Ryan sets sights on ‘down payment’ for tax reform

House Ways and Means Committee Chairman Paul Ryan (R-Wis.) conceded Tuesday that the broadest tax deal that could be struck in 2015 would involve revamping international rules for businesses and a long-term solution for certain expired tax breaks.

Ryan cast that sort of deal as a “down payment” on tax reform and said it was likely the most congressional Republicans could accomplish as long as President Obama in office.

{mosads}“That’s what we’re exploring right now in this divided government,” Ryan said at a conference sponsored by the American Institute of Certified Public Accountants. “And if we can have a good down payment on tax reform, we think we can get some momentum.”

The White House and congressional Republicans do have similar ideas on how to tax the foreign earnings of multinational corporations. Republicans have long called for a system that would shield most of that offshore income, and they praised Obama for putting out more details this year for a potential minimum tax on foreign earnings.

Congress also has to deal with the raft of tax incentives that require periodic renewal, commonly called “extenders.” Dozens of those preferences expired at the end of 2014, and the House has been voting this year to make some of them last indefinitely.

But Ryan didn’t mention lowering corporate tax rates as a potential part of that down payment. Reducing the top corporate rate of 35 percent is a plank in the White House’s framework for business tax reform and an area where the two sides aren’t far apart. Ryan also didn’t link tax reform to a long-term highway bill, an idea pushed by House Majority Leader Kevin McCarthy (R-Calif.) on Monday.

Republicans want a top corporate rate of 25 percent, and Obama has floated a 28 percent rate.

But in recent weeks, small-business groups have pushed back on any tax legislation that lowers the corporate rate without changing individual rates. The vast majority of small businesses pay taxes through the individual system, and advocates for those companies have long worried about a deal that takes away business incentives without an individual rate cut.

Top Democrats are against lowering individuals’ rates, but Ryan said Tuesday he sympathized with those who opposed only lowering corporate rates.

Ryan and Obama have been allies in trade negotiations recently, but the Ways and Means chairman made it clear that the two sides face deep divisions when it comes to taxes on individuals.

The Wisconsin Republican accused Democrats of engaging class warfare and demagoguery by refusing to discuss lower individual rates and targeting the tax rate paid by hedge fund managers.

Obama called out a carried interest tax break used by finance professionals last week. Ryan declined to weigh on in whether he thinks that incentive should be scrapped, but insisted that it won’t be going anywhere until the individual tax system is revamped — after there’s a new president.

“The thing that I don’t think we ought to be doing is buying into class warfare,” Ryan said. “We want people to be successful.”

Still, Ryan previously has sounded open to cutting a deal with Obama on corporate tax rates, and a spokesman said Tuesday they “continue to look for any common ground that may exist and haven’t dropped any ideas.”

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