Republicans Eye 'Once In A Generation' Chance At Tax Overhaul
With so much focus in the early days of the Trump administration centered on GOP plans to repeal and replace the Affordable Care Act, it's easy to forget that Republicans are planning another ambitious goal this year — overhauling the entire federal tax code.
"Very few predicted President Trump's election with Republican majorities in both the House and Senate would move us to closer to pro-growth tax reform than at any point in the last 30 years," House Ways and Means Chairman Kevin Brady, R-Texas, said Tuesday in a speech previewing the House GOP's strategy at the U.S. Chamber of Commerce in Washington.
The last major overhaul of the tax code was in 1986, under President Reagan and a split control of Congress.
Brady chairs one of the more powerful committees in the House, with vast jurisdiction over the tax code, trade bills and health care. His panel is also working on legislation to repeal certain aspects of Obamacare, and it will play a key role in whatever the replacement plan ultimately looks like.
But Republicans are arguably more prepared for a potential tax overhaul, which they have been formulating for years. Former Ways and Means Chairman Dave Camp, R-Mich., authored an overhaul in 2014, but it was lobbied into defeat and never received a vote in Congress.
Brady sees lawmakers "moving forward aggressively" to enact tax reform in 2017. "Tax reform is truly one of those once-in-a-generation opportunities. We are committed to seizing it in a very bold way," he said.
The broad outlines of the plan include dramatically lowering corporate and business tax rates to the lowest in history. It would also allow businesses to write off the full cost of new capital investments, meaning tax-free returns on purchases related to new software, equipment, technology and the like.
Republicans also want to end what they call the "Made in America" tax on U.S. exports, also known as the border adjustment tax. President Trump has criticized this GOP proposal as "too complicated."
The controversial proposal seeks to boost U.S. manufacturers by taxing imports but exempting exports from taxation. "It will be a game-changer for our businesses and our economy as a whole," Brady said.
He voiced frustration often aired by lawmakers that border adjustment taxes mean, for instance, that it is cheaper for companies to buy Chinese steel than American steel or to buy foreign oil over American oil.
House Republicans also want to lower tax brackets for individuals and families, and Brady reiterated a long-standing GOP pledge to create a tax system where most people can file a single page of paperwork the size "of a postcard."
Brady also called for a "bust up" of the Internal Revenue Service, and to redesign the agency into three service units designed to provide customer service for individual, family and business tax questions.
The House GOP plan, of course, faces several roadblocks. The most significant is the U.S. Senate, where top Senate Republicans are moving more cautiously and have indicated they would like Democratic buy-in for a legislative overhaul of this magnitude. Senate Finance Chairman Orrin Hatch, R-Utah, is expected to offer his vision of tax reform in a similar address next week.
Senate Majority Leader Mitch McConnell has also indicated he prefers any tax overhaul to be revenue neutral, meaning new tax laws would shift the tax burden but would not change the amount of money coming in to the federal government.
The House GOP's plan, as outlined, would add to the deficit in that it would very likely result in less revenue coming in, but Republicans believe their tax overhaul would generate significant economic growth to make up the difference.
But deficit hawks were also given a fresh cautionary warning from the nonpartisan Congressional Budget Office Tuesday. Its latest long-term budget outlook forecasts deficits will continue to grow over the next decade, adding an additional $10 trillion to the public debt if no changes are made.
Maya MacGuineas, head of the Campaign to Fix the Debt, which advocates for centrist budget reforms to balance the budget, said in a statement that the current trajectory is "an unsustainable path" and requires clear-eyed policymaking in Washington.
"Policymakers should not go into debt denial with hopes that unrealistic growth and rosy projections will save the day," she said.