GOP anticipates comprehensive tax reform before end of 2017

UPDATE — 8/11, 10:31 a.m. EDT: Washington insiders told Reuters Thursday that the White House plans to release a three-to-five page tax reform proposal by mid-September, a collaborative effort of congressional leaders and the Trump administration.

While the framework will not include actual legislation, the White House and Speaker Paul Ryan have said they expect a bill overhauling the U.S. tax code to be voted on by Congress in the fall.

 

Despite two efforts to dismantle Obamacare failing in Congress, optimism remains high among Republicans on Capitol Hill and inside the White House that comprehensive tax reform will be enacted before the end of the year.

Both the Trump administration and the Republican Party have touted the first federal tax overhaul in 30 years.

“(The GOP) had different opinions on how to advance health care reform.  On tax reform, we’re largely in agreement,” House Speaker Paul Ryan told the Wisconsin State Journal in a Thursday interview.

Ryan also told the Journal Congress’ lower chamber intends to take up tax reform following the conclusion of the autumn recess in September.

Paramount among Ryan’s goal is lowering corporate tax rates, reducing income tax brackets from seven to three, simplifying the tax code and raising the standard deduction to help middle class families.

While the White House and more conservative members of the GOP caucus were at odds on dismantling the Affordable Care Act, Ryan and the White House are more likely to find common cause on tax reform.

Despite sharing the same priorities, differences remain, but not so staggering as to prevent passage of a bill.  Regarding corporate tax rates, the GOP envisions a 20 percent rate; the White House is seeking a deeper cut to 15 percent.

Similarly, both the White House and congressional Republicans share enthusiasm for raising the standard deduction on personal income tax.  The GOP has not settled on a level, but the White House wants to double the reduction, virtually wiping out tax liability for millions of American families.

Additionally, the White House and Republicans appear set on eliminating four of the seven current individual tax rates.  The White House wants three rates of 35, 25 and 10 percent.  The GOP version slightly differs, advocating 33, 25 and 12 percent brackets.

Although obstacles remain, it is unlikely the variances will prevent tax reform from being approved, unless the White House and Congress differs on one point:  Durability of reform.  Speaking to Fox Business on Friday, National Economic Council director Gary Cohn insisted growth would pay for tax cuts and said proposed tax cuts must be permanent.

“We need to do permanent tax reform in the United States. The way you do permanent tax reform in the United States is you have it balance over 10 years,” Cohn said.

Despite the business-friendly proposal’s support among many economic groups in Washington, charity lobbies are pushing reform to also include making individual donations to non-profit organizations a “universal” tax deduction, instead of the current “itemized” method.

If the bill were to pass as currently proposed by either the Trump administration or Congress, IRS filers will have less incentive to write-off charitable gifts on their tax returns, possibly reducing donations by as much as $13 billion per year according to a recent study by Indiana University.

 

[Wisconsin State Journal] [Washington Examiner] [Wall Street Journal] [Photo courtesy U.S. Chamber of Commerce Graphics]