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White House Passes Torch to Congress in Tax Reform’s Next Phase

Posted on August 28, 2017 by Jonathan Curry

President Trump’s upcoming speeches on the importance of tax reform, set to begin August 30 in Springfield, Missouri, will coincide with a shift in the responsibility for drawing up tax reform details from the “Big Six” Republican leaders to the taxwriting committees.

“At the end of the day, tax legislation has to happen in Congress,” National Economic Council Director Gary Cohn told the Financial Times in an August 24 interview. “Congress is going to own the writing of legislation — that is key,” he continued, adding that getting more buy-in on legislation from the taxwriting committees is one of the lessons they learned from the failed legislative push on healthcare reform.

The joint statement released by the Big Six, of which Cohn is a member, provided the skeleton of a tax reform plan; now it’s up to House Ways and Means Committee Chair Kevin Brady, R-Texas, “to put flesh and bone on it, and they will do it . . . when the House comes back into session,” Cohn said.

Cohn has already signaled a willingness to defer to the committees on specific details. Regarding which business and individual tax deductions might be eliminated, Cohn maintained that “everything is on the table,” and added that the taxwriting committees will make most of those decisions. He added that he expects tax reform will include a one-time tax on repatriated profits, but again noted that that “is one area where Ways and Means will come out with their structure.” Figuring out how to comply with Congress’s reconciliation rules is also something for the committees to determine, Cohn said.

Treasury Secretary Steven Mnuchin, speaking at an August 25 White House briefing, indicated that the administration still intends to have a role in shaping tax reform legislation. “Our objective here is to have one plan that includes the administration, the House, and the Senate [working] very closely together,” he said.

Road Trip

Meanwhile, Trump is going to be “on the road making major addresses justifying the reasoning for tax reform and why we need it in the U.S.,” Cohn said.

The themes Trump is expected to tap into during his August 30 speech, according to Cohn, deal with economic recovery being unnecessarily sluggish since the 2008 financial crisis, tax reform making the tax code simpler for individuals, and the tax code’s high statutory tax rate and worldwide system of taxing foreign-source profits being uncompetitive for businesses.

During the August 25 briefing, White House press secretary Sarah Sanders declined to say if Trump would unveil new details of the developing Republican tax reform plan in his speech in Missouri, but she reiterated that the president's remarks would focus on “tax relief for middle-class Americans.”

The series of speeches expected from Trump fulfill a promise made by White House officials at a July 31 forum, in which White House Legislative Affairs Director Marc Short said the president would be traveling to upper-Midwest states with Senate races up for grabs in 2018 — particularly those with Democratic members of Congress who could be amenable to engaging with Republicans on tax reform.

Trump’s speech could place pressure on Senate Finance Committee member Claire McCaskill, D-Mo., who is up for reelection in 2018 in a state that Trump won by a large margin in the 2016 presidential election.

Cohn left open the possibility of working toward a bipartisan tax bill, though he added that if Democrats don’t want to get on board, “we will just do reconciliation.”

The Right Role

The new role for the White House — one of selling the importance for tax reform while giving lawmakers space to fill in the blanks on a plan — is “probably the right place for the White House to be,” Gordon Gray of the American Action Forum told Tax Analysts.

“The end product is going to have to come first from the committees of jurisdiction and Congress itself,” Gray said, but it will be important for the administration to set some guideposts and parameters for reform, which “should be accommodating” for lawmakers.

That public-facing, largely hands-off role mirrors how the White House under President Reagan approached the 1986 tax reforms, Gray noted. The Reagan administration allowed Congress to work out the details of a tax reform deal while they refereed the boundaries of that deal. When Reagan was willing to accept what lawmakers presented him with, the White House brought the power of the bully pulpit to bear, he explained.

Gray also noted that Trump “of late has a ton of baggage,” which he said raises the question of whether he is “so toxic that he actually might harm the effort.” But the alternative — not having the president involved at all — is that tax reform simply doesn’t get done, he said.

A GOP strategist who declined to be named also emphasized that tax reform must have the support of the president if it’s to have any chance of passing. The objectives Republicans are pursuing with tax reform are consistent with Trump’s long-standing message of creating more jobs and making the United States more attractive to businesses, which makes tax reform a natural fit for the president’s message, according to the strategist.

“The best support the President can give the House and Senate is the space to work out the details while he simply takes the tax reform message to America,” the strategist said in an email.

Friendly Fire

The White House is wise to garner public support for tax reform, but it also needs to enlist the support of members of Congress. As long as Trump continues his public assault on an ever-growing list of Republican senators, he puts that objective in jeopardy, Gray said.

Sanders defended Trump’s attacks on fellow Republicans as a way of pressuring them to make progress on their legislative priorities. “I think the American people are very frustrated with Congress’s lack of action,” he said. “And for years they’ve been all talk and no action. We’re looking for them to step up at this point,” Sanders said at the August 25 briefing.

But Gray disagreed, contending that Trump’s attacks are “totally counterproductive” and do “absolutely nothing to help his agenda.” That doesn’t necessarily mean that Republicans who are at odds with the president would vote against a good tax reform bill, but it does reduce their willingness to cooperate on more thorny issues, he said.

As for whether Democrats might be wooed into supporting a bipartisan tax bill, Gray was skeptical.

“Even if they were presented with a good bill, why would their leadership, at this point, give the president anything?” he asked.

Follow Jonathan Curry on Twitter (jtcurry005) for real-time updates.