President Donald Trump kicked off his efforts to sell a big tax package to voters on Wednesday, calling for a “pro-American” system that would cut tax rates for businesses and offer a boost to the middle class.
Trump maintained that a new tax system was crucial to ushering in a new prosperity in the U.S., in a speech that White House officials acknowledged beforehand would be light on policy details.
The president laid out several principles for tax reform, including cleaning the code of tax breaks and offering tax relief to middle-class families. But in a speech meant to put a populist polish on tax reform, Trump also spoke repeatedly about the need to lower the statutory corporate tax rate — which, at 35 percent, stands among the highest in the industrialized world — and to give companies more opportunity to bring back profits they’ve stashed offshore.
“Instead of exporting our jobs, we will export our goods. Our jobs will both stay here in America and come back to America. We’ll have it both ways,” Trump said at a Springfield, Mo., manufacturer, adding that millions of people would move from welfare to work and “will love earning a big fat beautiful paycheck.”
“We believe that ordinary Americans know better than Washington how to spend their own money and we want to help them take home as much of their money as possible and then spend it,” he said. “So they’ll keep their money, they’ll spend their money, they’ll buy our product.”
But Trump’s speech also underscored just how big a challenge he and a Republican Congress will face in pulling off a true overhaul of the tax code. The president only briefly touched on policy details, saying that businesses would “ideally” be taxed at a top rate of 15 percent and that the tax code would contain incentives for child care — a top priority of his daughter, Ivanka Trump.
The president also laid bare some of the tensions that have erupted between the White House and GOP lawmakers following the implosion of their efforts to repeal Obamacare.
“I am fully committed to working with Congress to get this job done,” Trump said. “And I don’t want to be disappointed by Congress. Do you understand me?”
Trump’s speech was aimed at showing that Republicans have the message down on tax reform, but lawmakers have yet to confront the monumental task of turning the rhetoric into reality.
Senior White House officials this week repeatedly billed the president’s speech as an address focused on why tax reform needs to happen, not how it will materialize. That’s the sort of big-picture cover on taxes that Trump didn’t offer congressional leaders in their doomed efforts to repeal and replace Obamacare.
But while congressional leaders undoubtedly welcome the president making the broad case for a tax revamp, Trump’s speech doesn’t mask the fact that lawmakers still face a wide range of knotty questions when they return to Washington next week.
Republicans still have to figure out how to pass a budget this fall, a process that will play a big role in deciding how generous a tax plan they can write. They also have to decide whether tax changes should be permanent or temporary, or a mix of the two, and whether their plan should be a net tax cut that would add to the deficit.
And that’s before they will feel the full brunt of a massive lobbying push on what would be the first major tax overhaul in more than 30 years. Already, GOP lawmakers are starting to hear from industries that might be the losers in a tax overhaul, such as big corporations that don’t want a minimum tax on foreign earnings and a retirement sector wary of potential changes to savings plans.
The hurdles won’t be limited to policy, either, after a summer that saw both sides of Pennsylvania Avenue grow increasingly wary of the other as the GOP’s health care efforts imploded. Republicans on Capitol Hill steamed privately in July that Trump’s obsession with White House infighting and the Russia controversy was a major factor in the death of the repeal effort. They’re crossing their fingers that he won’t be so easily distracted on tax reform.
That’s because Hill Republicans will need Trump to use his bully pulpit for tax reform to cross the finish line, and GOP leaders believe Trump is uniquely able to reach the entire electorate in a way Hill leaders never could. As one House GOP leadership aide put it, the speech shows the White House is rowing in the same direction as the Hill, reassuring lawmakers that tax reform is possible.
But the ultimate test will come when the House, which is expected to move first on taxes, drops its bill. There are questions, following the health care debacle, over whether the White House will embrace the legislation as its own — or distance itself from the plan as a House effort once the critics and special interests start getting louder.
GOP leaders on the Hill say the weekly tax reform meetings with administration officials suggest that the White House and Congress will stand firm in their unity behind the jointly laid plan. Meanwhile, top Trump aides and advisers, like Gary Cohn, the director of the National Economic Council, have made it clear that lawmakers will take the lead on actually writing the tax bill.
“The administration has been very well represented in this process,” a senior White House official said Tuesday.
That unity will be tested, however, when various interests start picking apart the plan. Plenty of powerful industries could be hurt by a tax overhaul, which will undoubtedly complicate efforts to get lawmakers on board with the effort. The housing sector, for instance, is concerned about chatter that Republicans would consider both capping the mortgage interest deduction and ending the deduction for state and local taxes. The GOP is also looking at curbing the pre-tax benefits for contributing to retirement accounts, raising anxiety among that industry.
All sorts of businesses are also worried that Republicans might end the long-standing deduction for business interest, something the House GOP proposed in its blueprint last year.
The Alliance for Competitive Taxation, a coalition that includes Google, IBM and Pfizer, warned against across-the-board limits on the interest deduction in a new paper this week while also coming out against a minimum tax on offshore earnings that has gained traction since the death of the House GOP’s border adjustment.
“Imposition of a foreign minimum tax on the active business income of U.S. companies would have unintended and adverse consequences,” wrote the group, which also wants Washington to drastically cut the corporate tax rate from 35 percent and to generally limit the taxation of offshore income for multinational corporations.
Beyond the policies that have yet to be ironed out, Hill Republicans still have to pass a budget in order to tackle partisan tax reform — a major hurdle in itself.
House Republicans, divided among moderates and conservatives, have been unsuccessfully trying to reach a budget deal for months. But while GOP insiders believe they’ll finally advance their fiscal blueprint in September, they’ll still need to strike a deal with Senate Republicans, whose fiscal blueprint is likely to look entirely different, sending the House back to square one.
Without a budget, Republicans would need Democrats to pass any tax bill — an uphill battle for an increasingly unpopular president, especially considering that 45 Senate Democrats have vowed not to back any measure that includes tax cuts for the wealthy or adds to the deficit.
“The millionaires and the billionaires in this country are doing just fine, God bless them, don’t have any problem with that,” Senate Minority Leader Chuck Schumer said Wednesday in a conference call ahead of Trump’s speech.
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