Tax Reform Priorities And Moving Forward
As the tax reform debate approaches, DTA is highlighting the issues being considered, along with the views on the subject of tax reform as the implications of its enactment are immense for businesses in the U.S. DTA will continue to push for inclusion of repeal of the excise tax on medical devices as part of tax reform.
House Tax Priorities
The House Ways and Means Committee has announced its priorities for tax reform. They include:
- Lowering taxes at every income level.
- Delivering the lowest tax rates for job creators of all sizes so they can invest more money in growing their businesses and creating jobs.
- Eliminating the maze of special interest loopholes that keep rates artificially high.
- Increasing the standard deduction.
- Separating wage income from small business income.
- Ending the estate tax (a.k.a. Death Tax) so family-owned farms and businesses can be passed down to the next generation.
- Repealing the Alternative Minimum Tax.
- Cutting in half the tax rates on personal savings and investment.
White House Tax Priorities
Gary Cohn, the top economic adviser to President Donald Trump, is considered to be the man driving the White House's push to overhaul the tax code. Cohn recently laid out the administration's priorities on tax reform. The ideas Cohn detailed are similar in broad strokes to the one-page statement of principles the White House released in April. Here's a quick rundown of what the Trump Administration wants:
- To preserve only three individual deductions. The GOP plan would keep popular deductions for mortgage interest, charitable giving and retirement contributions. The first two were included in the tax principles released in April, and the White House clarified a few days later that it also wanted to keep the retirement deduction. The White House also wants to double the standard deduction.
- To eliminate the estate tax. This tax applies only if assets given to heirs total more than $5.49 million.
- To get the corporate tax rate "as low as possible." It is unclear whether a 15 percent tax rate is still the goal or not.
- To allow a one-time repatriation of overseas cash. The administration previously said this would happen, and Trump said it would come at a 10 percent rate.
Cohn has indicated the White House would begin to push the tax-cut plan in late August. He said the president's agenda and calendar are going to revolve around tax reform.
Moving Tax Legislation Forward
While the White House works on how to push for tax reform, key lawmakers are trying to figure out how to move tax legislation forward. Some are pushing for Republicans to embrace a long-shot strategy to tie tax reform to an infrastructure spending package to bring Democrats on board. Others have given up hope that Congress will be able to pass anything more than a temporary tax cut for individuals, perhaps the only measure that can attract 50 Republican votes in the Senate.
But the road to passing even a scaled-back tax bill is fraught with obstacles. Congress likely won’t even start on tax reform until after it has draining clashes about raising the debt ceiling and preventing a government shutdown. Treasury Secretary Steven Mnuchin and Cohn have been huddling with top Republicans in Congress, but Treasury is still in the early stages of hammering out the details of a plan.
At the time of the last tax reform enacted in 1986, President Ronald Reagan relied on approval ratings north of 60 percent to jam tax reform through Congress. President Donald Trump’s approval rating was just 36 percent in the most recent Gallup poll. This could play a factor in the tax debate if the White House is perceived as weakened. But some say the biggest contrast with the 1986 effort, though, may be Senate Majority Leader Mitch McConnell’s insistence that Republicans will pass tax reform on a party-line vote. Most Democrats and Republicans in the House and the Senate wound up supporting Reagan’s tax bill.
McConnell has said Republicans would pass tax reform through reconciliation, the Senate procedure that allows the party to pass budget bills with only 50 votes instead of the 60 required to overcome a Democratic filibuster. That means they can only lose two Republican votes in the Senate — a high hurdle that they already failed to meet when trying to repeal Obamacare. Despite McConnell’s plans, some think Republicans should avoid the pitfalls of reconciliation entirely by striking a deal with Democrats to pass a bill that ties tax reform to an infrastructure package.
By Patrick Cooney, The Federal Group, Inc.
Legislative Representative, Dental Trade Alliance