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GOP Not Aligned With Bannon Tax Hike

Posted on August 1, 2017 by Asha Glover

Top Republicans are dismissing a reported proposal from White House chief strategist Steve Bannon to raise the top individual income tax rate to more than 40 percent.

Appearing on Fox News’ Sunday Morning Futures July 30, House Speaker Paul D. Ryan, R-Wis., said that the tax reform guidelines the president released earlier in the year fit in with congressional Republicans’ goals more than does Bannon’s proposal to increase the highest rate to 44 percent. “I think [President Trump’s] rates were 10, 25, and 35 [percent]. That’s the kind of thing that we're looking at. That’s the kind of area where we have consensus,” Ryan said.

The next day, White House Director of Legislative Affairs Marc Short also said on Fox News that Bannon’s proposal was not under consideration. “We don’t believe that raising taxes is the way to encourage growth,” he said. At a separate event, Short described the White House’s goal to get a tax reform bill through Congress by November.

House Ways and Means Committee Chair Kevin Brady, R-Texas, speaking on the same show as Ryan, discussed the goals for a corporate rate reduction. While he didn’t name a specific rate, he said that 28 percent would be too high. “The average of our competitors [is] around 22 percent and continuing to go lower,” Brady said, adding that the aim was to get rates “as low as we can go.”

In a July 31 interview with Reuters, Senate Finance Committee Chair Orrin G. Hatch, R-Utah, said that even a 25 percent corporate tax rate would be a “sea change for this country,” but warned that it would be challenging to achieve. “It would be kind of miraculous if we could get it down to 25 percent or less. I'd like to get it down to around 20 percent. I'd love to get it at 15 percent if we could,” Hatch said, according to Reuters. “But I think the odds are, we’re going to be lucky to get it down at all.”

Hatch pointed to congressional Democrats as the roadblock to a lower corporate rate, saying in the interview that “Democrats have just about slowed everything down to such a point that we can’t hardly move on anything. But I’m going to try to break through and get this done.”

Getting on the Same Page

Both Brady and Ryan also reiterated support for the border-adjustable tax that was dropped from Republicans’ tax reform efforts, though they admitted it was more important for the House and Senate to be on the same page regarding what a tax reform plan should look like.

The White House and congressional Republicans released a joint statement on tax reform July 28 that included an acknowledgment that the border-adjustable tax — the hotly contested centerpiece of House Republicans’ “A Better Way” tax reform blueprint — lacks the support to remain a viable option this fall.

“I still think it’s the way to go,” Ryan said of the provision on his Fox News appearance. “I think that’s the right kind of tax reform plan, but if it’s going to stop us [from] getting to consensus to get tax reform done, then we don’t want that to happen.”

“It is more important for us than anything that we get tax reform done because we think it is absolutely critical for strong economic growth,” Ryan continued. He said that Republicans are trying to find an alternative to the border-adjustable tax, but that achieving their shared goals — which include low rates and expensing — is possible without one.

Brady agreed that dropping the provision was necessary to accomplish tax reform in 2017.

“It’s a great solution to bringing jobs back to the United States, and we had a healthy debate. That debate’s over,” he said. “Now we’re focused on how we can unite. I think that was one of the really key messages [of the reform principles released July 27]. We’re uniting behind bold tax reform, there’s an urgency. Get it done this year.”

Brady said that to replace the $1 trillion of revenue lost by dropping the border-adjustable tax, Republicans will have to “look at the provisions . . . that really distort the tax code, that sort of instruct businesses [to] do this and do that, that create complexities.” He added, “We’ll take a look at all of those because what we want for local businesses is a tax code that’s a green light, not a directional signal.”

Ryan reiterated that the House Ways and Means and Senate Finance committees will take the lead on writing tax reform legislation. “Getting consensus between the White House, the Senate, and the House on a way forward on tax reform makes it that much more of a viable enterprise,” he said. “I feel much more confident that we’re going to stick the landing on tax reform because we have now said, ‘We have consensus, here’s the framework, let’s go get it done.’”

When asked if tax reform has to be revenue neutral, Ryan said it had to be compliant with reconciliation rules. He said that Republicans will make sure to take economic growth effects into consideration for revenue estimates, and “what that means is we can have a big tax cut, but also make sure that we are in compliance with our deficit targets, our deficit rules.”

Mark Your Calendars

While Republican policymakers work to come to consensus on what a unified tax reform effort will look like, stakeholders are also trying to estimate when an official deal will be revealed.

“I think we’ll have a bill out of the White House, the Senate, and the House by September 28,” Americans for Tax Reform President Grover Norquist said on CNBC July 31. “The White House and the House and Senate leadership have made it clear they’re working together to write this bill,” he said, noting a departure from Republicans’ attempt to repeal and replace the Affordable Care Act, which failed in the Senate July 28.

“It’s going to be sort of pre-negotiated and the pieces of it are a lot easier,” Norquist said.

Norquist recommended cutting the corporate and passthrough rates to 15 to 20 percent. “That gives you the political heft for tax reform,” he said. Beyond nailing down the specifics of rate cuts, lawmakers also need to come to an agreement on expensing, he said, asking, “Do you go to full business expensing, or do you go to full business expensing for three or four years and then back to 50-40 percent” in order to abide by reconciliation rules?

Follow Asha Glover (@AshaSGlover) on Twitter for real-time updates.