Brady, Mnuchin Promise Tax Details This Month -- Not Now
U.S. companies can learn about tax rates later this month due to a tax overhaul in U.S.
(Bloomberg) -- U.S. companies can expect to learn more about the tax rate they’d pay and the deductions they’d be allowed to claim on interest payments later this month as part of a new framework for overhauling the U.S. tax code, Treasury Secretary Steven Mnuchin said Thursday.
But neither Mnuchin nor House Ways and Means Chairman Kevin Brady -- who both appeared at a tax event sponsored by Politico Pro -- specified the corporate tax rate or offered much new detail.
Brady said proposed limits on the “net interest deductibility” available to U.S. corporations would likely allow existing loans to be grandfathered in, and officials are working on ways to provide exemptions to small businesses and agriculture. He said he knew that limiting interest deductibility would be “a significant change.” A spokeswoman for Brady, a Texas Republican, said she had nothing to add to his remarks Thursday afternoon.
Brady, Mnuchin and other Republican leaders who have been trying to hammer out a tax plan -- a group known as the Big Six -- plan to release a framework for the legislation during the week of Sept. 25. Interest groups are gearing up to pressure lawmakers to pass an overhaul before the end of this year -- a task that Brady called “ambitious.” During a conference call Thursday, conservative interest groups warned of “bleak” prospects for Republicans in next year’s elections if a tax overhaul fails in Congress.
The status of corporate interest deductibility has been one of the major unanswered questions for businesses this year. A blueprint for tax legislation released in June 2016 -- backed by Brady and House Speaker Paul Ryan -- called for eliminating the ability to deduct interest. But President Donald Trump and his advisers have signaled a preference for keeping the tax break. A statement released in July by White House officials and congressional leaders involved in tax negotiations didn’t mention the issue.
No ‘Rubber Stamp’
“We will continue to work toward some changes, but in a way that creates certainty and helps us grow the economy in a big way,” Brady said Thursday.
He cautioned that the tax framework that will be released in two weeks -- which Trump administration officials have billed as an attempt to create a unified approach -- will include greater detail, but won’t answer every question.
Brady’s counterpart in the Senate -- Orrin Hatch, chairman of the Senate Finance Committee -- is already raising questions about just how unified that framework will be. During a committee hearing earlier Thursday, he said that although he’s a member of the Big Six group, it “will not dictate the direction we take in this committee.”
“My goal is to produce a bill that can get through this committee,” Hatch said. And he cautioned that the panel won’t merely provide a “rubber stamp.”
President’s Outreach
Meanwhile, the president has been engaging with Democrats in bipartisan gatherings as part of discussions on taxes this week. Trump reiterated his support Thursday for a tax plan that benefits the middle class and brings companies back to the U.S.
After suggesting Wednesday that the ultimate legislation might mean higher taxes for the wealthy -- in comments that got mild pushback from congressional Republicans -- Trump altered his comments slightly Thursday. “I don’t think we’ll have to” raise taxes on high earners, Trump said. But he stressed that his priorities will be “people in the middle class” and seeking a corporate tax rate of 15 percent, down from the current 35 percent.
Mnuchin said during the Politico event that even if the top individual income tax rate is reduced, it will be offset by the elimination of deductions, so “there’s not a tax cut for the rich.” But he reiterated the administration’s commitment to eliminating the estate tax -- a 40 percent levy that’s applied to estates worth more than $5.49 million for individuals and $10.98 million for married couples.
Brady said Thursday he thought the president’s outreach to Democrats was helpful and that there would be unity around middle-class tax cuts and business tax changes that would bring jobs back from overseas.
2018 Elections
Interest groups are continuing to pressure the GOP to get a tax overhaul completed this year, and emphasizing the negative effect a failure would have on elections.
“2018, we believe, will be bleak if Congress has nothing to show after a year of complete control,” Tim Phillips, the president of Americans for Prosperity, said during a conference call Thursday of 88 organizations that have banded together to advocate for a tax revamp in 2017. Americans for Prosperity is backed by billionaire industrialists Charles and David Koch.
Timely passage of a tax bill will determine the 2018 and 2020 elections, and it’s essential that voters feel the effects of a tax overhaul before 2018, Grover Norquist, president of Americans for Tax Reform, also said during the call.
Brady said his committee is ready to get the job done, while acknowledging that it took more than two and a half years to pass the last major tax overhaul in 1986.
Still, he maintained that the year-end target is necessary.
“You know how Congress works,” Brady said. “If the deadline is at midnight, we start working on it at 11:15 and go past it.”
--With assistance from Sahil Kapur Ben Brody Lynnley Browning and Saleha Mohsin
To contact the reporters on this story: Alexis Leondis in Washington at aleondis@bloomberg.net, Agnel Philip in Washington at aphilip19@bloomberg.net.
To contact the editors responsible for this story: Alexis Leondis at aleondis@bloomberg.net, John Voskuhl