Tax Reform May Now Prove More Difficult, Lawmakers Say

CCH Tax Day Report

As Capitol Hill shifts its primary focus back to tax reform after the unsuccessful attempt by House leadership to move their health care reform bill through the House (TAXDAY, 2017/03/27, C.1), some lawmakers are saying the new task at hand will likely prove to be more difficult. The Trump administration, however, seems to think tax reform will be easier to tackle.

President Trump announced that “tax reform is next,” in a press briefing he gave on March 24 after House GOP leadership pulled their health care reform bill from the floor when it became clear it would not pass (TAXDAY, 2017/03/27, C.1). Among the Patient Protection and Affordable Care Act (ACA) (P.L. 111-148) taxes that will remain in place are the net investment income tax (NIIT), additional Medicare tax, the delayed “Cadillac” excise tax on high-cost health care plans, the excise tax on qualified medical devices and others.

Having to keep ACA -related taxes in place while drafting and potentially enacting tax reform legislation will be more difficult, but not impossible, House Speaker Paul Ryan, R-Wis., said. Ryan and House Ways and Means Committee Chairman Kevin Brady, R-Tex., have both confirmed they are moving onward from health care to tax reform.

Treasury Secretary Steven Mnuchin has stated that, in his view, tax reform will be easier to address than health care. “Health care and tax reform are two very different things,” Mnuchin said at a recent Axios event in Washington, D.C. (TAXDAY, 2017/03/27, T.1). “Health care is a very, very complicated issue. In a way, (tax reform) is a lot simpler.”

Some lawmakers from both parties disagree with that notion, however. “Anyone who thinks tax reform is going to be easier than health care, doesn’t know their way around the tax code,” Sen. Mark Warner, D-Va., said on March 27. Likewise, Rep. Ted Poe, R-Tex., said on the same day that the tax reform process will be tougher.” I think that is going to be more difficult, to change the tax structure of the country, than replacing and repealing (the ACA). We will see that it’s going to be very, very difficult,” Poe said.

Adding to the list of potential impediments is the House GOP’s controversial border adjustment provision within their tax reform blueprint released last June (TAXDAY, 2016/06/24, C.1). Under the proposal, U.S. businesses would no longer be effectively permitted a deduction based on the cost of imports, and those businesses would no longer be taxed on income received from exports. Like health care, Republican lawmakers have not reached consensus on the proposal. While Brady maintains border adjustment is a vital component of tax reform, saying on March 26 that he would not support an alternative that does not include it, other House and Senate lawmakers on a bipartisan basis are expressing doubts. Similarly, Mnuchin has stated that the administration is considering the provision but has some concerns.

By Jessica Jeane, Wolters Kluwer News Staff

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