The White House and House Republicans have plenty of disagreements about how to proceed with tax reform, which makes one of the things they agree about kind of surprising: Both insist that they will get a major piece of legislation overhauling the federal tax code passed before the end of the year.
Treasury Secretary Steven Mnuchin, speaking at the Peter G. Peterson Foundation Fiscal Summit in Washington on Wednesday, admitted that his original prediction that a bill would reach the president’s desk by August isn’t going to happen. However, he insisted that things are -- indeed, must be -- on track.
“Our objective is to get it done this year,” Mnuchin said, describing it as the Trump administration’s “number one priority.” He added, “It is critical to our plan for economic growth.”
Appearing at the same event a few hours later, Texas Congressman Kevin Brady, who chairs the House Ways and Means Committee confirmed that he is working with the same timetable in mind.
“We’re focused on delivering it this year,” he said. “Tax reform before the end of 2017.”
If that’s going to happen, there are some major hurdles that will have to be overcome, and some very difficult negotiations that will have to take place, all of them among Republicans.
For one, the White House and the House Republicans are not in agreement on the tax rates that a final plan would be expected to settle on. The Trump administration has called for slashing the business tax rate to 15 percent from 35 percent. The House doesn’t think they can get that rate lower than 20 percent. There is also disagreement on the structure of individual income tax brackets.
There is also the question of allowing companies to immediately write off the cost of capital investments while removing the tax deduction for interest payments. Brady said that the House envisions half of the growth it projects from its plan coming from that change in particular. However, he admitted, the transition from the current system would be extremely complicated and would require considerable negotiations with the administration.
Finally, there is the issue of a border-adjustable tax, which the House is extremely anxious to put in place, in large part because the revenue it would raise from a tax on imported goods and raw materials would help offset proposed cuts to the personal income tax rate. However, the White House is, at best, lukewarm to the idea.
Brady said that considerable work remains to be done to reassure people that the impact wouldn’t hit some businesses or consumers disproportionately, and to convince skeptics of the overall benefits of the plan.
Nevertheless, he said that he remains confident that the House is on track to pass a bill that the president can sign. Other observers aren’t so sure. House Minority Leader Steny Hoyer, appearing just before Brady, pointed out that he was serving in Congress the last time a major tax reform bill was passed in 1986.
“I think it’s very doubtful as to whether or not they are going to be able to get any kind of consensus on major tax reform,” Hoyer said.
“My experience in 1986...the way you got tax reform is you created a very large consensus,” he continued. “I don’t see any consensus. Not only between Democrats and the White House. I don’t see any consensus between the Trump policy and [House Speaker Paul] Ryan and Brady’s policy. They’re not on the same page.”
Pete Peterson funds The Fiscal Times, an independent news and opinion organization, as a private venture. The Fiscal Times is not associated with The Peter G. Peterson Foundation.