While House and Senate counterparts continue their efforts toward tax reform, a number of discrepancies must be reconciled before a unified plan emerges. What makes an already complicated process more difficult is the lack of agreement among the taxwriters, according to Eric Solomon, Ernst & Young (EY), who spoke at the Federal Bar Association’s (FBA) 29th Annual Insurance Tax Seminar in Washington, D.C.
There is, however, “unanimous agreement” among the principles leading the tax reform effort that a tax code overhaul in 2017 remains the goal, Barbara Angus, House Ways and Means majority chief tax counsel, said at the event. As for a specific timeline, Angus was unwilling to set a date. Coming to agreement on a tax plan is more important than setting a false deadline, she said.
Mark Prater, Senate Finance Committee (SFC) majority chief tax counsel, also commented on timelines at the FBA event, although he also would not set a target. Accomplishing tax reform in 2018, however, is a possibility, Prater said, while still implying 2017 is the shared goal. The “good news,” according to Prater, is that members and staff have spent years working on ideas for tax reform and are “eager” to accomplish the task.
What will be included in the tax reform package also remains to be seen. While the House GOP tax reform blueprint is the basis for House legislation, the Senate is taking a look at other options, according to Prater. The Senate is working to accommodate the “ambitious targets” put forth by both House lawmakers and the White House, he said. Weighing past tax reform proposals are also on the table, he added.
One particular component of tax reform discussions that continues to hang heavy over negotiations is the border adjustment tax (BAT) as outlined in the House GOP blueprint. A number of Republican and Democrat lawmakers, as well as the Trump administration, have been unsupportive of its inclusion in tax reform. Generally, a BAT system would tax imports and exempt U.S. exports. It is estimated to raise $1 trillion in revenue, which would pay for proposed tax cuts.
Treasury Secretary Steven Mnuchin, leading the Trump administration’s efforts on tax reform, has been, up to this point, unwilling to support a BAT system. Additionally, Sen. Mike Lee, R-Utah, predicted in a June 2 interview that a BAT will be “out” of tax reform legislation, calling it a “horrible idea.” He added, “The White House doesn’t like it, a number of us in the Senate don’t like it.”
Rachel McCleery, SFC minority chief communications advisor, told Wolters Kluwer on June 2 that ranking member Ron Wyden, D-Ore., “has been widely referring to it (BAT) as a grocery tax.” Wyden has expressed concern that a BAT would essentially raise prices of food and clothing.
Without the border adjustment provision, however, the blueprint no longer operates as it was intended, Angus noted at the FBA event. In quoting House Ways and Means Committee Chairman Kevin Brady, R-Tex., Angus said “the provisions of the blueprint were designed to work together.”
Despite the rocky terrain, the House, Senate and White House remain optimistic tax reform will be accomplished collaboratively in 2017. “[SFC] Chairman [Orrin G.] Hatch, R-Utah, is continuing to work with his colleagues in Congress and the administration to help craft a pro-growth tax reform plan that will produce more income, more jobs, and more opportunities for all Americans,” SFC majority communications director Julia Lawless told Wolters Kluwer on June 2.