Jersey’s en­tire House del­e­ga­tion, which in­cludes Mr. Lance and four other Repub­li­cans, were among about 70 mem­bers who re­cently sent a let­ter to Trea­sury Sec­re­tary Steven Mnuchin urg­ing him to con­sider pre­serv­ing the state and lo­cal credit in tax re­form talks, with pow­er­ful Ap­pro­pri­a­tions Com­mit­tee Chair­man Rod­ney Frel­inghuy­sen among the sig­na­to­ries.

Mr. Lance also said he wants to keep the de­duc­tion busi­nesses can now take on re­search and devel­op­ment ex­penses, say­ing his dis­trict has many em­ploy­ees in the phar­ma­ceu­ti­cal and med­i­cal de­vice in­dus­tries who would ben­e­fit from the break.

“So yes, I want a con­tin­u­a­tion of mak­ing sure that there can be re­search and devel­op­ment in this coun­try,” he said.

The re­sis­tance is em­blem­atic of the prob­lem Re­pub­li­can lead­ers have found. Ev­ery tax break in the code has de­fend­ers, and so far few peo­ple are will­ing to give up on their fa­vored pro­vi­sions for the sake of a broader tax re­form.

GOP lead­ers had in­tended to keep two big breaks: the mort­gage-in­ter­est and char­i­ta­ble-giv­ing de­duc­tions.

Some Repub­li­cans on the bud­get com­mit­tee have in­di­cated they could get go­ing on a 2018 bud­get plan as early as this week, which would lay out the frame­work for tax re­form.

But Mr. Jor­dan said it’s not a given that Repub­li­cans will be able to even pass a bud­get this year. That fail­ure would up­end the plans House Speaker Paul D. Ryan and Se­nate Ma­jor­ity Leader Mitch McCon­nell have been talk­ing about for months.

“You can’t get tax re­form if you don’t have rec­on­cil­i­a­tion in­struc­tions. You can’t get rec­on­cil­i­a­tion in­struc­tions if you don’t pass a bud­get,” Mr. Jor­dan said, speak­ing at a re­cent Her­itage Foun­da­tion fo­rum.

Repub­li­cans also have yet to work out in­ter­nal di­vi­sions over a pro­posed 20 per­cent tax on im­ports, known as a bor­der ad­just­ment. The tax, ex­pected to raise about $1 tril­lion over 10 years, en­joys sup­port from ad­vo­cates like House Ways and Means Chair­man Kevin Brady and Mr. Ryan, who say it would level the play­ing field for U.S.-made prod­ucts.

But GOP sen­a­tors say it could trans­late to higher prices on con­sumer goods, and that it’s dead on ar­rival in the up­per cham­ber. The tax also hasn’t been em­braced by White House of­fi­cials, who hope to have a uni­fied Re­pub­li­can tax plan ready for floor con­sid­er­a­tion dur­ing the first half of Septem­ber.

Sen. Or­rin Hatch, Utah Re­pub­li­can and chair­man of the Se­nate Fi­nance Com­mit­tee, also in­di­cated Mon­day that Pres­i­dent Trump could be open to a com­pro­mise on his de­sired 15 per­cent cor­po­rate tax rate. House Repub­li­cans have pro­posed a 20 per­cent rate, though both pro­pos­als would be down from the cur­rent 35 per­cent rate.

“It’d be won­der­ful if we could get them down to 15 per­cent,” Mr. Hatch, a key tax-writer, told Fox Busi­ness Net­work. “Now, I think the pres­i­dent has prob­a­bly come off that par­tic­u­lar fig­ure re­cently … if we could get [them] down to 25 per­cent or 20 per­cent, this coun­try would turn around, I think, overnight.”

For now, Mr. Brady says he’s weigh­ing the con­ser­va­tives’ pro­posal for smaller tax re­forms in ex­change for big­ger en­ti­tle­ment spend­ing changes.

“We’re look­ing at that. I get the ar­gu­ment that we need a work­force ready for a much stronger econ­omy,” said Mr. Brady, Texas Re­pub­li­can.


“Maybe we as the Free­dom Cau­cus can live with a higher bud­get num­ber if, in fact, we do real wel­fare re­form on the tax bill,” said Rep. Jim Jor­dan, Ohio.

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