House Speaker Paul Ryan told conservative activists Friday that the Republicans’ plan on tax reform is to create as many permanent changes as possible, while making others temporary to comply with budgetary rules.
According to multiple individuals present at a meeting in his office, Ryan said the top priority is to lower, as quickly as possible, overall business and individual tax rates, as well as some sort of enhanced write-offs (“expensing”) for businesses, with the aim of reaping the economic benefits headed into the 2018 midterm elections. Republicans sorely need such a win after the implosion of their plans to repeal and replace Obamacare.
“They want to make as much of it as possible permanent,” said Grover Norquist, the president of Americans for Tax Reform, one of the conservative groups in the room. He added that conservatives were at “97 percent” agreement on tax reform after a tax on imports, known as “border adjustment,” was tabled yesterday.
“It’s now a question of making it fit” within the budgetary rules Congress must follow, he said.
Republicans are planning to use a tactic known as budget reconciliation to push tax reform through the Senate without Democratic votes. But any provision in a reconciliation package that would add to the deficit outside the 10-year budget window has to be temporary.
For instance, tax cuts spearheaded by President George W. Bush in 2003 had to expire after 10 years, and became a political football during the Obama administration. Republicans hope to avoid a replay and plan to mix and match the various parts of tax reform. Measures that they believe would be politically easy to renew in 10 years would be put in the temporary pile.
Most likely to end up permanent would be cuts to business and individual rates, as well as some sort of carrot-and-stick approach to prevent companies from offshoring revenues and other assets to avoid paying taxes on them in the U.S.
Elimination of various individual tax breaks, including the federal deduction for payment of state and local taxes, could be permanent as well, since it would help pay for lower rates. Ending the state and local tax deduction also would serve a secondary conservative goal of putting pressure on high-tax states to lower their own rates, since their residents would no longer see a benefit from the federal write-off.
Doubling the standard deduction that individuals can claim instead of itemizing expenses on their tax returns, as well as increasing the amount of money businesses can write down immediately for large purchases, are more likely to be temporary. The goal would be to extend them or make them permanent down the road.
Specifics will be ironed out during the August recess, as staff for the tax policy committees in the House and Senate bounce different ideas off the CBO and Joint Committee on Taxation to get a better sense of how the different pieces will fit.
Privately, Republican leadership will whip members into line on passing a budget to serve as a vehicle for tax reform in September, while publicly, Ryan, House Ways and Means Chairman Kevin Brady (R-Texas) and President Donald Trump will hit the road to sell tax reform to the public.
“I think everyone is eager to pivot” from “the health care quagmire,” said conservative lobbyist Ryan Ellis, another person in the room for Friday’s meeting.