The White House claimed this week that it’s leading the charge on tax reform, but that will mean resolving several issues that threaten to split Republicans, and with a skeleton crew that so far doesn’t include a chief tax policy official at the Treasury Department.
And as the healthcare failure showed last week, Trump is not necessarily able to woo all the Republican votes he’ll need to gain a victory on tax reform.
“One general takeaway from that is you have to go into it knowing what you’re trying to accomplish, and therefore who you’re trying to get on your side,” said Jeff Kupfer, who teaches public policy at Carnegie Mellon University and previously served in the George W. Bush Treasury Department and as executive director of Bush’s panel on tax reform.
“We have to coalesce around a tax plan, argue behind closed doors, come to an agreement and then speak with one voice,” agreed Rep. Chris Collins, R-N.Y.
Undaunted, White House press secretary Sean Spicer suggested this week that Trump would lead the Republican effort to overhaul the tax code, and told reporters that “we’re driving the train on this.”
If that’s going to happen, the administration will have to tackle several tough questions.
At the top of the list of intra-GOP divisions that must be addressed is whether to endorse the destination-based corporate tax advanced by House Republicans. That plan, which would adjust taxes at the border by allowing companies to write off exports but disallowing deductions for the cost of imported goods, is staunchly opposed by retailers, but favored by some manufacturers. It has split the GOP.
Speaking on Fox Business Wednesday, House Ways and Means Committee Chairman Kevin Brady, R-Texas, suggested that he is closer to winning over skeptics on the border adjustment, and said that “we’re already contemplating significant modifications to that.”
Another major question is whether to pursue the goal of making sure that tax reform doesn’t add to the deficit. While House leadership has said tax reform shouldn’t lose revenues over a 10-year budget window, but some conservatives have said that they would be comfortable with a tax cut. On the campaign trail, Trump called for a multi-trillion dollar tax cut.
That question partially hinges on which legislative strategy the GOP chooses to pursue, and in particular whether they aim to use the fiscal year 2017 or 2018 budget reconciliation instructions, which allow legislation to pass with only a bare majority in the Senate.
Beyond that, any number of questions come up regarding each tax break under consideration, and every industry and interest group that would be affected.
Additionally, Republicans have created a major new question for themselves by failing to repeal Obamacare. Now, they must decide whether the taxes imposed by Obamacare are part of reform.
House Speaker Paul Ryan said last week that they are not and that the medical devices tax, net investment tax and other taxes included in the law should be left untouched in tax reform. Senate Finance Committee chairman Orrin Hatch, however, told reporters at the Capitol Wednesday that he favored any way of getting rid of those taxes, which he called “abysmal.”
Normally, all those questions would be sorted through by the administration, with the tax staff at the Treasury addressing the details.
At this stage, however, the Treasury is understaffed and does not yet have an assistant secretary for tax policy, typically the person driving tax proposals for the administration.
“Where we are at this point in the administration is there’s a lot of vacancies,” said Kupfer. “It’s going to be tough to exert some of that leadership that’s going to be needed.”
Congressional Republicans seem ready to be led on the issue.
“I love President Trump leading the effort on tax reform,” Brady told the Wall Street Journal.
