Republican lawmakers are working toward nailing down key components of the upcoming tax reform bill and getting closer to holding markups, House Ways and Means Committee Chair Kevin Brady, R-Texas, said October 5.
Brady said that while there are still disagreements among lawmakers on some issues, Republicans are “farther along and settled on a great number” of issues. “We’re in those key weeks right now,” he told reporters during a briefing.
He also said House passage of its fiscal 2018 budget cleared the path for “once-in-a-generation, pro-growth, pro-family, pro-middle class tax reform. . . . Moving forward, [the] Ways and Means Committee will continue our work on the overall tax reform plan and the timetable of bringing this forward once the budget is signed, sealed, delivered,” Brady said.
Ways and Means Tax Policy Subcommittee Chair Peter J. Roskam, R-Ill., predicted October 5 that tax reform legislation would go straight to a committee markup, bypassing any additional hearings. He added that a markup could be held on legislation in October. But subcommittee ranking minority member Lloyd Doggett, D-Texas, cautioned against passing tax legislation without giving Americans an opportunity to judge its impact.
In an October 4 letter to Brady and Roskam, Doggett said tax reform should be a deliberative, bipartisan process that allows for consideration of a broad range of opinions from expert witnesses and Trump administration officials.
Doggett said that without thorough consideration, Americans will not be able to judge whether GOP tax proposals encourage U.S. job creation, avoid widening the income gap, maintain fiscal responsibility, or enrich President Trump and his family.
State and Local Tax Deduction
Beyond the legislative process, a Senate Democratic leader also criticized Republicans’ proposal to eliminate the state and local tax deduction.
Eliminating the deduction would affect more than just a handful of states, as Republicans have claimed when justifying its elimination, Senate Minority Leader Charles E. Schumer, D-N.Y., told reporters during a press briefing. He said that when legislators attempted to include a provision to eliminate the state and local tax deduction in 1986 tax reform legislation, “they had to remove it before they could move forward on the bill. The same thing is going to happen here.” Schumer added that removing the provision would increase the deficit by $1.3 trillion.
He said that compromises floated by Republicans, such as making taxpayers choose between the mortgage interest deduction and the state and local tax deduction, are “half-baked and won’t work.” A proposal suggested by Ways and Means Committee member Tom Reed, R-N.Y., to create a tax credit for state and local taxes would not be a viable alternative, Schumer said. “It’s like saying, ‘Constituent . . . will you accept it if I chopped two instead of five of your fingers off?’”
Schumer said that the provision would attract significant pushback from Republicans. “Even if they do reconciliation, it’s going to force enough votes [against] that they can’t pass it,” he said.
Brady told reporters that there have been no changes to the Republican tax reform framework, which includes eliminating the state and local tax deduction, but that lawmakers are “listening very carefully to ideas and how we make sure we deliver tax relief for the families.”
White House press secretary Sarah Sanders said Trump has been clear about his position and that the White House plans to proceed with the framework released in September.
“The president has laid out his priorities and the framework of what he wants to see in this tax relief package,” Sanders told reporters. “I think one the big things you have to look at is that most Americans don’t actually itemize deductions — 80 percent of the benefit goes to six-figure tax filers. The fact is — is it fair? And it doesn’t make sense for working Americans across the country to subsidize the very wealthy in a few states.”
CRS on Corporate Rate Cut
A new Congressional Research Service report could weaken GOP assertions that tax reform centered on lower corporate rates would generate economic benefits.
The analysis, written by Jane G. Gravelle, a senior specialist in economic policy, said claims that behavioral responses may boost revenues if rates are cut do not hold up on either a theoretical or an empirical basis.
“Studies that purport to show a revenue-maximizing corporate tax rate of 30% (a rate lower than the current statutory tax rate) contain econometric errors that lead to biased and inconsistent results; when those problems are corrected the results disappear,” the report says.
Claims that America’s high tax rates weaken its position in the global economy “suffer from a misrepresentation of the U.S. tax rate compared with other countries and are less important when capital is imperfectly mobile,” the report says.
It also says available evidence suggests that the burden of the corporate income tax falls largely on capital rather than labor.
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