GOP postpones tax bill rollout; future uncertain

Republicans in Congress are postponing the roll out of their tax reform bill until at least Thursday. Kevin Brady, Chairman of the House Ways and Means Committee, says there are too many issues that need to be resolved before details of the plan can be discussed.

Politico:

Some details of the bill started leaking out Tuesday after Speaker Paul Ryan briefed conservative leaders on text that had been finalized. The proposal, sources in the meeting said, would lower the corporate tax rate to 20 percent, meeting their initial goal. They’ve also decided to keep the current top 39.6 percent tax rate on the wealthiest individuals — though they have not settled on which incomes would be hit by that rate.

Ryan told conservative group leaders Thursday that the income threshold for the top rate would likely be higher than it currently is, likely between $750,000 and $1 million. He said the estate tax would likewise be repealed but may have to be phased out to save money in the short term.

But it's the unresolved issues that caused Ways and Means members the most heartburn this week — and ultimately led to the delay. Those include: how to win over GOP lawmakers from high-tax states that are balking over curbing the state and local tax deduction, which their constituents rely on. There are also question about how to ensure that wealthy individuals don’t take advantage of the lower 25 percent small business or “pass-through” rate.

Many of the unresolved items are hot-button issues, including what to do with 401(k) retirement plans.

Trump asked Brady in a phone conversation last week to drop his plans to curb such tax preferred savings. And some senior House Republicans who believe that doing so would incite severe pushback have been urging Brady to leave the matter alone.

But Brady has refused to ditch the idea of imposing some limitation on the popular retirement plans. The reason comes down to basic math: Republicans want to lower the corporate tax rate to 20 percent, and collapse and lower individual rates into four brackets — and targeting 401(k) plans could help pay for those cuts.

The plan is not likely to be revenue neutral, although there will probably be some smoke and mirror savings that will make it appear that the bill will not raise the deficit significantly. But finding offsets is a real problem and some of the ideas that have been presented so far would be deal breakers for too many Republicans.

Finding a way through the various impasses on offsets will take the wisdom of Solomon. You can't split the difference on every remaining issue, especially when it comes to taxing 401K accounts and allowing for less than full state tax deductions. These are game stoppers for many Republicans and would almost certainly condemn the bill to oblivion before it has a chance to be voted on.

But there is one thing working in favor of the leadership; the prospect of having no bill at all to take to the voters. This Republican Congress has been a "do nothing" Congress, failing to keep almost every promise made to the voters in 2016. Trump has done his part, trying to scrap many Obama era regulations that were anti-business and anti-competitive.

Without tax reform, the prospects of a Democratic takeover of the House in 2018 rise significantly. The GOP base, already angry for the Congress's failure to repeal Obamacare, could choose to stay home on election day in significant numbers. So it behooves the GOP leadership to get tax reform done - and get it done before the end of the year.

The Thursday deadline for the roll out will probably slip again, but expect some version of the bill to be made public by early next week.

 

Republicans in Congress are postponing the roll out of their tax reform bill until at least Thursday. Kevin Brady, Chairman of the House Ways and Means Committee, says there are too many issues that need to be resolved before details of the plan can be discussed.

Politico:

Some details of the bill started leaking out Tuesday after Speaker Paul Ryan briefed conservative leaders on text that had been finalized. The proposal, sources in the meeting said, would lower the corporate tax rate to 20 percent, meeting their initial goal. They’ve also decided to keep the current top 39.6 percent tax rate on the wealthiest individuals — though they have not settled on which incomes would be hit by that rate.

Ryan told conservative group leaders Thursday that the income threshold for the top rate would likely be higher than it currently is, likely between $750,000 and $1 million. He said the estate tax would likewise be repealed but may have to be phased out to save money in the short term.

But it's the unresolved issues that caused Ways and Means members the most heartburn this week — and ultimately led to the delay. Those include: how to win over GOP lawmakers from high-tax states that are balking over curbing the state and local tax deduction, which their constituents rely on. There are also question about how to ensure that wealthy individuals don’t take advantage of the lower 25 percent small business or “pass-through” rate.

Many of the unresolved items are hot-button issues, including what to do with 401(k) retirement plans.

Trump asked Brady in a phone conversation last week to drop his plans to curb such tax preferred savings. And some senior House Republicans who believe that doing so would incite severe pushback have been urging Brady to leave the matter alone.

But Brady has refused to ditch the idea of imposing some limitation on the popular retirement plans. The reason comes down to basic math: Republicans want to lower the corporate tax rate to 20 percent, and collapse and lower individual rates into four brackets — and targeting 401(k) plans could help pay for those cuts.

The plan is not likely to be revenue neutral, although there will probably be some smoke and mirror savings that will make it appear that the bill will not raise the deficit significantly. But finding offsets is a real problem and some of the ideas that have been presented so far would be deal breakers for too many Republicans.

Finding a way through the various impasses on offsets will take the wisdom of Solomon. You can't split the difference on every remaining issue, especially when it comes to taxing 401K accounts and allowing for less than full state tax deductions. These are game stoppers for many Republicans and would almost certainly condemn the bill to oblivion before it has a chance to be voted on.

But there is one thing working in favor of the leadership; the prospect of having no bill at all to take to the voters. This Republican Congress has been a "do nothing" Congress, failing to keep almost every promise made to the voters in 2016. Trump has done his part, trying to scrap many Obama era regulations that were anti-business and anti-competitive.

Without tax reform, the prospects of a Democratic takeover of the House in 2018 rise significantly. The GOP base, already angry for the Congress's failure to repeal Obamacare, could choose to stay home on election day in significant numbers. So it behooves the GOP leadership to get tax reform done - and get it done before the end of the year.

The Thursday deadline for the roll out will probably slip again, but expect some version of the bill to be made public by early next week.

 

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