White House explores new direction on tax reform

White House explores new direction on tax reform
© Greg Nash

The White House is signaling an interest in moving the tax-reform debate in a different direction. 

A House tax reform blueprint, released last year as part of Speaker Paul RyanPaul Davis RyanGOP leaders pitch children's health funding in plan to avert shutdown Lawmakers see shutdown’s odds rising Fix what we’ve got and make Medicare right this year MORE’s (R-Wis.) “Better Way” agenda, had long been viewed as the starting point for tax reform. During the campaign, President Trump's tax plan was revised to more closely resemble it. 

But the Trump administration is now drafting a new proposal, with officials considering a range of policy options beyond what Republicans in Congress have put forward. 

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Office of Management and Budget Director Mick Mulvaney told CNBC in a video posted Wednesday that “it's too early to say” if the White House’s plan would resemble the House’s blueprint. But he suggested the administration wouldn’t hesitate to go its own way.

“The House can go and do what they want to do,” Mulvaney said. “We are going to formulate our own policies.” 

The White House made clear after last month’s collapse of an ObamaCare repeal bill that it intends to take more of a leading role on tax reform.

In the last several weeks, Trump and members of his economic team have been meeting with lawmakers, businesses and industry groups to get their input.

A White House spokesperson said Trump is getting feedback from stakeholders “to help develop a plan that will provide significant middle class tax relief and make American businesses more competitive.” 

Ryan spokeswoman AshLee Strong said in a statement that “our intention has always been and continues to be to coalesce around a unified GOP plan and those conversations continue.”

The most controversial aspect of the House’s plan is its reliance on border adjustability to tax imports and exempt exports.

While that tax is the cornerstone of Ryan’s proposal, the White House has yet to fully embrace it.

The Washington Post last week reported that the White House was looking at other ideas, including a value-added tax and a carbon tax, neither of which is in the House plan. The Associated Press, meanwhile, reported that Trump was abandoning his campaign tax plan.

The White House has pushed back on those reports, saying that a value-added tax and a carbon tax are not under consideration and that the campaign tax plan remains the administration’s foundation on tax reform.

Even if administration officials are simply batting around ideas, it seems clear that Trump’s team is open to a different approach.

“It definitely looks like they’re going to do their own scouting and come up with their own idea,” said Alan Cole, an economist at the Tax Foundation.

Trump has also floated linking tax reform with infrastructure, which is not part of the House Republicans’ plan. Senate Majority Leader Mitch McConnellAddison (Mitch) Mitchell McConnellSessions: 'We should be like Canada' in how we take in immigrants NSA spying program overcomes key Senate hurdle Overnight Finance: Lawmakers see shutdown odds rising | Trump calls for looser rules for bank loans | Consumer bureau moves to revise payday lending rule | Trump warns China on trade deficit MORE (R-Ky.) said on NewsMax TV on Thursday that he thinks the two issues will be addressed separately. 

Administration officials have suggested that they will move deliberately on tax reform and care more about getting tax reform right than meeting a deadline. But with the healthcare efforts floundering, White House officials are under pressure to get Trump’s legislative agenda back on track. 

“That I think is their motivation,” said Marc Gerson, vice chairman of the tax department at law firm Miller & Chevalier and a former tax counsel to the House Ways and Means Committee.

One consideration for the White House as it weighs its next move on tax reform is whether the House GOP blueprint can pass Congress. 

The plan is already facing pushback from some Republican lawmakers, particularly in the Senate, over the border adjustment provision. Senate Finance Committee Chairman Orrin HatchOrrin Grant HatchKoch groups: Don't renew expired tax breaks in government funding bill Hatch tweets link to 'invisible' glasses after getting spotted removing pair that wasn't there DHS giving ‘active defense’ cyber tools to private sector, secretary says MORE (R-Utah) said late last month that the Senate is unlikely to simply pass a House bill “without our members having significant input on the substance of the bill.”

“If tax reform happens, it will be because the president has picked out a plan and herded the members of Congress into voting for it,” Cole said. 

If the administration opts against the border-adjustment proposal, it would have to find another way to raise revenue to pay for lowering tax rates.

The version of Trump’s tax plan that he released in September doesn’t include border adjustability but has a number of other similarities to the House GOP tax plan, including individual tax brackets of 33 percent, 25 percent and 12 percent. Both plans would also lower the corporate tax rate.

Given the similarities, the White House may still ultimately put out a proposal that is in line with the House blueprint, even if changes some of the details.

“I think there’s a lot of the Ryan proposal that works for them,” said Dean Zerbe, national managing director of alliantgroup and a former senior counsel to the Senate Finance Committee. He added that the basic elements of the Ryan plan would be in any Republican tax proposal.

Leading tax writers in the House have expressed support for the White House’s efforts on tax reform.

House Ways and Means Committee Chairman Kevin BradyKevin Patrick BradyHouse passes tariff-relief bill GOP may increase IRS’s budget Overnight Finance: Congress barrels toward another shutdown crisis | Canada worries Trump will withdraw from NAFTA | Blue-state Republicans push tax law changes | Chamber CEO calls out Bannon, Warren MORE (R-Texas) said on CNBC earlier this month that it’s “encouraging and helpful” that administration officials are engaged in the tax-reform process and considering a range of options. 

He said that Trump’s economic team is “trying to find the right, most pro-growth tax code.”

“The sooner the White House and Congress can get on the same plan, the better it is,” Brady added.