On June 24, 2016, the House Republicans released their "A Better Way" blueprint for tax reform. Obviously as part of an election strategy. On November 9, 2016, with Republican victories all around, I thought there would be fast track activity to draft legislative language to be released early in the 115th Congress. We haven't seen any legislative language yet although I suspect some exists.
The details of the plan can be found in the full report of the Republicans and a July 2016 article I have on it. The blueprint seems to have hit a few roadblocks, most notably the tax on imports. Note that this is not a tariff. Instead, imports are taxed by not allowing a deduction for them. Likewise, exports are tax-free by removing export revenue from the tax base. The goal is to make the business tax a consumption tax that can be border-adjustable (per the report).
Many taxpayers are not in favor of the import treatment, most notably retailers with lots of imports, as well as oil companies (and others). For example, see the National Retail Federation's website on "BAT is a Bad Tax." [BAT = Border Adjustable Tax]
The import tax though generates a lot of revenue to help pay for lowering the corporate tax from 35% to 20% and the maximum tax on passthrough business income from 39.6% to 25%. So, it is an important part of tax reform.
The blueprint includes several simplifications and several open questions to be resolved. Drafting legislative language is difficult as changes have effects on several other parts of the law, transition rules must be addressed, and there were several questions left open in the report.
Meanwhile, it it not identical to President Trump's plan and the Senate doesn't yet have a formal plan. However, this past week, Senate Finance Committee Chairman Hatch formally asked for suggestions - due by July 17.
Also, on June 20, Speaker Ryan delivered a speech on tax reform to the National Association of Manufacturers. He would like to see tax reform by the end of 2017 [CNBC, "Speaker Paul Ryan tries to save 'crown jewel' of GOP agenda: Tax reform," 6/20/17.]
There are additional agenda items for Congress and President Trump for this year, including work on the Affordable Care Act, passing a budget, and dealing with the debt ceiling.
What do you think? Will we see tax reform by the end of the year?
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