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Brady Hints at Temporary Corporate Rate Cut for Tax Reform

Posted on November 2, 2017 by David van den Berg, Asha Glover, Stephen K. Cooper

The House’s top taxwriter suggested November 1 that the corporate tax cut in his forthcoming bill could be merely temporary but that he would work with his House and Senate colleagues to formulate a permanent rate cut that would comply with Senate budget rules.

Ways and Means Committee Chair Kevin Brady, R-Texas, said that Republicans still want to get to a permanent 20 percent corporate tax rate, but he thinks “it’s going to take several steps through the process to achieve that. We have, as you know, in reconciliation, those awfully funny Senate Byrd rules, so that will enter in the discussion.” Senate rules prohibit legislation from increasing the deficit outside the budget window. But Brady said ultimately his goal is “permanence on all the really key growth items.”

Even as Republican members of the Ways and Means Committee worked to finalize details of their comprehensive tax reform legislation, Brady and other House Republicans promised the bill would be unveiled November 2. “We’re less than 24 hours” away, Brady said after GOP lawmakers on the tax panel met behind closed doors in hopes of finalizing details. The rollout was originally scheduled for November 1, but was moved back a day.

In an interview on Bloomberg Television on November 1, House Budget Committee Chair Diane Black, R-Tenn., said lawmakers were completing work on the tax bill’s legislative language. House Majority Leader Kevin McCarthy, R-Calif, also told reporters that lawmakers were on track to release the bill.

That same day, Brady continued his efforts to win over Republicans from New York and other high-tax states who have threatened to vote against tax reform if it eliminates the deduction for state and local taxes. He also worked on other controversial provisions regarding retirement plans and lower rates for passthrough businesses.

“I think we made big progress on restoring the property tax deduction” component of the state and local tax deduction, Brady told reporters. “Many members feel this really provides them that middle-class tax cut and the other family relief they were looking for.” 

Rep. Chris Collins, R-N.Y, told reporters earlier November 1 that he heard the itemized deduction for property taxes would be included in the bill and capped at $10,000. “I do think that the lack of deductibility of state income tax will cost us six or eight votes,” he said. “But those folks voted no on the budget.”

One of those who voted no on the budget, Rep. Peter T. King, R-N.Y., said that if the GOP tax reform plan is unveiled November 2, it likely means that House leaders have determined that they can pass the reform bill without the support of “the guys from the SALT states.”

Rep. Thomas MacArthur, R-N.J., told reporters that “directionally, there has been progress” on reaching an agreement on House Republicans’ proposal to eliminate the state and local tax deduction, but lawmakers and Republican leadership haven’t yet reached an agreement.

“I think the cap concept I can live with, but the cap itself I think is still a bit too low,” MacArthur said. MacArthur said that “a cap that covers the vast majority of homeowners” would be sufficient, adding, “From zero up to upper-middle class, I think all of those people, both from a homeowner perspective and an income perspective, should see a decrease in their taxes.”

MacArthur said he has proposed a cap number in negotiations that he thinks will benefit people in high-tax states.

Delayed Estate Tax Repeal

Asked about a reported proposal to delay repeal of the estate tax, Collins said he’s disappointed but he’s fine with it and thinks “most people” would be because the tax would be gone.

“But I do hear that the Senate’s going to insist that it come back,” he said. “I’m hearing there’s some senators who will not vote yes . . . if there’s a full repeal, even if it’s delayed five years.”

He added that he expects the Senate to send the bill back with increased estate tax exemptions, and that there is talk in the Senate of doubling exemptions to allow couples to take $22 million.

‘Reckless in the Extreme’

Brady’s timing for the release of the tax reform plan did not sit well with Ways and Means ranking minority member Richard E. Neal, D-Mass., who argued that Republicans should reschedule a markup planned for November 6 since Brady delayed the bill one day while negotiating agreements with GOP lawmakers.

Republicans’ October 31 announcement that they would delay the bill’s rollout to November 2 “means that Democratic members will have even less time to review legislation that will touch every American and fundamentally alter the finance system of this country,” Neal wrote in a letter to Brady.

Neal argued that given the Republican caucus’s inability to reach even internal agreement on the tax reform proposal, “it would be reckless in the extreme to rush this process through committee next week.” He also pointed to the legislative process followed during the 1986 tax reform debate, which included 30 full Ways and Means Committee hearings, 12 hearings in Ways and Means subcommittees, 450 witness testimonials, and 26 days of markup in the Ways and Means Committee.

“Giving your colleagues one and a half workdays between bill unveiling and markup is unwise and unfair,” Neal wrote. Later, in an interview with reporters, Neal said Republican taxwriters have over-promised tax cuts to everyone but are unable to offset the cost of the bill. “Money has been the problem since day 1. It’s always left out of the argument,” Neal said. “This idea that everybody’s going to be onboard because everybody’s going to get what they want — it doesn’t work that way.”

Ways and Means member Lloyd Doggett, D-Texas, told Tax Analysts Neal is “absolutely right” to call for a delay in the markup. “It’s challenging to get our amendments drafted, and maybe even more important than that, to get independent analysis of their bill,” he said. “Just as they didn’t want a [Congressional Budget Office] score on their health bill, they’re trying to avoid independent analysis of this. So, it should be postponed another week to allow the public to find out what’s in the bill, and for that matter, to let their own members find out what’s in the bill.”

Senate Finance Committee ranking minority member Ron Wyden, D-Ore., said he thinks the main obstacle Republicans face in trying to pull together a bill is having too many benefits and not enough revenue.

“I think their challenge is they made $4 trillion worth of promises to all of their supporters and all the people that have been their political coalition. As of today, they have virtually no revenue to pay for those promises,” Wyden told reporters, adding that all of the Republicans’ proposed revenue raisers — including the border-adjustable tax and eliminating the state and local tax deduction — have faced criticism from industry groups, Democrats, and even some Republicans.

“I’ve never seen a version of dynamic scoring that’s going to make up for all of that,” Wyden continued.

Follow David van den Berg (@TAtaxDavidVDB), Asha Glover (@AshaSGlover) and Stephen K. Cooper (@ScoopOnTaxeson Twitter for real-time updates.