By JOHN T. BENNETT and LINDSEY McPHERSON, CQ Roll Call
The Trump administration on Wednesday rolled out a massive package of tax rate reductions and code changes. Senior officials claimed it will “pay for itself,” even though details remain murky and a fight with Congress lies ahead.
The package proposes lowering the corporate tax rate to 15 percent. Trump contends doing so would make U.S. businesses more competitive. The plan would also provide a moderate tax cut for middle-income Americans by increasing their standard deduction.
As the new Republican president and White House continue slogging toward a deal on a revised measure that would repeal and replace the Obama administration’s 2010 health care law, experts and lawmakers say tax reform could be even more difficult. The Trump plan’s apparent effect on the deficit and exclusion of a House GOP-favored border tax instantly erect big hurdles.
The White House late last week promised broad “principles” — just what it delivered Wednesday. The one page summary it handed out closely resembled the Trump campaign’s tax plan.
The tax proposal would reduce the number of tax brackets from seven to three: 10 percent, 25 percent and 35 percent. Where each bracket falls remains undecided. The president’s tax proposal would “double the standard deduction” for individuals while terminating the “alternative minimum tax.”
The package would also “eliminate targeted tax breaks that mainly benefit the wealthiest taxpayers,” while also protecting homeownership and charitable giving deductions. Also, Trump proposes to repeal the “death tax” so family businesses won’t have to be sold to pay a big tax bill, his top economic aide, Gary Cohn, told reporters at the White House.
On the business side, Trump’s plan would lower the existing 39.6 percent corporate tax rate to 15 percent. It would also install a “one-time tax on trillions of dollars held overseas” and “eliminate tax breaks for special interests,” according to the White House summary.
Cohn said, if enacted, the plan would be “the most significant tax reform legislation since 1986, and one of the biggest tax cuts in the American history.”
The broad plan closely reflects Trump’s campaign themes of “job creation, economic growth, and helping the low- and middle-income families who have been left behind by this economy,” as Cohn described Wednesday. “That’s why tax reform is such a big priority to this president,” he added.
Treasury Secretary Steve Mnuchin contended the president’s tax plan would “pay for itself” via economic growth and things like its proposed deductions changes.
Mnuchin and Cohn made clear the package is still in its embryonic state. Many “details” must still be ironed out — and they are well aware that House and Senate lawmakers will want to shape the final legislative text, they said.
Cohn declared tax reform long overdue and promised the administration will slash taxes to make businesses competitive for the American people, “especially low- and middle-income families.” Neither Cohn nor Mnuchin had answers about how much of a tax cut those families should expect.
White House officials will work with lawmakers over the next few months to turn the broad strokes unveiled Wednesday into actual legislation. In a sign of possible White House flexibility, the administration’s one-page summary said those talks will aim for legislation that can pass both chambers.
House Ways and Means Chairman Kevin Brady will be key to molding and pushing Trump’s plan through that chamber. The Texas Republican and Mnuchin have been working closely for months on the reform package. All the lower rates the president is proposing will be a challenge on Capitol Hill, Brady said Tuesday.
“I think the bolder the better in tax reform,” Brady said. “I’m excited the president is going for a very ambitious tax plan because it’s going to take some real game changing approaches for us to leapfrog back into the top three places on the planet for new jobs and new investment.”
Brady seemed to signal that the plan will inevitably change after lawmakers begin re-working it. (The Constitution places tax-writing policy in the hands of the legislative branch.)
“I’m convinced that working with the White House we can deliver the most competitive rates and design of tax code in a permanent way that grows our economy,” Brady said.
The Trump plan breaks with congressional Republicans by excluding the so-called “border adjustment tax” so many of them support. The idea would be to slap a 20 percent tax on imports from select countries, helping to offset — or pay for — other tax cuts.
Even after Wednesday’s roll out, it remains unclear just how the president plans to implement the “massive border tax” he called for throughout the campaign.
“I don’t like the word ‘adjustment’, because our country gets taken advantage of, to use a nice term, by every other country in the world,” Trump told Fox Business News earlier this month. “Adjustment means we lose. We lose.”
Brady made clear House Republicans will keep fighting for its inclusion.
He said the BAT “isn’t just a pay-for,” saying it is “about leveling the playing field and taxing all products and services equally in America for the first time ever — and eliminating any tax incentives to move American jobs and plants overseas.”
Another major question about the tax plan — likely to take months being transformed into legislative text and submitted to lawmakers — is whether Republicans can clear a 60-vote Senate threshold with no Democrats.
Speaker Paul D. Ryan earlier Wednesday signaled it could be possible.
“What’s easier on tax reform is the entire bill can go into reconciliation, not just part of it,” Ryan said at the Baker Hostetler legislative seminar. “You can do one bill that does all that you want to do, need to do, on tax reform and that makes the process much easier [than health care].”
Lawmakers on both sides of the Capitol have plenty of ideas about tax reform, meaning the White House will have to sift through those inputs and likely include some in whatever the House and Senate ultimately take up.
For instance, Sen. Roy Blunt, R-Mo., on Wednesday said passing a tax overhaul, which he considers a more difficult policy lift than health care, might be simplified by combining the measure with an infrastructure package.
White House Legislative Affairs Director Marc Short said Tuesday he still expects the House and Senate to pass a health care measure before a tax plan. Before such a bill even arrives on Capitol Hill, Short expects four to six weeks of meetings among members and White House officials, including Trump.
It would only then begin a slow march to the House and Senate floor, then possibly a conference committee to hammer out any differences. Both chambers are expected to depart in late July for their annual August recess with a debt ceiling fight and another government shutdown threat possibly awaiting them in September.
“I’m less focused on the month than on the year for tax reform,” Brady said, “which will be this year, 2017.”
Mark Hamrick, a senior economic analyst at consumer financial services firm Bankrate.com, made clear the president faces an uphill fight. Individual and corporate tax reform is essentially the entire economy, he said.
“The split within the GOP over taxes might well be just as difficult to overcome,” Hamrick said, citing border adjustment differences as a major hurdle. “So, the problem remains how to find an eventual plan, as well as potential implications for the debt and deficit.”
Mnuchin sidestepped questions about whether the president’s tax plan would improve his personal financial situation. Trump’s treasury secretary and top economic adviser abruptly left the White House briefing room soon after.
Barack Obama, the charismatic former president, can cause a scene just by walking into a coffee shop, as the rapturous crowds in usually blase New York City demonstrated at one of his cameos. So as he gently re-entered the public and policy eye this week, it’s no surprise that he could throw both Democrats and Republicans off balance — though of course for very different reasons.
Senate Majority Leader Mitch McConnell gave President Donald Trump possibly his most important first-100-day achievement by spearheading the maneuver to transform Obama’s Supreme Court pick to replace Antonin Scalia into the conservative Neil Gorsuch, whose first significant vote allowed an Arkansas execution to proceed. McConnell’s obstruction and subsequent “nuclear option” may have played a part in breaking the democratic process, but isn’t that a small price to pay for a win — at least I’m sure the president feels that way.
The Republican Congress and a Republican president, through executive orders, laws and public statements, have focused on undoing the Obama legacy, from immigration reform to climate change to criminal justice. Their major impediment, on, for example, the Affordable Care Act, has been the fractures within the party itself.
The former president’s appearance this week at his pre-presidency hometown of Chicago, moderating a panel of young future leaders on community engagement, was not outwardly political. But of course it was, as all the values he holds dear and the issues he chose to champion in and out of the White House run counter to the GOP playbook. Even the setting, in a city Trump has demonized, sent a message.
McConnell, the man who stymied Obama time and time again, could not quite put him away by making him that one-term president, as he promised at the midpoint of Obama’s first term. In his reappearance on the public stage, can Obama do anything to halt the assault on his legacy?
The Kentucky senator must be wondering what the former president could possibly do to return the favor of McConnell’s disfavor.
Democrats, on the other hand, might be longing for some leadership after an ugly, dispiriting campaign that ended in big losses. But is the rested and ready Obama a reminder that it was under his leadership that the party lost big in state legislatures and governors’ races over eight years?
His large persona did not come with coattails in subsequent midterm elections, and the crowds’ cheers came with grumblings from Democratic Party pros that Obama was not that interested in grass-roots party building in 50 states.
Obama, as usual, is charting his own path. He always was an outsider, in some ways, who kept his own counsel. It may have appealed to an electorate in two presidential runs, but puzzled and frustrated politicians.
Though Democrats waved goodbye wistfully, they also need new faces for next steps, as polls show that the public may not like Republicans, but finds Democrats not in touch with concerns of the average person. Essential regrouping could be a lot more difficult when the glamorous prom king sort-of returns.
The fact that his guy, Tom Perez, beat progressive favorite Keith Ellison for Democratic National Committee chairman still rankles some as the party tries to stay united. That’s always been tough for Democrats, a trait on display in the Perez-Bernie Sanders road show.
The Obama family, each member with star power and a particular appeal — “Oh, Michelle,” her nostalgic fans wail — are now more welcome presences than the Clintons with a legacy tarnished with an unexpected and spectacular fall that will be the subject of books and misgivings till the end of time.
But the Democratic Party, a back bench depleted by all those state losses, also wants to go about the business of building star power. As Jon Ossoff, who was a whisper away from a first-round knockout in a House race in Georgia, and a-close-but-no-cigar finish for the Democrat in a Kansas special election prove, the road back will be rocky indeed.
On the plus side for Democrats, Obama’s influence could unite the party that showed togetherness after Trump’s win but is already breaking apart on issues such as abortion rights. He is supporting and taking an increasingly visible role in the fight by his former attorney general, Eric Holder, to break up the byzantine and ingenious redistricting and gerrymandering that have given Republicans in Congress and states an edge, even when vote totals favor Democrats.
Obama’s cool and popularity also seems to truly bother the new president. At Trump’s inauguration, he cozied up to and even courted the approval of the man he long said, using racially tinged, sinister and unproved accusations, was not a legitimate leader of the free world.
Then, he tweeted the charge — denounced by anyone with facts — that Obama wiretapped Trump Tower. Trump has continued to keep an eye on the man he reviles and admires, something that will be much easier as Obama tantalizingly ladles out public appearances here and there.
Republicans in Congress, with health care, tax reform and keeping the government open, have moved on in ways the new president has not.
Though out of office, Obama still seems to engender the passion that only abated when Hillary Clinton became the pinata of choice. Looking back can become a distraction when you’re trying to make progress and forge ahead.
Roll Call columnist Mary C. Curtis has worked at The New York Times, The Baltimore Sun and The Charlotte Observer. Follow her on Twitter @mcurtisnc3.