Trump Tax Plan Sets Up Another Battle With Congress

President would lower corporate rate, slash individual brackets from 7 to 3

President Donald Trump delivers remarks while hosting ambassadors from the 15 country members of the United Nations Security Council with his Ambassador to the U.N. Nikki Haley, left, and National Security Advisor H.R. McMaster in the State Dining Room at the White House on Monday. (Chip Somodevilla/Getty Images)
President Donald Trump delivers remarks while hosting ambassadors from the 15 country members of the United Nations Security Council with his Ambassador to the U.N. Nikki Haley, left, and National Security Advisor H.R. McMaster in the State Dining Room at the White House on Monday. (Chip Somodevilla/Getty Images)
Posted April 26, 2017 at 3:21pm

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.”

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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 from 35 percent the existing top 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.

[White House: Final Health Care Deal Unlikely This Week]

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.

Correction: An earlier version of this story incorrectly identified the current top corporate tax rate.