By Bernie Becker | 05/18/2017 10:24 AM EDT
With help from Brian Faler and Sarah Ferris
AN EVENT ... MONTHS IN THE MAKING: Hearings aren't always the big news of the day for taxes, but this looks like a good exception - the House Ways and Means Committee will hold its first hearing of the year on tax reform today, after the tax world spent months picking over the border adjustment pushed by Chairman Kevin Brady and other House GOP leaders.
The hearing's scheduled topic deals with how tax reform can spark the economy, so the witness list doesn't really contain a ton of shocks - top officials at three big corporations (AT&T, Emerson Electric and S&P Global), a representative from a smaller company (Atlas Tool Works from the Chicago area) and a representative for the Democrats (Steve Rattner, a financier and former Obama administration official). But the hearing could give some clues about where more rank-and-file Republicans are on any number of key tax issues, including the border adjustment, the deduction for business interest and whether a tax overhaul should definitely be revenue-neutral.
And remember, you won't have long to wait for the second tax reform hearing of the year - Tuesday, border adjustment, be there. Ahead of even this first hearing, more than 30 economists wrote to senior tax writers to say that a border adjustment should play a central role in any comprehensive revamp of the tax code. That group includes Alan Auerbach of the University of California, who border adjustment opponents like to note advised John Kerry's presidential campaign.
A DAY OF PREP: Give this to Treasury Secretary Steven Mnuchin and National Economic Council Director Gary Cohn - they weren't loafing around when it came to tax reform meetings on the Hill on Wednesday. They met with a bipartisan group of Senate Finance members in the morning, and Mnuchin was then seen leaving a lunch meeting of House Ways and Means Republicans. There was a get-together with visiting energy executives; a sit-down in Speaker Paul Ryan's office also joined by Brady, Senate Majority Leader Mitch McConnell and Senate Finance Chairman Orrin Hatch; and a gathering with the more centrist Republicans of the Tuesday Group. What does it mean for tax reform talks going forward? Well, Cohn certainly sounded as if everyone is still feeling the situation out. "We told you we were going to have listening sessions, when we laid out the tax plan - we're having listening sessions," Cohn said. "We're taking feedback from both senators and House members and we're taking their input as we said we would and it's a very constructive conversation."
For his part: Brady said at an event with Morning Money's Ben White that all the other fireworks coming out of the White House won't distract from the work on tax reform. "When they're at the table, they're engaged," he said about Mnuchin and Cohn. And yet: Nancy Cook and Burgess Everett report that GOP efforts on taxes and other policy initiatives "appear in more jeopardy than ever as scandal and investigations beset President Donald Trump's White House." (As Hatch put it: "Everything affects our work right now. The more controversy we have, the more difficult it is to do things."
Other side of the aisle: Democrats have complained that Republicans have shut them out of the tax reform process, but our Brian Faler reports they weren't exactly thrilled after the bipartisan Finance Committee meeting either. Sen. Ron Wyden, the top Democrat on the tax-writing panel, said his members made it clear they had a couple of demands for tax reform: more middle-class tax cuts, and that Republicans shouldn't use budget reconciliation to push through a revamped tax code.
HEY, IS IT THURSDAY ALREADY? It's also the 105th anniversary of the first film released in India - Mumbai, to be exact, and called "Shree Pundalik."
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NEW FROM THE KOCHS: The Koch advocacy arms are going to spend millions of dollars plugging tax proposals that look pretty similar to the White House's tax framework, POLITICO's Ken Vogel and Brian report . That's potentially notable for a couple of reasons - the Kochs weren't exactly cozy with Trump's 2016 campaign, and millions of dollars in advocacy could help tax reform break through all the noise surrounding the White House these days. The Kochs' own tax plan "echoes the Trump administration's call for reducing business taxes - though it does not specify by how much - and moving to a so-called territorial system, where the government would no longer try to tax companies' overseas earnings. It also proposes lower taxes on investments, eliminating the alternative minimum tax and ending the estate tax." (And as you'd probably suspect, it doesn't include a border adjustment, which the Koch network has not been shy in opposing.)
THAT KOCH STUDY, CONT'D: John O'Hare of Quantria Strategies, which authored the study released this week by Koch Industries that suggested that cutting the corporate tax rate would spur growth better than full expensing, told Morning Tax on Wednesday that the paper's findings didn't contradict a 2015 paper that was more sympathetic to cost recovery provisions.
O'Hare essentially said that it's difficult to compare the two studies side-by-side, because they start from radically different places. This week's paper for Koch takes the House GOP blueprint, with its 20 percent corporate rate and proposal for full expensing, as it starting point. But the 2015 paper for a group backing more robust expensing provisions assumed a 35 percent corporate rate and examined proposals to make depreciation schedules less generous than those currently on the books, which the study said would hurt economic growth. "I'm convinced they're consistent results," O'Hare said.
** 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 how the government can help identify vulnerabilities and prevent the theft of taxpayers' personal information. Watch: http://bit.ly/2r3TTg0 **
CART, MEET HORSE: One of the sometimes overlooked challenges of using budget reconciliation for tax reform is ... you have to pass a budget first. But Rep. Mike Simpson (R-Idaho), a House Appropriations subcommittee chairman, isn't glancing past that potential problem at all, suggesting it might actually force some more substantive bipartisan talks about taxes. "The only way they can convince members to vote for one of these budgets is, look, you've got to do this because it's how we get reconciliation for tax reform. I'm starting to think maybe reconciliation and tax reform don't go together. Maybe you have to do a bipartisan bill," Simpson told reporters, via Pro budget guru Sarah Ferris. "What a novel concept."
SO YOU'RE SAYING THERE'S A CHANCE: House Democrats got the first GOP lawmaker to sign on to a discharge petition that would force a vote on a measure that would force the president and presidential candidates to publicly release their tax returns. That House Republican might be the one you were guessing, too - Rep. Walter Jones of North Carolina, who has joined with Democrats on other efforts focused on Trump's tax returns.
INTERNATIONAL UPDATE -
TALK ABOUT AN INSIDE JOB: A deputy commissioner in Australia's tax office faces up to five years in jail after being accused of facilitating a tax fraud that netted $165 million Australian ($123 million) in not even a year, the Associated Press reports. The tax official, Michael Cranston, is accused of slipping information to his son, the managing director of a financial services firm, whose syndicate then "spent unpaid taxes on luxury homes, racing cars, aircraft, motorbikes, jewelry, art and vintage wine."
TIME TO GET A CUTTING: Egypt's president is assuring people in his country that tax relief is on the way, as they deal with rising prices ahead of the Muslim holy month of Ramadan. Abdel Fattah al-Sisi "said his government would introduce tax cuts and increase subsidized food in the coming weeks to help Egyptians struggling amid the highest inflation rates in decades," Reuters reports off an interview Sisi gave to state newspaper Al-Ahram. Egypt put a value-added tax into place after the 2011 uprising strained its economy, which caused some problems for working families.
STATE NEWS -
DON'T SAY THE GRAND BARGAIN IS DEAD: Illinois officials, trying to avoid a third consecutive year without a budget, are trying to pull off a bipartisan grand bargain. But as the AP reports , the Illinois Senate votes so far on planks from a potential fiscal deal have been pretty partisan. And not just that: There's still lots of work to be done on key priorities for Republican Gov. Bruce Rauner, including a two-year freeze on property taxes. State GOP officials have also said they would go along with an increase in the personal income tax, but only if that's paired with other structural changes.
- A majority of voters believe corporations aren't paying enough in taxes, according to a new poll.
- New Democrats urge Trump to pair tax reform and infrastructure.
- Center on Budget and Policy Priorities: The 400 top earners in U.S. would get average tax cuts of around $15 million a year under Trump tax plan.
- Top Republicans unsure why IRS wants information on American users of Coinbase, the digital currency exchange.
- Tuition tax credits can amount to a federally backed tax shelter in some states, according to new report.
DID YOU KNOW?
Alan Cranston, a future senator from California, was sued by Adolf Hitler's publisher in 1939 for copyright violation for producing and releasing a less sanitized American version of "Mein Kampf."
** 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. Our goal for this forum is to foster an informed dialogue on important topics and create a platform for expert insights into tax policy. This video discusses the cybersecurity threats that businesses and individuals face today, and how the government can help identify vulnerabilities and prevent the theft of taxpayers' personal information. Watch: http://bit.ly/2r3TTg0 **
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