CCH Tax Day Report
The House Ways and Means Committee held a full committee hearing on tax reform on May 18. A panel of five business leaders testified before the committee, each offering their view on the current tax code and how best to approach comprehensive reform.
“President Trump is leading the charge for bold tax reform that will unleash the growth of jobs and paychecks nationwide. And, he’s calling on the House and Senate to put forward our best ideas,” Chairman Kevin Brady, R-Tex., said during opening statements. Witnesses differed in their opinions of current tax reform proposals released by the Trump administration and House Republicans. The Senate, while reported to be crafting its own tax legislation, has not yet unveiled a reform proposal.
“The tax code is broken—it is far too complicated and in need of repair,” ranking member Richard Neal, D-Mass., said during opening statements. “I stand ready to work in good faith on tax reform with Republicans in Congress and the administration, but only if we’re truly doing so to benefit our nation’s middle class,” he added.
Taxwriters from both sides of the aisle and witnesses alike all agreed on the importance of enacting tax reform legislation to spur economic growth. Each witness testified that further delay in overhauling the tax code would be problematic.
“There is a lot of disagreement on what exactly we should do, but no reasonable person could disagree that sitting here now, having done nothing for 30 years in terms of comprehensive tax reform has cost us billions of jobs and billions of dollars,” Steven Rattner, chair, Willett Advisors LLC, testified. Rattner said he is troubled, however, by the tax reform proposals currently on the table, referencing the House GOP “Blueprint” and the administration’s tax outline.
Border Adjustment Tax
A provision of the House GOP “Blueprint” that has garnered a lot of attention, as well as controversy among lawmakers and industry leaders alike, is the border adjustability proposal. According to Zachary Mottl, chief alignment officer, Atlas Tool Works, Inc., border adjustability is a vital component of comprehensive tax reform. Mottl testified that a border adjustment tax (BAT) system will neutralize border tax problems imposed by other countries and allow businesses to reclaim a competitive edge in international trade. Additionally, a BAT tax is an important revenue raiser to help make tax reform efforts revenue neutral, he noted.
“The shift from nonâ€ï¿½border adjustable to border adjustable taxes is their [other countries’] strategic secret, one that the U.S. government has not, in the past, figured out,” Mottl said. According to Mottl, lowered tax rates (like income) must coincide with a border adjustment tax.
Permanence Equals Certainty
Lawmakers questioned witnesses about the important role permanence plays in business decisions and overall economic growth with regard to enacted tax policy. Some lawmakers have expressed concern that if comprehensive tax reform is not accomplished in 2017, Congress will settle instead for tax cuts that do not equate to comprehensive reform.
Further, House Republicans and the Trump administration have stated they intend to use the budget reconciliation process to move tax reform legislation through Congress, assuming little to no Democratic support. Generally, under Senate rules, however, any legislation passed through budget reconciliation cannot increase the federal deficit after a 10-year budget window. One potential way around this rule is to make tax cuts temporary.
The entire panel agreed, however, that permanent tax reform is extremely important. “Permanence creates certainty; certainty reduces risk,” Douglas L. Peterson, president and chief executive officer, S&P Global Inc., said.
Meanwhile, the Senate Finance Committee (SFC) announced on May 18 that it will hold a tax reform hearing on May 25 to examine current policies to overhaul the nation’s tax code. “As Congress and the administration continue to work to unite behind policies that will remake the tax code to better meet the challenges of today’s economy and get our nation on a better growth path, it’s imperative we have a clear understanding of how Washington intends to achieve this goal,” SFC Chair Orrin G. Hatch, R-Utah said in a statement.
In related news, Treasury Secretary Steven Mnuchin told the Senate Banking Committee on May 18 that some 100 employees of the Treasury Department are working on tax reform. Mnuchin predicted that tax reform would not only simplify the tax system but also boost competitiveness of U.S. businesses. “It is our goal to bring meaningful relief to middle income Americans and make American businesses competitive again. We will do this all while simplifying the system,” Mnuchin said.
By Jessica Jeane, Wolters Kluwer News Staff
Ways and Means Press Release: Opening Statement of Chairman Brady
Ways and Means Press Release: Ranking Member Neal Opening Statement