Next on the GOP Calendar: Tax Reform

While health care consumed nearly the entire Beltway spotlight this week, other issues lurched forward – in particular, tax reform.

With health care repeal seemingly stalled for good, Congress and President Donald J. Trump are expected to pivot to a tax overhaul. It’s a task that will be made harder by the failure to repeal Affordable Care Act taxes.

On the other hand, the ACA failure might push the two parties toward a bipartisanship plan – virtually a requirement to get anything done.

“The lesson of this week is big bills need bipartisan cooperation,” said Michael Lewan, longtime Democratic strategist. “Love to see (Sen. Orrin) Hatch and (Sen. Ron) Wyden work on taxes, but the well may be too poisoned.”

Sens. Hatch, R-Utah, and Wyden, D-Ore., are seen as key players in the tax debate.

A joint statement on tax reform principles released Thursday looped in House Speaker Paul Ryan, Senate Majority Leader Mitch McConnell and the White House. It was short on specifics beyond endorsing a plan that “reduces tax rates as much as possible, allows unprecedented capital expensing, places a priority on permanence, and creates a system that encourages American companies to bring back jobs and profits trapped overseas.”

No Border Tax

The statement dropped a “border adjustment tax” seen as unlikely to pass. A Ryan brainchild, the border tax was projected to raise $1 trillion by taxing imports. It was also once viewed as a key pillar to the GOP tax reform vision, as it would pay for corporate tax cuts while discouraging companies from shifting jobs overseas.

The statement signaled that tax reform will dominate the fall legislative calendar.

“Our expectation is for this legislation to move through the committees this fall, under regular order, followed by consideration on the House and Senate floors,” it read. “As the committees work toward this end, our hope is that our friends on the other side of the aisle will participate in this effort.”

The details are key. Some congressional rules require revenue-neutral budget impact to achieve the permanent tax changes the GOP wants. That means more revenue must come from somewhere in order to achieve the tax cuts on which Republicans campaigned.

“This tax reform has to move us toward a balanced budget, not away from it,” Rep. Kevin Brady, R-Texas, told the Wall Street Journal.

Brady chairs the House Ways and Means Committee, which will write the first version of the bill.

To further complicate matters, Trump advisor Steve Bannon floated an idea to raise the top individual income tax rate to 44 percent to pay for a targeted, middle-class cut.

Both Trump and Ryan campaigned on plans that would consolidate the number of individual income-tax rates to three from the existing seven. The top rate would drop to 33 percent from 39.6 percent currently.

'Opposition To Any Change'

Lewan, former chief of staff to then-Sen. Joe Lieberman, sees little chance for meaningful tax reform.

“My guess is all the special interests restate their opposition to any change that might increase their tax exposure--even if a better rate was offered,” he said.

The Insured Retirement Institute responded to the joint statement by urging lawmakers to preserve the current tax treatment of retirement savings. It has been speculated that tax reformers could go after 401(k) accounts, which lawmakers deny targeting.

“Preserving the current treatment of retirement savings is enormously important to families, to small businesses, and ultimately America’s economy,” said IRI President and CEO Cathy Weatherford.

InsuranceNewsNet Senior Editor John Hilton has covered business and other beats in more than 20 years of daily journalism. John may be reached at john.hilton@innfeedback.com.

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InsuranceNewsNet Senior Editor John Hilton has covered business and other beats in more than 20 years of daily journalism. John may be reached at john.hilton@innfeedback.com. Follow him on Twitter @INNJohnH.