Five things to watch in GOP's tax rollout

Five things to watch in GOP's tax rollout
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President Trump and congressional Republicans are seeking to move the ball forward this week on their efforts to overhaul the tax code.

A group of GOP lawmakers and administration officials known as the “Big Six” on Wednesday will release a long-awaited framework for a tax-code rewrite, expected to include big cuts to the corporate and individual tax rates.

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The president will pitch the framework on Wednesday in a speech in Indiana, and House Republicans that day will meet to talk taxes at a retreat.

There is still no legislation, but backers hope the framework gives the tax effort a boost. Here are five things to watch on taxes this week.

 

What will be included in the tax framework?

The precise level of detail to be included in the plan is still unclear, but several media reports say it will call for cutting the top individual rate from 39.6 percent to 35 percent, echoing the one-page tax plan the White House released in April.

The framework will also reportedly call for lowering the corporate rate from 35 percent to 20 percent and for cutting the top rate for “pass-through” businesses.

The latter can include small businesses but also those organized as LLCs, law firms and investment funds. These groups, which now pay the top individual rate of 39.5 percent, would be taxed at 25 percent.

These ideas were contained in the tax blueprint Speaker Paul RyanPaul Davis RyanDem: Ex-lawmaker tried to pin me to elevator door and kiss me Two months later: Puerto Rico doesn’t have power, education or economy running again On Capitol Hill, few name names on sexual harassment MORE (R-Wis.) released last year, though Trump has said he wants to tax all business income at 15 percent.

Other provisions expected include increasing the standard deduction and eliminating the state and local tax deduction. 

 

How will the proposed tax cuts be paid for?

After Republicans ruled out an earlier revenue-raising proposal, a tax on imports, they’ll need to slash some major tax breaks to pay for the rate cuts.

Their biggest target is to eliminate the state and local tax deduction, which counts as its biggest beneficiaries individuals in Democratic-stronghold states like New York and California.

But lawmakers will have to do away with many other tax preferences as well in order to prevent their plans from ballooning the debt.

The White House and congressional Republicans have said in the past that they plan to keep the deductions for charitable giving and mortgage interest. Past plans have called for eliminating tax breaks for special interests but don’t specify the provisions that would be repealed.

White House press secretary Sarah Huckabee Sanders said Trump would speak in Indiana about the elimination of tax breaks that benefit the wealthy and special interests. However, it’s unclear how much detail the Big Six’s framework will include about specific ways to pay for any proposed tax cuts.

Industry groups representing charities, homebuilders, investment funds and a slew of others are ready in the wings in case any of their breaks are targeted.

Republicans intend to pay for their plan, on paper at least, in part by counting the revenue generated by the economic growth their proposed cuts would produce.  GOP lawmakers are already casting doubt on the official congressional scorekeepers — the Congressional Budget Office and Joint Committee on Taxation — because they tend to include less economic growth baked into their estimates.

GOP lawmakers on the Senate Budget Committee last week announced an agreement to produce a budget that calls for a reported $1.5 trillion tax cut before economic growth is taken into account.

But even still, policymakers will need to find ways to make up some of the revenue losses that their proposed tax cuts would yield.

 

Does the tax framework meet Trump’s goal of no tax cuts for the rich?

Trump recently said that wealthy individuals wouldn’t benefit from his tax plan, and the White House has said that it intends to focus on the middle class and businesses.

But reports on the framework’s details indicate that many rich people would still be likely to see lower taxes, given the expected cut to the top individual rate and the new special rate for pass-through businesses. The largest share of pass-through business income goes to high earners.

Treasury Secretary Steven MnuchinSteven Terner MnuchinAnalysis: House GOP tax bill adds .3T to the deficit Mnuchin: Comparisons to James Bond villain a compliment Sunday shows preview: GOP gears up for Senate tax reform push MORE said on CNN Sunday that his vow last year about “no absolute tax cut” for the upper class was not a pledge but rather was Trump’s objective. Mnuchin also said that many people on the high end of the income scale would not see their taxes cut.

 

How much does the tax framework matter?

The Big Six document will represent the consensus of key players in the House, Senate and White House.

But the legislation will ultimately be written by the congressional tax-writing committees. Senate Finance Committee Chairman Orrin HatchOrrin Grant HatchProminent conservative passes on Utah Senate bid Republicans offer this impossible choice: Tax cuts or senior care Senate GOP running out of options to stop Moore MORE (R-Utah), a member of the Big Six, has said that the six won’t “dictate” his panel’s work.

One area where the framework could be helpful is in winning over the conservative House Freedom Caucus. If Republicans want to be able to pass a tax bill without any votes from Democrats, they will need to pass a budget resolution first, and the Freedom Caucus has sought more details before it gets a vote on the House floor.

 Given that the tax framework is expected to have similarities to past GOP plans, the new document is likely to provide a measure of satisfaction to Freedom Caucus members.

“If it’s the Better Way plan of Paul Ryan, we’re a yes. If it’s the president’s plan, we’re a yes,” Rep. Dave Brat (R-Va.), a Freedom Caucus member, said earlier this month.

 

Will Republicans be able to keep the spotlight on taxes?

A tax code rewrite is a top agenda item for Republicans this year. The GOP hopes that this week’s tax developments will help give the efforts attention and momentum.

But other issues have the potential to overshadow the framework’s release.

Republicans have until the end of the week to pass ObamaCare repeal legislation under the fiscal 2017 budget resolution that allows a bill to advance with only a simple majority.

The debate over protesting athletes during the national anthem has dominated the headlines since Trump on Friday said that NFL team owners should fire players who kneel. 

And Tuesday’s primary runoff for the GOP nomination in the Alabama Senate race is a high-stakes event for Trump. The president endorsed Sen. Luther StrangeLuther Johnson StrangeAlabama election has GOP racing against the clock McConnell PAC demands Moore return its money Graham on Moore: 'We are about to give away a seat' key to Trump's agenda MORE (R-Ala.), who is backed by Senate Majority Leader Mitch McConnellAddison (Mitch) Mitchell McConnellAlabama election has GOP racing against the clock McConnell PAC demands Moore return its money Klobuchar taking over Franken's sexual assault bill MORE (R-Ky.) but is trailing in the polls to former Alabama Supreme Court Chief Justice Roy Moore.