House Speaker Paul D. Ryan launched a major push Tuesday to overhaul the tax code this year — including massive cuts — but Republicans in Congress and the White House are running out of time as they continue to battle over the details.
With the year’s legislative days dwindling, Ryan (R-Wis.) tried to jump-start the process with a major speech about what his staff described as the “crown jewel” of the Republican economic agenda.
“Once in a generation or so, there is an opportunity to do something absolutely transformational, something that will have a truly lasting impact long after you and I are gone,” he told the National Assn. of Manufacturers. “That moment is here and we are going to meet it. Ladies and gentleman, we are going to fix this nation’s tax code once and for all.”
“We are going to get this done in 2017,” he said. “We cannot let this once-in-a-generation moment slip by.”
Speaking before Ryan, Vice President Mike Pence made the same promise to the trade group. He downplayed the difficulty of negotiations between the Trump administration and House and Senate Republicans.
“Discussions will continue. Details are being worked out,” Pence told the manufacturers, who strongly support a tax overhaul. “But I can assure you, with your support and the support of our leaders in Congress, we will get tax cuts done and we will get them done this year.”
That’s a formidable task.
There still is no tax bill in the House or the Senate as disputes among Republicans remain unresolved, particularly whether to enact a controversial border tax. Treasury Secretary Steven T. Mnuchin already has given up on his earlier hopes to get legislation passed before Congress leaves for its August recess.
Ryan now is aiming to get legislation up for consideration this fall. But in a tacit acknowledgement of the hurdles, Ryan did not wade into the policy disputes in Tuesday’s speech as he laid out broad principles that echoed those of the White House.
The Trump administration has called for slashing the corporate tax rate to 15% from 35%, and providing more favorable treatment for overseas earnings. Trump also wants to reduce the number of personal income tax brackets from seven to three, with rates of 10%, 25% and a top rate of 35%.
The House Republican blueprint that Ryan helped draft calls for a 20% corporate tax rate. He told CNBC after his speech that he’d love to cut the tax to 15% “if we can get the numbers to work.”
To help offset the cuts, the administration and House Republicans want to eliminate most deductions, including one for the payment of state and local taxes. Californians and residents of other states with high taxes and high earners would lose the most if that deduction disappears.
Republicans also want to eliminate the alternative minimum tax and the estate tax.
But the administration’s sketchy plan, contained on a single page with 19 bullet points released in April, still lacks many basic details, including income requirements for the new tax brackets and any analysis of how much it would increase the national debt.
The only detail to emerge in recent weeks is that rich Americans might fare better in the overhaul. Last week, Mnuchin publicly backed off of an earlier promise he made that the wealthy would not pay less in overall taxes because lower rates would be offset by fewer deductions.
There are a lot of similarities with the House Republican plan. But the biggest obstacle appears to be its push for a controversial border-adjustment tax, which would subject importers to higher taxes than exporters or those that produce products in the U.S. for domestic consumption.
Such a tax could raise $1 trillion in revenue over 10 years. The money would help offset a sharp reduction in the 35% corporate tax rate.
But the business community is split on the border-adjustment tax. Major exporters support it. But retailers that import a lot of goods, such as Wal-Mart Stores Inc., oppose it. Senate Republican leaders and Trump administration officials are cool to the tax, which opponents argue would lead to higher prices for consumers as retailers pass on the cost of the tax to them.
David McIntosh, president of the Club for Growth, an influential conservative advocacy group, called the tax “a political loser.”
“Any member who campaigned on lower taxes should not even entertain the idea” of a border adjustment tax, McIntosh said Tuesday. He complained the Republican-controlled Congress “has made little progress towards cutting taxes.”
Mnuchin dodged a question on the border tax Tuesday during an appearance on CNBC. But he downplayed the obstacles to getting a tax overhaul enacted.
“We fundamentally agree on what the principles are and we’re working hard to get the details ironed out,” Mnuchin said.
Without the revenue from a border adjustment tax, it will be difficult to draft tax legislation that does not add to the budget deficit after 10 years.
If the plan adds to the deficit, Senate Republicans will need Democratic support to overcome a 60-vote threshold.
The other alternative would be to have the changes expire at the end of 10 years, which would allow Senate Republicans to pass the bill through a process known as reconciliation that requires only a simple majority.
The 2001 Bush tax cuts used that approach. In 2012, Congress allowed some of those cuts, for the highest earners, to expire.
Ryan on Tuesday declared that he did not want to pass tax changes that would expire after 10 years.
“These reforms, these tax cuts, they need to be permanent,” Ryan said.
11:45 a.m.: This article was updated with comments from Vice President Mike Pence and additional details about the tax plans.
This article originally was published at 11 a.m.