Tax Reform Stalled As Ryan Pushes His Own Proposal

Ryan’s speakership ultimately will be judged on his ability to produce a tax plan that fulfills decades of promises by the GOP on tax reform. While many of his caucus voice their opposition to the BAT, Ryan stubbornly clings to the hope he can move them in his direction.

Blame Ryan’s wonky streak. Unlike most of his predecessors — who don’t usually hatch their own proposals but rather sift through the options to find the one that can pass — Ryan has been unusually invested in the details of major legislation.”

Ryan’s plan calls for cutting the corporate tax rate to 20 percent and adjusting the tax code to tax imports but not exports. While some academic economists applaud the proposal, retail businesses that rely on imported goods worry the plan will prove disruptive and sharply raise consumer prices.

As an old tax writer I would say this, you have to weigh alternatives off one another,” Ryan said on May 18. “I obviously think border adjustment’s the smart way to go, I think it makes the tax code the most internationally competitive of any other version we are looking at.”

Ryan promises to get a bill that’s “unified,” with the House, Senate and Trump Administration all on the same page.

Some estimates project the BAT would raise about $1 trillion over the next decade. This revenue generation is key to allowing the rate cuts promised by President Trump in his campaign. In order to make the tax changes permanent, under Senate rules the tax bill must be revenue-neutral. That revenue-neutral requirement is critical to using the budget reconciliation mechanism for fiscal year 2018 in order to avoid a filibuster by Democrats.

The BAT concept raises concerns not just with House members, but outside think tanks as well. Matt Schlapp, chairman of the American Conservative Union, worked with Ryan as a Senate staffer two decades ago, and believes the tax will have to be given up in order to get a bill through the Congress.

I know the speaker well enough to know that he realizes that the BAT will not be in the tax bill, but he wants to make sure he takes every second to explain why he believes it needs to be.”

House Ways and Means Committee chairman Kevin Brady is working on changes to the BAT to ease its impact on industries most likely to be affected.

Ryan so far is just about the only major fan of the Ryan plan. Treasury Secretary Steve Mnuchin has told some House Democrats that a border-adjusted tax is dead. Senate Majority Leader Mitch McConnell of Kentucky said the proposal’s chances in the Senate are “rather bleak.”

On Tuesday, Ryan met with White House economic adviser Gary Cohn, Mnuchin, McConnell and other GOP leaders to discuss a path forward. It was just one in a series of meetings that have yet to produce a unified approach.

Doug Holtz-Eakin, president of the American Action Forum, thinks it’s possible more Republicans might eventually agree with Ryan about the wisdom of a border-adjusted tax, but that it might prove a time-consuming process. “And time is our enemy here,” he added.

Cohn said the White House doesn’t expect to send its detailed tax proposal to Congress until September. Members of Congress already are looking ahead to taking August off for their summer break.

GOP lawmakers appear to agree on about 80 percent of the tax overhaul, with the remaining 20 percent and how to pay for the plan the remaining obstacles.

For President Trump, tax reform is a major promise he intends to keep. In order to do so, he must have GOP leadership that follows his lead instead of throwing sand in the gears.

Source: Bloomberg