It is unclear when an outline of principles for comprehensive tax reform favored by the so-called Big Six group of lawmakers and administration officials will be released, with one member of the group saying it would be released soon and another saying it wouldn’t be released before lawmakers leave for the August recess.
Following a closed-door meeting of the group on Capitol Hill the evening of July 26, House Ways and Means Committee Chair Kevin Brady, R-Texas, told reporters that the House, Senate, and White House are “uniting behind key tax reform principles,” adding, “You’ll see those soon.”
Brady declined to give a more specific timeline, saying he would “leave it to the press folks.”
However, earlier in the day, Senate Finance Committee Chair Orrin G. Hatch, R-Utah, told Tax Analysts the outline was unlikely to be released before the August recess. Hatch said the group, which also includes House Speaker Paul D. Ryan, R-Wis.; Senate Majority Leader Mitch McConnell, R-Ky.; Treasury Secretary Steven Mnuchin; and National Economic Council Chair Gary Cohn, has moved closer to an agreement, “but the question is whether we’re prepared to go with something by recess.”
Several tax lobbyists in Washington speculated that the evening meeting would result in the release of an updated outline of tax reform principles, following Ryan’s remarks at the Capitol Hill Club late July 25, where they said he suggested moving up the release of details to mid-August.
Hadar Susskind, senior vice president of government relations at the Council on Foundations, told Tax Analysts that a representative of his organization heard Ryan’s tax reform discussion and said Ryan told attendees that he expected the Big Six to release some type of document outlining tax reform principles by July 28.
Brady would not confirm that expectation, telling reporters that the White House would be the most likely to make any announcement.
One congressional tax staffer said the group will likely discuss whether to release any tax reform messaging ahead of Congress’s upcoming August recess, including whether it is appropriate to set specific deadlines for action this fall. The members could also determine whether any broad areas of agreement exist, the staffer said, adding that the Senate’s lukewarm response to the House’s controversial border-adjustable tax is still impeding progress.
House taxwriters “know it’s not going anywhere,” Hatch later told Tax Analysts of the proposed border-adjustable tax. “They say that privately; they know it’s not going anywhere.”
Known Areas of Agreement
The areas of agreement among the Big Six that are already known include the preference for a lower corporate tax rate and for moving from a worldwide system of international tax to a territorial system.
Mnuchin touted the benefits of both those proposals at a hearing of the Senate Appropriations Financial Services and General Government Subcommittee earlier in the day, saying they would ensure that companies invest more in the United States and would lead to higher wages for workers.
Subcommittee member and Senate Democratic Whip Richard J. Durbin of Illinois suggested that with U.S. corporate profits as a share of GDP never higher and corporate taxes as percentage of GDP never lower, the Trump administration might rethink its tax reform priorities.
“Despite the growth in corporate profits in America, there has not been a parallel growth in the earning power and wages of the people who are working for these corporations,” Durbin said, urging the Trump administration to look at tax reform “not in terms of the boardroom, but of the family room.”
Mnuchin said that’s one reason the Trump administration wants to move to a territorial system. “The last eight years have been a terrific time for rich people and financial markets, but the average American has not seen their wages increase, and that’s something that we are very, very focused on with economic growth,” he said.
While the effective corporate tax rate is much lower than the statutory 35 percent rate, Mnuchin said, “many of our corporations leave money offshore because they get to defer the tax and not pay anything here.” Switching to a territorial system will allow trillions of dollars to come back and be invested in the United States, benefiting workers, he argued.
But Durbin responded that the country’s last experience with repatriation — the American Jobs Creation Act of 2004 — “proved that unless you are careful in how you do that, the money, profits, will be repatriated and will go out the back door in dividends and corporate salaries, instead of what you just said — reinvestment in our economy.”
A Break for the Middle Class?
While much of the tax reform discussion so far has focused on corporate taxation, President Trump raised the possibility on July 25 of increasing taxes on the wealthy to provide tax relief for middle-income Americans.
“The people I care most about are the middle-income people in this country, who have gotten screwed,” Trump said in an interview with The Wall Street Journal. “And if there’s upward revision, it’s going to be on high-income people.”
Trump didn’t elaborate on how his tax proposals would help middle-income taxpayers, and his one-page tax reform outline released earlier this year offers few details on how it would reform the individual side of the tax code. But analyses of Trump’s tax proposals so far have found that their benefits would mostly go to the wealthiest taxpayers. For example, a recent dynamic analysis from the Urban-Brookings Tax Policy Center estimated that 49.4 percent of the administration’s tax cuts would go to the top 1 percent of earners, providing an average annual tax cut of $174,540.
Dylan F. Moroses and Wesley Elmore contributed to this article.
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