By Bernie Becker | 05/19/2017 10:00 AM EDT
With help from Aaron Lorenzo and Colin Wilhelm
DON'T CALL IT A COMEBACK ... : You might have figured that tax reform was working-grouped out, but another one - sort of - has come together. A trio of Senate GOP tax writers will work together on proposals to reshape tax laws following a request from Finance Chairman Orrin Hatch, our Aaron Lorenzo has learned. Hatch chose Sens. Rob Portman of Ohio, Tim Scott of South Carolina and Pat Toomey of Pennsylvania as part of his efforts to seek a range of input, sort of like Hatch already does on estate tax issues with Sen. John Thune (R-S.D.), a big proponent of repealing that tax.
"As chairman, Sen. Hatch promotes a collaborative process at the committee level - one that is driven by member priorities and encompasses a variety of individual member views and input," Julia Lawless, a Finance spokeswoman, said in an email. "He routinely meets with Finance Committee members to discuss current efforts to overhaul the broken tax code and examine viable policy solutions that will help achieve that goal." The House has been the more vocal chamber on GOP tax reform efforts this year, but some Senate Republicans are starting to get more public - including Thune, who just released a business tax reform bill.
OH, BUT JUST WAIT FOR NEXT WEEK: Tax nerds might have had to wait a long time for Thursday's Ways and Means tax reform hearing, but the sequels are coming in quick succession next week. Ways and Means will take a deeper look at the border adjustment on Tuesday, and Treasury Secretary Steven Mnuchin will head to the committee's hearing room the next day to discuss President Donald Trump's first budget. Mnuchin will then cap off the week at Senate Finance, to discuss both the Trump budget and the Trump tax reform framework.
Dribs and drabs from that Trump budget leaked out on Thursday evening, including a Wall Street Journal report that the administration would call for revenue-neutral tax reform. "The budget won't present final details on the president's tax proposals, but it will include an estimate that any tax overhaul will be revenue neutral, meaning revenue lost from rate cuts will be made up by curbing deductions, eliminating tax breaks and revving up economic growth." (Recall that the Committee for a Responsible Federal Budget roughly estimated that the White House tax framework released in April would cut taxes by around $5.5 trillion over a decade.)
Mnuchin spent part of his Thursday at the Senate Banking Committee, where our Colin Wilhelm reported that the Treasury secretary nonetheless offered something of a preview for next week's tax reform back-and-forth. Under questioning from Sen. Elizabeth Warren, Mnuchin defended the 15 percent rate for pass-throughs in the Trump plan, though he stressed that only small to medium-size businesses would get that rate and the administration would strive to stop any gaming of that system. The secretary also said that his department might publicly release its score of a tax reform bill, suggesting that the official dynamic and static scores coming from the Joint Committee on Taxation would understate the Trump plan's ability to spur the economy. Treasury, Mnuchin said, will likely "have a different view of growth and show those numbers." (Either way, remember that the JCT score carries the day on the Hill, where any tax overhaul needs to be passed.)
As for Thursday's House hearing: Our Brian Faler reported there wasn't a ton of new ground broken, though a couple of key GOP tax writers openly worried that Republicans might not be as keen to compromise as they'll need to be.
WELL, THIS WEEK FILLED WITH NOTHING SIGNIFICANT JUST FLEW BY. Today also marks 12 years since the release of the final installment of the Star Wars prequels, "Revenge of the Sith." (From our point of view, the hate out there is a little over the top.)
Let us know what's going on out there. Email: email@example.com, firstname.lastname@example.org, email@example.com, firstname.lastname@example.org, email@example.com. Twitter: @berniebecker3, @tobyeckert, @brian_faler, @colinwilhelm, @AaronELorenzo, @POLITICOPro and @Morning_Tax.
HOW DETROIT IS BEATING ITS BLIGHT: Land banks are the Swiss Army knives of urban reclamation efforts, wielding an array of powers to make abandoned, tax-foreclosed properties useful again. In the latest installment of POLITICO Magazine's "What Works" series, we visit the city of Detroit, which went from a robust city of 1.8 million in 1950 to barely a third of that size today. Learn how Mayor Mike Duggan's administration created the largest land bank in the U.S., taking control of 98,000 properties to help his city rebound from bankruptcy and an unprecedented level of decline. Read more.
SPEAKING OF BUDGETS: Brian also broke down just how hard it will be for Republicans to try to muscle a tax reform measure through via budget reconciliation (The short answer: Hard.) Job No. 1 - actually passing a budget, likely no small feat given that conservatives have signaled they won't just wave a measure through like they did earlier this year to tackle Obamacare repeal. Other potential problems: If a budget calls for revenue-neutral tax reform, the GOP wouldn't be able to easily shift to tax cuts if that task became too difficult. And remember: Republicans can't move on their 2018 budget until they're done working on health care, which is currently using the 2017 reconciliation instructions.
The WSJ reached a similar conclusion - just passing a budget is going to be hard. But Ways and Means Chairman Kevin Brady was at least publicly confident on Thursday about getting that done. "Tax reform is going to play a major role in passing our balanced budget," Brady told reporters.
IN ANY EVENT: Speaker Paul Ryan, like Brady, isn't backing away from the idea that a tax overhaul can be a 2017 proposition, POLITICO's Rachael Bade reported . Ryan added Thursday that he still believes the border adjustment from the House blueprint "is the smart way to go," but also seemed to take a softer tone on the idea. "If you're not going to do border adjustment, then you have to look at the alternatives to that. There's always upsides and downsides to alternatives. That's the process we're going through right now," Ryan said, later adding: "I do believe that there are very serious and legitimate concerns to any version of tax reform, and we're going to have to accommodate those concerns as we move to a new tax system."
That fits in with what Rep. Peter Roskam (R-Ill.), the chairman of the Ways and Means Tax Policy Subcommittee, also said Thursday - that Republicans want to roll out and unify behind one single tax overhaul. "So the name of the game here is not to have a House bill, White House language and Senate Finance language," he said. "That is not the optimal thing."
** A message from Intuit Tax and Financial Center: In our series - Talking Tax with Intuit - we interview experts with diverse experiences in tax policy and administration about tax reform issues. This video discusses the compliance issues specific to the sharing economy. Watch: http://bit.ly/2q6Lo6N **
REALTORS, NOT LYING DOWN: The National Association of Realtors is out with a new study from PricewaterhouseCoopers that found that a tax overhaul similar to the House GOP blueprint would give a double whammy to middle-class homeowners - increase their taxes while decreasing the value of their property. People with a house and an adjusted gross income between $50,000 and $200,000 a year would see an average tax increase of more than $800, according to the study, and home prices in general would fall by around 10 percent in the short run.
The mortgage break generally is preserved in proposed GOP tax plans, but greatly increased standard deductions would mean far fewer homeowners would use the deduction. That's caused some big pushback from the housing industry, at a time when there's a growing view from the left that the incentive has exacerbated income inequality in the U.S.
PUT THE POPCORN AWAY: A federal judge ruled that Lois Lerner's forthcoming deposition for a tea party lawsuit against the IRS should stay out of the public eye, at least during the current discovery phase, Aaron notes. Judge Michael Barrett added that it was premature to say the depositions of Lerner and Holly Paz, another key figure in the IRS's tea party controversy, should be sealed after the discovery phase. Lerner and Paz are asking for their testimony to be sealed because they're worried about their safety.
INTERNATIONAL UPDATE -
TOUGH LUCK, FACEBOOK: The United Kingdom's Conservatives are vowing to open the door for new taxes on social media providers like Twitter and Facebook to pay for initiatives to make the Internet safer for children, Bloomberg reports . The Conservatives' manifesto, coming just weeks before a general election in which they're projected to keep control of the government, didn't include any details on how high of a tax, and which companies would be subject to it. More from Bloomberg: "Any levy could set a precedent for other countries, giving the U.K. new resources amid a global push by companies, governments and the public to tackle hate speech and online bullying. The fees would 'support awareness and preventative activity to counter internet harms,' similar to an existing tax on the gambling industry, according to the party's manifesto."
Don't be sad. Two out of three ain't bad: The BBC notes that Prime Minister Theresa May looks to be softening on the so-called triple tax lock, in which Conservatives vowed not to raise the value-added tax, income taxes or insurance contributions. "The promise not to raise income tax or national insurance has been replaced by a rather vaguer 'firm intention to reduce taxes on Britain's businesses and working families.'"
STATE NEWS -
THAT SOUNDS FAMILIAR: A prominent business group in Illinois is backing the idea of a grand bargain in that state, much the way some prominent business groups in D.C. used to back that sort of approach on a federal level. The Civic Committee of the Commercial Club of Chicago said that it would back income tax increases and spending cuts, to the tune of around $10 billion a year over five years, because it was concerned "about the deterioration of Illinois' attractiveness as a place to live and work, as well as its reputation among investors," the Chicago Tribune reports.
- Oops: The American Health Care Act might require yet another vote in the House.
- Free market groups: Let's do competitive bidding on infrastructure.
- Property taxes play central role in final New Jersey GOP gubernatorial debate.
DID YOU KNOW?
La Paz, Bolivia, is the highest national capital in the world - at around 12,000 feet.
** A message from Intuit Tax and Financial Center: In our series - Talking Tax with Intuit - we interview experts with diverse experiences in tax policy and administration about tax reform issues. In this video, we highlight the compliance issues specific to the sharing economy. As traditional businesses operate differently than companies such as Uber or Airbnb, this video discusses how Congressional action must be taken to encourage innovation and to lessen tax and compliance confusion on sharing economy businesses. Watch: http://bit.ly/2q6Lo6N **
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