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Ryan Urges Passage of Permanent Tax Reform by Year-End

Posted on June 21, 2017 by Asha Glover, Luca Gattoni-Celli

House Speaker Paul D. Ryan, R-Wis., in what his office billed as a “major” speech on tax reform June 20, called for the passage of permanent tax reform for both individuals and businesses by the end of 2017.

“We are going to cut taxes. But if we are going to truly fix our tax code, we have to fix all of it — both for individuals and businesses,” Ryan said. “Why? Because this will create jobs. That is what this is all about: jobs, jobs, jobs. Good, high-paying jobs.”

Speaking at the National Association of Manufacturers’ annual summit in Washington, Ryan pointed to some specifics of a potential overhaul of the tax code that were included in House Republicans’ “A Better Way” tax reform blueprint. These include eliminating the estate tax and the alternative minimum tax, going from seven individual tax brackets to three, and doubling the standard deduction.

Ryan committed to enactment of tax reform this year, saying, “We are going to get this done in 2017. We need to get this done in 2017. We cannot let this once-in-a-generation moment slip. . . . Transformational tax reform can be done, and we are moving . . . full speed ahead.”

Ryan also made the case for permanent reform. “These reforms — these tax cuts — they need to be permanent,” Ryan said. “Every expert agrees that temporary reforms will only have a negligible impact on wages and economic growth. Businesses need to have confidence that we will not pull the rug out from under them. They need the certainty from permanent tax cuts to hire more workers, invest in their businesses, and plan for the future.”

Ryan and House Ways and Means Committee Chair Kevin Brady, R-Texas, have consistently urged permanent, revenue-neutral tax reform, but some senators and White House officials have sent mixed signals on whether they would accept temporary tax cuts instead.

Ryan also emphasized the need for a territorial system of international taxation, arguing that transitioning to such a system will help halt corporate inversions and remove incentives for U.S. companies to move overseas. “We are actually very unique in the world in the way we discourage capital from coming back to America and how we incentivize offshoring jobs,” he said. “This is not the kind of exceptionalism we should aspire to. . . . We must think differently, so that once again we make things here and export them around the world.”

Narrowing the Differences

In a CNBC interview after his speech, Ryan said he hopes to have reform completed in the fall. “We are narrowing our differences between the House, the Senate, White House, getting on the same page, and then we’re going to be delivering tax reform in the fall,” he said. “The reason I’m confident about doing this is every Republican I know in Congress is dedicated to getting tax reform done because we realize this is existential for the future growth of our economy and for the competitiveness of American business, big and small.”

Ryan did not address which issues specifically are still being resolved between Congress and the White House in their tax reform negotiations. He told CNBC that he and the Trump administration are fairly aligned on “just about everything, actually,” adding that he would “love it” if there could be a 15 percent corporate tax rate as the White House proposed in its one-page tax reform outline.

National Economic Council Director Gary Cohn recently suggested that draft tax reform legislation will be ready by the time Congress returns from its monthlong August recess. Ryan said that the House, the Senate, the White House, and Treasury will “spend all summer long” drafting and getting scores on tax reform legislation.

“We want to get these rates as low as we possibly can, get to a territorial system — there are the basics that we all agree on and that’s what we’re working off of right now,” he said, adding that comprehensive permanent tax reform paired with regulatory reform is instrumental in getting 3 percent economic growth.

Speaking before Ryan at the National Association of Manufacturers event, Vice President Mike Pence also presented a united GOP front. However, unlike Ryan, Pence repeatedly touted tax “relief," only using the term "tax reform" once, as he praised Ryan and Senate Majority Leader Mitch McConnell, R-Ky., for working with the White House on the issue.

“Discussions will continue, details are being worked out,” Pence said. “But I can assure you, with your support, and the support of our leaders in Congress, we will get tax cuts done and we will get them done this year.”

Similarly, White House press secretary Sean Spicer said June 20 that there’s major agreement between the White House and congressional Republicans on what “any significant tax reform package must include,” including tax simplification and a need to reduce the compliance burden. He added that there is also agreement on timing, saying, “Perhaps most importantly, we all agree we need to get this done sooner rather than later.”

Despite their areas of agreement, Congress and the White House have yet to signal consensus on how to pay for their tax cuts. While Ryan and Brady have shown steadfast support for the border-adjustable tax included in their blueprint, the White House and many lawmakers from their own party have largely dismissed the proposal.

Ryan didn’t mention the border-adjustable tax during his speech, but he told CNBC that the proposal isn’t dead. “We acknowledge, along with the administration, that in its present form — a fully phased-in, immediate, 100 percent, day one — you can’t do that,” he said. “We don’t want the currency to have to appreciate 25 percent overnight. We think that that would be very disruptive.”

In hopes of winning more support for the border-adjustable tax, Brady proposed the week of June 12 a five-year phase-in of the levy.

Ryan's speech didn't appear to move the needle for Democrats on tax reform, with Ways and Means member Lloyd Doggett, D-Texas, criticizing the lack of hearings on tax reform. “What they now call ‘full speed ahead’ did not produce a public hearing for 11 months to even begin evaluating its many shortcomings,” said Doggett, ranking minority member of the Tax Policy Subcommittee. In a letter to the committee and subcommittee chairs, Doggett urged hearings on several tax reform issues, including passthroughs, immediate expensing, revenue raisers, and dynamic scoring.

Tax Reform in Relief

During a PwC webcast after Ryan spoke, former McConnell aide Rohit Kumar interpreted Ryan’s emphasis on transformative, permanent tax reform as a partial hedge against some Republicans’ growing willingness to set their sights lower, on an easier political win.

Kumar, who leads PwC’s tax policy services group in Washington, said he thinks that Ryan senses “there’s been a shift in the gravitational pull from reform to relief” and that temporary, expiring tax relief might be all that Republicans can pass given their use of budget reconciliation “and the political reality and the timing.”

Ryan’s personal goal of passing tax reform before Thanksgiving is commendable but highly ambitious, said Kumar. If both chambers pass a tax reform bill by the end of 2017, failure to enact something into law would be unusual but not impossible, he added. Setting that scenario as a realistic goal, Kumar said he would be confident that Congress could reconcile the bills’ differences in early 2018.

John Gimigliano of KPMG LLP said in a statement that the 2017 timeline for tax reform could make it a closed-door process. “Meeting this timeline could require shortcuts in the standard legislative process. These shortcuts, while speeding things along, could make the process less transparent and less collaborative,” he said.

Gimigliano welcomed Ryan’s call for permanent tax reform, but added that “permanence will likely require offsets to make the reform revenue neutral. Finding those offsets is always the most complex and most controversial aspects of tax reform.”

Kumar said he did not take much out of Ryan’s failure to mention the border-adjustable tax during the speech, arguing that Ryan's defending it as written would not be news, and that Ryan would certainly not acknowledge or declare that the embattled provision is dead. “In truth, he didn’t really talk about any of the kind of tough, base-broadener issues,” Kumar said of Ryan. “He was talking about all the benefits of reform.”

Whether tax reform becomes law by Thanksgiving 2017 or Valentine’s Day 2018, Kumar said, the effective date of simpler elements such as phased-in statutory rates would be the same, while any Treasury rules and regulations needed to implement more complex provisions would not be written this year either way, meaning their effective dates would have to be delayed. Any meaningful tax reform would yield “the rule-writing project to end all rule-writing projects at Treasury,” he said.

Jonathan Curry contributed to this article.

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