Paul Ryan has announced that he is not going to run for President, which increases the chances that we will see corporate tax reform this year. The window closes as soon as the presidential campaign heats up next year. Let's hope that they close some of the loopholes.
GOP targets budget process for tax reform
Republicans debate how best to use a potent budget tool.
By Manu Raju and Burgess Everett
Politico
1/13/15 5:34 AM EST
Several influential Republicans want to use a filibuster-proof budget procedure to overhaul the corporate tax code — rather than wield it as a weapon against Obamacare, as conservatives are demanding.
The quiet push, led by South Dakota Sen. John Thune, seeks to use the potent tool known as budget reconciliation to give both the GOP and President Barack Obama the sweeping victory on tax policy that business groups want, which could include a significant cut in corporate tax rates as well as provide funding for a long-term transportation bill. In contrast, an attempt to use reconciliation to gut Obama’s health care law might showcase Republicans’ new strength on Capitol Hill but would inevitably end in a veto.
“I would rather use reconciliation to do tax reform, which I think is very pro-growth — and have votes on Obamacare” separately, said Thune, the No. 3 Senate GOP leader. “There’s going to be a lot of interest in using it to repeal Obamacare, but you only get so many bites at the apple for reconciliation.”
It’s still unclear whether Republicans and the White House could reach a tax deal: Though both sides have said they favor tax reform, they’ve been far apart on specifics. And the discussions on Capitol Hill, now in their nascent phases, represent a tricky calculus for the two parties.
If GOP lawmakers try to use the budget maneuver to repeal Obamacare, they could send a powerful political message, which they’d be able to replicate after 2016 if they take back the White House and keep control of the Capitol — but it wouldn’t become law in the 114th Congress. And while focusing on tax reform and infrastructure funding could win presidential support, the move could anger conservatives who want to show voters that Republicans are prepared to use every means possible to attack the health law.
The dilemma showcases the larger question facing Republicans as they chart a course for their control of Congress: Should they fight to show a clear distinction with their Democratic adversaries, or should they compromise and pass more centrist legislation that could prompt backlash from the right?
“The conference has to decide, and will decide, whether or not the tools that we have in reconciliation ought to be used for things that we know provide a contrast with the president — we know that he will not support Obamacare repeal in reconciliation — or things that are possible for us to get a true change in public policy, with his signature,” Georgia Rep. Tom Price, who chairs the House Budget Committee, told reporters last month. “We haven’t, as a conference, as a group, reached a strategic decision.”
Ahead of a White House meeting with President Barack Obama and congressional leaders on Tuesday, and as the House and Senate GOP head to Pennsylvania this week for a rare joint retreat, some Republicans say a tax deal could be one of the few bipartisan agreements between Congress and the lame-duck president — if the two sides agree on the process for achieving it.
But moving tax legislation through budget reconciliation creates its own problems. If the overhaul blows a hole in the deficit, it could violate budget rules — so Republicans could have to scale back their ambitions or sunset the legislation after a certain number of years. Moreover, many GOP lawmakers believe that Obama is highly unlikely to sign a tax overhaul that passes Congress on a party-line vote of mostly Republicans. So, they argue, it makes more sense to use the reconciliation process for an attack on Obamacare and instead go through regular order for a broader tax overhaul that could garner a bipartisan supermajority in the Senate.
“There is a reality that anything that gets through here with 51 votes is unlikely to get signed into law,” said Sen. Pat Toomey of Pennsylvania, who sits on the Senate Budget Committee.
“My sense from a tax-reform standpoint is that it has real limitations,” Rep. Kevin Brady (R-Texas), a senior member on the House Ways and Means Committee, said of reconciliation. “We want to do the most pro-growth tax reform there is. My sense is that it would be through regular order, which is where I’d like to see it.”
In private conversations with GOP leaders, Obama has indicated an interest in tax reform during this Congress but has yet to go beyond generalities. Rewriting the Tax Code would prompt a massive lobbying war in Washington, and the White House and Capitol Hill are at loggerheads over setting tax rates for different industry sectors and overhauling an array of popular tax deductions.
The White House and many Republicans both say they’d like to cut the top corporate tax rate, now 35 percent, and that they want the outcome to be revenue neutral, though there is some dispute over what that means. That’s where the agreement usually ends.
Some believe it would be nearly impossible to do business-only reform — without addressing individuals — and the parties are at odds over how to handle small businesses that file taxes under the individual side of the code, known as pass-throughs. The White House also believes that a broader tax overhaul must raise revenue, a nonstarter for most Republicans.
Ohio Sen. Rob Portman, a former head of George W. Bush’s Office of Management and Budget, said a GOP decision to gamble on using reconciliation for tax reform depends largely on whether Obama is committed to the process.
“It depends on how it’s used and if the president is with us,” said Portman, a Republican who sits on the Budget Committee. “The more important thing is where the president is.”
Senior Obama administration officials and GOP leadership aides said it’s premature to game out the forthcoming budget battle, saying they have yet to engage in serious discussions on the matter.
“Reconciliation is a powerful tool, and Republican senators will continue to discuss the path forward,” said John Ashbrook, a spokesman for Senate Majority Leader Mitch McConnell (R-Ky.).
Despite the hurdles, making a priority of tax reform is one of the few broad areas of consensus between Republicans and the White House, along with international trade agreements.
“Having tax discussions makes more sense than some other things,” Republican Sen. Jeff Flake of Arizona said when asked if he’d rather pursue tax reform than a health care repeal in a reconciliation bill.
Thune, who chairs the Commerce, Science and Transportation Committee, said he already had discussions with senior administration officials, including Transportation Secretary Anthony Foxx, about using reconciliation to overhaul corporate tax laws. Along with several other Republicans, Thune said repatriating roughly $2 trillion in profits held overseas could create enough revenue to pay for changes to the corporate tax code and fund a five- or six-year transportation and infrastructure bill, which Congress must act on by late spring.
“If the White House was able to get infrastructure out of tax reform, it might be a way of bringing Democrats in to vote for something that they otherwise wouldn’t,” Thune said.
The budget reconciliation process is a highly complex, controversial and generally partisan process that majorities of both parties have repeatedly employed to pass legislation by a simple Senate majority of 51 votes. Democrats used reconciliation to enact a portion of Obamacare in 2010, and Republicans used it to shepherd through the Bush tax cuts in 2001 and 2003. Republicans were forced to sunset those tax cuts after a decade to meet strict rules prohibiting the budget bill from worsening the deficit, which eventually helped set the stage for the 2012 “fiscal cliff” drama.
The first step to passing a reconciliation bill is for Congress to adopt a nonbinding budget blueprint, a treacherous task for Republicans given the diversity of views within the House and Senate GOP. In that budget blueprint, Republicans plan to include “reconciliation” instructions, directing congressional panels to propose binding legislation aimed at reconciling tax and spending laws to meet the goals of the budget.
In addition to their special protections that prevent Senate filibusters, reconciliation bills are on a fast track for passage, subject to just 20 hours of debate, meaning Republicans could pass one quickly by a party-line vote. But the president could still veto it.
Senate Budget Committee Chairman Mike Enzi (R-Wyo.) is open to using reconciliation to both alter Obamacare and change the Tax Code, though the ultimate decision on how to proceed is likely weeks away, said Enzi spokesman Daniel Head.
“I will look at all forms of legislative acts,” added Sen. Orrin Hatch (R-Utah), the new Finance Committee chairman, when asked about passing tax reform through reconciliation. “I would rather do things straight up — if we can.”
Indeed, a number of Republicans won’t rule out the possibility of backing a strategy in which the Obamacare repeal votes occur outside the budget process and let Congress write the budget to instead focus on areas of potential bipartisan support like tax reform. Still, some want the GOP to go even bigger.
“It needs to be a very broad bill that would make a very significant difference,” said Sen. Dan Coats (R-Ind.), who sits on the Senate Finance Committee. “Corporate tax reform is important, but it’s only a piece of what tax reform ought to be.”
Kelsey Snell and Brian Faler contributed to this report.
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