An economist who helped write Donald Trump's tax proposals floated a plan for Congress to tackle business taxes — including a rate cut on companies' overseas earnings — quickly next year, while postponing consideration of individual income taxes.
That strategy, offered by Stephen Moore, an economist who has advised Trump, has at least some political risk; throughout his campaign the president-elect generally pitched his tax plans as "a massive tax reduction" for working and middle-income Americans. But focusing on business taxation first might allow for moving a bill much faster — and win support from Senate Democrats, who want to use short-term revenue gains from an offshore tax break to fund nationwide infrastructure improvements.
"If you have to give Democrats some of the things that they want, do it," Moore said Wednesday during an event sponsored by Politico and American Innovation Matters, a corporate interest group that is calling for tax reform. "Let's move this thing forward."
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Lawmakers' initial responses were guarded. Republican leaders in the House and Senate have said they prefer a comprehensive approach to overhauling taxes. Democrats weren't eager to respond to a proposal they haven't seen.
It's not even clear that Trump would pursue a separate-bill strategy. "It's still being decided; we don't know yet," Moore told Bloomberg News after his remarks. Peter Navarro, another of Trump's economic advisers, declined to comment.
"I think that the business tax reform is a lot easier to get done," Moore said during his talk. "I would label this a jobs bill. I think the economy is extremely weak right now. I think we could be headed toward recession in 2017, and we need some kind of anti-recession insurance policy."
Moore said his approach might attract enough Democratic support in the Senate to allow Republicans to avoid the politically perilous, fast-track process known as reconciliation. Republicans hold a slim majority in the Senate.
A business tax bill would include a tax cut for U.S. companies' offshore earnings. Under current law, that income is taxed at a 35% rate — but companies can defer paying those taxes until they decide to bring those earnings back to the U.S. As a consequence, U.S. companies have accumulated as much as $2.6 trillion in offshore profit.
Offering a lower rate — Trump has proposed 10%, while House Republicans have proposed 8.75% or lower — would provide a tax cut and a short-term revenue boost at the same time.
Rep. Kevin Brady, the Texas Republican who chairs the House Ways and Means Committee, said that while he prefers taking a comprehensive approach to taxes, "we're eager to work with the Trump transition team on both tax reform and health-care reform, and to the extent possible their infrastructure package."
"We're eager to work with them on all these and I'm sure we're going to have a lot of good, constructive discussions," Brady said.
A Senate Democratic leadership aide declined to comment on Moore's proposal, and said there'd be no comment unless or until the president-elect's team puts it in writing. Senate Minority Whip Dick Durbin of Illinois said Wednesday that "there is room for conversation" about compromising on tax legislation, but he indicated to reporters that it may take more than infrastructure spending to win his support.
"Well that depends," Durbin said. "Ultimately what I'm looking for is a progressive tax cut. Find a way to reduce taxes for low and middle-income families, I'm all ears."
At the same time, Senate Finance Committee chairman Orrin Hatch, a Utah Republican, told reporters he was open to infrastructure spending in some form, but he also said he thinks Republicans could use reconciliation to achieve a tax overhaul. That process allows for expedited consideration of tax, spending and debt-limit issues — avoiding Senate rules that can block legislation that doesn't have 60 votes.
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Reconciliation has some attraction for Republicans on the House Ways and Means panel — since it might allow them enact large portions of a tax-overhaul blueprint that they helped produce in June. That document includes individual rate cuts, and it would reset business taxes with rate cuts and a move toward a destination-based, cash-flow system of taxation that Brady has said is "built for growth."
It would be unfair to walk away from that work so soon after beginning talks with Trump's surrogates, Rep. Kenny Marchant, a Texas Republican, told Bloomberg BNA after he and his colleagues on the panel met for lunch for the first time since September.
But the problem with using reconciliation, Moore said, is that it can lack durability. An example is the Affordable Care Act, which was enacted with reconciliation and now faces repeal. Trump shouldn't go down that path, Moore said.
It would be a good idea to get Democrats on board for any tax overhaul discussions later, said Rep. Peter Roskam, an Illinois Republican, who said it might be politically smart for them as well.
"If I was a Senate Democrat that was serving in a state that Donald Trump won, I would be very interested in working with Republicans to try and create a pro-growth agenda," he told Bloomberg BNA.
At least one Democrat on the Ways and Means panel suggested he might be swayed, since members of his party generally agree that investing in infrastructure can create jobs. But the job-creation claims have to be supported by evidence, said Rep. Xavier Becerra of California, who chairs the House Democratic Caucus.
"When you go beyond that, you have to prove that what you are proposing creates jobs," Becerra said.
Bloomberg News
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