Congressional taxwriters are aiming for a corporate tax rate in the 20s instead of the 15 percent corporate rate proposed by President Trump, House Speaker Paul D. Ryan, R-Wis., said September 7.
Trump “obviously wants to push this as low as possible,” Ryan said of the corporate rate. “I completely support doing that, but at the end of the day, we’ve got to make these numbers work,” he said. “I think our goal is to be at or below the industrialized world average, and that’s 22-1/2 [percent]. So our goal is to get in the mid- to low 20s, and we think that that’s an achievable goal.”
Ryan, speaking at a forum in Washington sponsored by The New York Times, said that lowering rates for both passthroughs and corporations would encourage growth and result in better wages for workers because “they bear the brunt of a lot of these taxes.”
Specifics of any tax reform legislation, including when it will be revealed, are in the hands of the House Ways and Means and Senate Finance committees, Ryan said. “I’ll leave it up to the taxwriters . . . to decide when they’re going to release their template, as they describe it,” he said. “Once they release their template, they start moving through committee legislation. It’s going to take a while to do that; it always does.”
House Ways and Means Committee Chair Kevin Brady, R-Texas, told reporters September 7 that “real progress” was made at a meeting of the “Big Six” tax reform negotiators that day, although he did not provide specifics. “We’re really, again, making progress on the important decisions that go into this framework,” he said. “From this framework, the Ways and Means Committee will fill in the details, transform this into legislative text, which we’re in the process of right now.”
Treasury Secretary Steven Mnuchin gave a similar progress report in an interview on the Fox Business Network. “I think it’s still very viable to get it done this year,” he said of tax reform. “There’s a lot that’s done; the major blueprint has been outlined. It’s going to go to the committees; the committees will add to different parts of this.”
Any tax reform bill passed by the end of 2017 will be retroactive to the beginning of the year, said Mick Mulvaney, director of the Office of Management and Budget, during a September 7 Fox Business interview.
Responding to Ryan's remarks, Mulvaney said, “We will continue to advocate for the biggest reforms and the biggest reductions that we can possibly get. At the end of the day, the president doesn’t get to make law — the House and the Senate do. So we’ll be working with them, as we have to try and get the best possible package that can pass.”
Finance Hearing Scheduled
Meanwhile, the Finance Committee announced that it has scheduled a September 14 hearing to discuss how the tax system can be reformed for individuals and families. “Clearly, the code is broken and that’s why Congress and the administration are working to create a tax system for individuals that is simpler, fairer, and will deliver much-needed relief to middle-class families,” committee Chair Orrin G. Hatch, R-Utah, said in the hearing announcement.
Ryan said he thinks there is agreement among lawmakers to preserve the income exclusion for employer-sponsored healthcare, as well as the mortgage interest and charitable giving deductions. “We see those as more broader-based, important things that should be encouraged,” he said.
Tax reform negotiators are reportedly considering reducing the cap on home mortgages eligible for the interest deduction to as low as $500,000, but Ryan did not address that possibility.
Conversations about the standard deduction have focused on “something close to doubling” it, Ryan said, adding that doing so while keeping “things that middle-income families really rely on and participate in,” such as the mortgage interest and charitable deductions, will “dramatically simplify the code, and it’s fairer that way.”
Eliminating the state and local tax deduction, meanwhile, is a “fairness issue,” Ryan said, because that deduction “uniquely goes to wealthier people,” especially if the standard deduction is increased.
One proposal said to be under consideration by tax reform negotiators would replace the deduction for state and local taxes with a credit. Few details exist of the proposal, suggested by House Ways and Means Committee member Tom Reed, R-N.Y., but the Tax Foundation has estimated it would raise much less revenue than eliminating or limiting the current deduction.
Freedom Caucus Demands Details
A group of conservative House Republicans doesn’t want to wait for specifics of a tax plan. The House Freedom Caucus needs to know what’s going to be in a bill, Rep. Dave Brat, R-Va., told Tax Analysts September 7.
“No one knows anything,” he said. “I think we’re actually developing our own plan to make it very clear since there’s been such a lag. We were told six months ago that we would see the details in two weeks.”
Axios reported September 7 that the caucus wants to lower the corporate rate to 16 percent, double the standard deduction, and drop revenue neutrality. The group also would seek to change the budget window, Axios reported.
Mnuchin expressed concern about the Freedom Caucus plan in his Fox Business interview. “I hope there’s not an intent on a separate plan,” he said. “There’s one plan. It’s going to be debated. It will be discussed.”
Rep. Mark Meadows, R-N.C., who chairs the caucus, told Tax Analysts the group merely has concepts it hasn’t yet put into legislative text. Meadows said he doesn’t anticipate the caucus offering its own legislative text but instead is “going to really try to work with Chairman Brady.”
Brady told reporters he thinks the Freedom Caucus agrees “that it’s important not to do tax reform like we did healthcare,” indicating that a more open process than the one used on the American Health Care Act would serve tax reform efforts. Brady said that the conservative group of GOP lawmakers and Republican leaders “share a lot of common principles” on tax reform.
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