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Trump promising new tax plan this week

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Tax Hot Topics: Trump promising new tax planPresident Trump promised to deliver a new tax plan by April 26, calling it “a massive tax cut” for both individuals and businesses.

The White House initially appeared to walk back that aggressive timeline, but tweets over the weekend again doubled down on the promise. Trump’s campaign tax platform shared many elements of the House Republican Blueprint for tax reform, but it would cut the corporate rate to 15% instead of 20%. In addition, it included no border adjustability proposal.

It’s unclear how much Trump’s new plan will mirror his campaign proposals or how detailed it may be. The Treasury Department doesn’t yet appear to be staffed at the level that would allow for the creation of fully formed legislation. Gary Cohn, director of the National Economic Council and one of Trump’s top economic advisers, has been heavily involved in tax reform, but the White house has denied it is considering some items he has been discussing, including a carbon or value-added tax. 

The White House may also consider abandoning revenue neutrality to pursue a simple tax cut. Trump called the coming plan a tax cut “bigger than any tax cut ever.” The administration has also talked about completing tax reform in stages, starting with an initial tax cut, and then following revenue neutral reform. If Republicans plan to use the reconciliation process to avoid 60-vote hurdles in the Senate, any net tax cuts would need to expire within 10 years.

A new tax plan from the White House could provide a much-needed spark for tax reform. Efforts have momentarily slowed after the failure of legislation to repeal and replace the Affordable Care Act (ACA). The Trump administration is also pushing House Republicans to vote on a new version of American Health Care Act (AHCA) this week.

Trump is clearly looking for some signature legislative achievements to mark his 100th day in office, but it’s unclear how much support he will find in the House. Republican leadership has not promised a vote on health care this week, and the new tax plan could undermine the House’s own tax reform efforts.

House Ways and Means Committee Chairman Kevin Brady, R-Texas, postponed a hearing on border adjustability just before Trump made his announcement. Brady has shifted strategy after the failure of ACHA, looking to cultivate the grassroots support from the caucus so tax reform doesn’t face a similar fate. Border adjustability is by far the most controversial proposal. Trump has offered mixed signals on the proposal. He has publicly supported similar ideas — such as a reciprocal tax, mirror tax or even tariffs — but has not endorsed the idea of border adjustability itself. More recently, he indicated that to the extent border adjustability mimics the economic effects of those kinds of ideas,  perhaps only the name needs to be changed.

The Ways and Means Committee is still fleshing out its Blueprint into a full bill. Brady still appears committed to moving a bill based on the Blueprint, but Trump’s plan, if released as promised, could change the outlook. Trump has promised an imminent new tax plan several times in the past, only to delay action, so another delay is certainly possible.

Contacts
Mel Schwarz

Partner, Washington National Tax Office
+1 202 521 1564

Dustin Stamper
Director, Washington National Tax Office
+1 202 861 4144

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