Friday, February 24, 2017

Tax Reform: Making Progress Slowly

The House Republican tax plan relies on revenue from a provision to tax imports and exempt exports to help defray rate reduction costs and Rep. Ken Brady, chair of the Ways and Means Committee, has even said that without the provision it is not possible to have a tax reform bill. Apparently, the Senate is willing to call his bluff, with Sen. Lindsey Graham (R-SC) even saying that there are not ten votes in the Senate in favor of the current House plan.
Former Senate Banking Committee chair Sen. Phil Gramm (R-Texas) agrees with Graham, writing in the Wall Street Journal that Republicans are "poisoning" tax overhaul efforts by including the contentious border adjustment tax and should look to the 1986 model of eliminating tax breaks to reduce the rates.
Gramm said a tax revamp could grow the economy even if the corporate rate isn't as low as the 20 percent rate Republicans have touted. "The House bill 'pays' for its 20% corporate tax rate by implementing policies that have little basis in economic logic, hinder economic efficiency, violate the letter and the spirit of numerous trade agreements, subject the economy to excruciatingly painful adjustments, expose America and the world to unacceptable economic risks—and in the process diminish or even eliminate the positive effect of the 20% rate," Gramm said.
So, where do we go from here?
Recently confirmed Treasury Secretary Steve Mnuchin said that, "I think there's a consensus on the majority of where we are on tax reform," without noting exactly what might be included in such a consensus other than a desire to enact something that can be called tax reform.
Mnuchin said it remains too early to reveal details of a tax plan from the Administration, such as retroactivity, revenue neutrality and distribution, but said the administration is committed to passage by August. "We've been working closely with the leadership in the House and the Senate, and we're working on a combined plan," Mnuchin said.
Stay tuned.

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