Washington insiders hungry for tax reform are bracing for President Trump to unveil an agenda light on details and scaled back from the ambition of his 2016 campaign.
The president campaigned on a fundamental overhaul of the federal tax code compatible with a plan drafted by House Speaker Paul Ryan, R-Wis., His would generate $1 trillion in revenue by radically transforming how imports and exports are levied.
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But Trump backed away from the proposal soon after winning the election and has since been vague about his position on tax reform beyond platitudes about wanting to simplify the code and cut corporate and individual rates.
Republicans and business interests anxious for specifics aren’t expecting much more than that from the White House when Trump’s agenda is introduced on Wednesday, just in time to meet his 100-day mark in office.
“Our coalitions are scrambling, trying to anticipate what’s coming and how we should be prepared to respond — if at all,” a Republican lobbyist said, on condition of anonymity in order to speak candidly. “This is so bizarre.”
A White House turf war over tax reform has contributed to the confusion and uncertainty about the president’s position.
Soon after Trump won the election, he chucked the tax reform plan developed by his economic advisors on the campaign. A battle among his top administration aides ensued for influence over what form a new plan would take.
Former Goldman Sachs executive (and Democrat) Gary Cohn, the president’s chief economic advisor, eventually muscled out another Goldman Sachs alum, Steven Mnuchin, for possession, even though as treasury secretary, Mnuchin outranks Cohn.
Contributing to the sense of aimlessness on taxes coming from the White House was the fact that that Trump from the start was unusually ambiguous about tax policy for a businessman who spent a career paying taxes and being directly impacted by them.
Stephen Moore, an economist with the conservative Heritage Foundation think tank who advised the president’s campaign this issue, said it was hard to predict what Trump’s tax agenda would look like when he introduces it later this week.
“I’m not sure if they know,” Moore said Monday in a telephone interview with the Washington Examiner. “There’s definitely some internal strife on what the best course of action is: To go for the big bang — simplify the system and broad-based reform, versus just a tax cut.”
This indecision has left congressional Republicans in limbo, frustration they’re willing to express only privately.
Absent direction from Trump, they can’t figure out if they should embrace Ryan’s blueprint, complete with the politically charged “border adjustability” border tax provision, or devise an alternative. Senate Republicans oppose Ryan’s plan.
Mnuchin, who declined during a brief White House news conference Tuesday to say whether Trump would finally weigh in on border adjustability, countered that the president has been clear for several months about his principles for tax reform.
“On the personal side, we’re about a middle-income tax cut and simplification,” the treasury secretary said during a short appearance at the White House daily press briefing. “On the business side, we’re about making them competitive.”
Mnuchin and other senior administration officials were scheduled to meet with Republican leaders in the House and Senate Tuesday on Capitol Hill to discuss what’s next for tax reform.
The prospects for an overhaul took a hit when House Republicans and the White House failed to negotiate consensus legislation to partially repeal and replace Obamacare.
Many Republican champions of tax reform, which hasn’t been achieved since President Ronald Reagan worked with House Democrats to produce an overhaul in 1986, are pessimistic. The issue rivals health care in complexity and political sensitivity.
“It’s a heavy lift,” Moore said.
But Trump’s allies in the business community and among conservative activists are pressing the White House not to let the setback on health care impact their tax agenda. They want wholesale reform, not simply tax cuts.
A rate reduction, accompanied by eliminating the complexity of the code and the raft of special carve outs for various industries, is viewed as essential to sparking economic growth in the range of 3 percent to 4 percent.
That’s unlikely at this point, say Republicans who keep tabs on Trump’s emerging tax agenda. But the White House is signaling that it will propose cutting the corporate tax rate from 35 percent, among the highest in the world, to 15 percent.
Grover Norquist, a key conservative voice on taxes who is president of Americans for Tax Reform, said such a dramatic cut in the corporate rate might be enough to accomplish the main goal of broad reform, which is to raise the economic growth above 2 percent.
“That’s dramatically pro-growth,” Norquist said.
