Washington's most powerful business groups are urging lawmakers to press ahead on tax reform amid fears that a once-in-a-generation opportunity is slipping ...and more »
Washington's most powerful business groups are urging lawmakers to press ahead on tax reform amid growing fears that what Republicans had billed as a once-in-a-generation opportunity to transform the nation's tax code is slipping away.
Their efforts come as the Trump administration seeks to generate new momentum on the issue over the next few weeks with a "Made in America" message campaign. Capitol Hill lawmakers locked in a stalemate over healthcare have begun looking over the horizon to tax reform as the next major agenda item.
Among the groups that have sent letters to Republican leadership in recent weeks: the Financial Services Roundtable, the Business Roundtable and the U.S. Chamber of Commerce.
They have stressed the importance of securing a major reduction in the corporate rate, which currently stands at 35 percent. Though both White House and Republican leaders have proposed steep cuts, political and financial analysts say divisions within the GOP and the stalemate on healthcare have diminished the prospect of aggressive action.
"There's a growing concern among Republicans that they're going into the 2018 midterms with zero accomplishments," said Jon Traub, a Capitol Hill veteran who is now Deloitte's tax policy leader.
Another key priority is to change the way businesses are taxed. The U.S. is one of the only developed countries with a worldwide system, collecting taxes on corporate income no matter where it is earned. Industry lobbyists instead argued that the U.S. should adopt a territorial system that only taxes earnings in America.
Sen. Orrin Hatch (R-UT)
"Pro-growth international tax policies are instrumental to both the ability of American companies to compete globally and grow not only their global footprint, but also U.S. jobs and operations," the Chamber of Commerce said in a recent letter to Republican Sen. Orrin Hatch, chairman of the finance committee.
Hatch requested public input last month as he attempts to lay the groundwork for support on the Republicans' signature issue, and the committee has received hundreds of thousands of responses, a spokeswoman said. On Tuesday, the House is slated to release its fiscal 2018 budget, which is expected to provide an outline of its plans for reform.
One open question is whether the administration intends to pay for any tax cuts — and if so, how.
In the White House's 2018 budget, officials assumed that the reductions would not add to the deficit because they would be offset by economic growth and eliminating deductions. However, budget analysts have declared those projections unrealistic, and the nonpartisan Congressional Budget Office declined to score the administration's plan because it lacked "specificity."
The path lawmakers choose will help determine the size and scope of any tax package. If the legislation adds to the deficit, congressional rules prevent Republicans from passing it in the Senate with a simple majority vote. Instead, lawmakers would have to settle for a smaller, temporary cut — a compromise that business groups warned would be disappointing.
"The goal of tax reform should be to level the playing field for American businesses and American workers. Without lowering rates and moving to a territorial tax system, corporate inversions and the movement of intellectual property and earnings abroad will continue to accelerate, while factories and jobs continue to relocate to lower tax jurisdictions," read a letter that the Made in America Coalition, which represents major manufacturers such as GE and Boeing, sent to Hatch's office on Monday.
"These fundamental issues cannot be effectively addressed with a modest, temporary tax cut," the group added.
The group has been among the most vocal proponents of the controversial border adjustment tax backed by House Speaker Paul Ryan. The proposal would allow U.S. companies to deduct the cost of goods manufactured in America — providing a boost to exports but raising the cost of imports. The measure was estimated to raise roughly $1 trillion to help pay for lower rates for all businesses.
But border adjustment has run into widespread opposition on Capitol Hill, where retailers have lobbied hard against it. On Monday, the coalition signaled it was open to alternatives.
"The House blueprint is just one example of how tax reform can reduce the cost of investing and help restore America's communities and job base," its letter stated.
The Financial Services Roundtable, an industry advocacy group headed by Bank of America CEO Brian Moynihan, also expressed a sense of urgency in getting reforms pushed through.
The group said it "strongly supports the [Senate Finance Committee's] goal of enacting a simpler, fairer and a more efficient tax code that significantly reduces tax rates on individuals, businesses and investment income, while also shifting to an internationally competitive territorial tax system.
"Such reforms will create jobs, increase wages, bolster economic growth, and make America a more attractive place to invest.
Treasury Secretary Steven Mnuchin and National Economic Council Director Gary Cohn have met with Republican leadership on Capitol Hill at least four times in recent months to discuss the framework for tax reform.
At the White House and on Capitol Hill, the hope is that negotiating key components of the plan before it is released will help secure its passage in the long run. The administration has said it expects to release those details late this summer.
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