Ryan Says Tax Overhaul Must Happen in 2017 to Rebuild Economy

(Bloomberg) -- House Speaker Paul Ryan said a tax overhaul must happen in 2017 to rebuild U.S. confidence and get the economy growing more robustly.

“We have to do tax reform in 2017 if we’re going to get a confident America,” Ryan said Tuesday during an interview on Fox News. “It’s ridiculous -- it’s costing us competitiveness, it’s costing us jobs,” Ryan said, referring to the current U.S. corporate tax rate, which is 35 percent.

Ryan’s remarks come ahead of what his office has touted as his “first major speech on tax reform” Tuesday afternoon at an event in Washington for the National Association of Manufacturers. In the speech, he’ll argue for a tax overhaul that’s permanent and does more than simply cut rates, according to prepared remarks released by his press office.

The speaker will emphasize the urgency of a tax overhaul, but won’t hash out pending decisions on controversial provisions -- meaning he may not directly address his controversial proposal for a border-adjusted tax on imports.

“Transformational tax reform can be done, and we are moving forward,” Ryan says in excerpts of his prepared remarks. “Full speed ahead.”

House Blueprint

The speech comes almost one year after the release of House Republican leaders’ blueprint for rewriting the tax code. The GOP remains divided on the basics of a tax overhaul, including whether a bill should be revenue-neutral and, if so, how it should raise revenue to pay for tax-rate cuts. The major proposed offsets in the Ryan-backed plan -- a border-adjusted tax and elimination of corporate interest deductibility -- lack support from the White House and Senate Republicans, who have yet to propose any alternatives.

Treasury Secretary Steven Mnuchin said during a Bloomberg TV interview on Tuesday that the administration is working every week with the House and Senate to come up with a joint tax plan. Private tax meetings are ongoing between Mnuchin, White House economic adviser Gary Cohn, Ryan, Senate Majority Leader Mitch McConnell, Senate Finance Chairman Orrin Hatch and House Ways and Means Chairman Kevin Brady to find a way forward. Republicans broadly agree on the goal of individual and corporate tax-rate cuts.

“The idea is to get us all on the same page so when we release the combined plan it’s going to get passed,” Mnuchin said. “It’s our focus to get that done this year -- it’s critical to the economy and we’re working every day to get that done.”

Ryan and his chief tax ally, Brady, have refused to abandon their ideas but have indicated openness to modifications and alternatives. Brady recently proposed a five-year phase-in for the so-called BAT, which would replace the current corporate tax rate of 35 percent with a 20 percent levy on U.S. companies’ domestic sales and imported goods, while exempting exports.

‘Half-Measures’

In his speech, Ryan will warn against “half-measures,” while recognizing that transforming the tax code will be politically challenging.

“I think the border adjustment tax, whether you phase it in or you put it in all at the same time, is DOA,” said Representative Mark Meadows, chairman of the House Freedom Caucus, a group of influential conservatives. “The political reality is there’s not the votes there for the border adjustment tax -- whether it’s today, tomorrow or in five years.”

Without Ryan’s main revenue raisers, the GOP is struggling to find other options. Ohio Representative Jim Jordan, a Freedom Caucus leader, has proposed some $400 billion in cuts to the welfare safety net as a way to help pay for a tax overhaul. Other Republicans, including Hatch, have said they aren’t committed to revenue neutrality. Another proposal backed by Pennsylvania Senator Pat Toomey is to change the budget rules and extend a 10-year time horizon for deficit-raising tax cuts to as long as 30 years.

To contact the reporters on this story: Anna Edgerton in Washington at aedgerton@bloomberg.net, Sahil Kapur in Washington at skapur39@bloomberg.net.

To contact the editors responsible for this story: Alexis Leondis at aleondis@bloomberg.net, John Voskuhl