Thursday is the new Wednesday. Facing a pileup of disagreements over basic elements of a tax code overhaul, House Republicans late Tuesday decided to delay the rollout of the first draft of their bill, originally set for this morning.
Now, they’re aiming to debut the package tomorrow. House Ways and Means Committee Chairman Kevin Brady (R-Tex.) made it official in a statement released after 9:30 p.m. Tuesday, stating that his panel is “pleased with the progress we are making and we remain on schedule to take action and approve a bill at our Committee beginning next week.”
But the Halloween hiccup points to a package in such flux that an all-nighter would have been insufficient to get it in presentable shape.
Here’s what we know about the bill, such as it is, via my colleagues Damian Paletta and Mike DeBonis.
What’s likely in it:
- A consolidation of the seven existing individual tax brackets into four, with the top bracket probably remaining at 39.6 percent.
- A doubling of the standard deduction, “but it would also eliminate the ‘personal exemption,’ which tends to benefit families with multiple children.” And a new child tax credit.
- A repeal of the estate tax, but it would be phased in over several years.
- The abolition of the alternative minimum tax, “a system set up to ensure people do not claim so many deductions that they pay too little in taxes.”
- A prohibition against individuals deducting state and local income taxes from their federal burden (though property taxes would remain deductible).
- A reduction of the corporate rate from 35 percent to 20 percent, at least temporarily.
- A reduced rate for companies that pay their taxes on the individual side of the code, from a top rate of 39.6 percent to 25 percent.
- A new incentive for companies to immediately write off capital investments for five years, paired with a scaled-back ability to deduct interest payments.
- A minimum tax on certain foreign earnings of U.S. companies to crack down on international tax-dodging: “Businesses are watching carefully how the House bill deals with U.S. companies that produce goods overseas and then sell them back into the United States.”
What remains in dispute:
- Whether Republicans can make the corporate rate cut permanent, owing to its cost: “Business leaders will fight hard to prevent Republicans from allowing the rate to go back up after several years, but the GOP could be hamstrung because it cannot push into law a tax change that adds too much to the deficit.”
- How the plan will treat retirement accounts. House Republicans are discussing changes to the tax treatment of the plans, including 401(k)s, to generate some revenue. But the precise contours of those tweaks remain under discussion — and it’s possible leaders will back off altogether.
- At what income threshold the top marginal rate will kick in for individuals. There’s some talk that tax-writers could increase the current cutoff from $470,700 per family to $1 million, meaning those in the gap would still see a tax cut.
What we don’t know:
- How the middle class will fare, how the wealthy will fare — and how the new burden will be divided among them. The answers will go a long way toward framing the debate around a measure Democrats are already eager to criticize as a giveaway to the rich.
- What safeguards the plan will include to prevent wealthy people from taking advantage of the newly lowered rate for businesses that file their taxes through the individual side of the code.
- On a more philosophical level, we also don’t know whether any of this matters. Senate Republicans have proven unable to muster their razor-thin majority behind any major legislation this year. So it may be that the best hope for a tax package would involve the Senate GOP passing whatever it can and then asking House Republicans to simply swallow it whole.
These are just the fundamentals. As the WSJ’s Richard Rubin, Siobhan Hughes and Kristina Peterson point out, “hundreds of other details wait under the surface.” House Republicans will finally scratch it tomorrow — and then they have a long way to go.
The latest on the terrorist attack in Lower Manhattan: “Investigators in Uzbekistan combed records and intelligence reports on militant factions in the Central Asian nation Wednesday seeking to fill out the portrait of the 29-year-old immigrant who brought Halloween death and bloodshed to a Manhattan bike path,” report Renae Merle, Devlin Barrett and Mark Berman.”The Uzbek probe came as U.S. officials also dug deeper into the life of the suspect, identified as Sayfullo Saipov, since he arrived in the United States six years ago and shifted from New Jersey to Ohio and Florida.”
Eight people were killed and 11 injured when a truck allegedly rented by Saipov plowed through cyclists on the Hudson River bike route.
Trump seemed to at least partly blame Democrats for lenient immigration policies in tweeting about the attack last night and this morning (even though Uzbekistan wasn’t on the list of countries included in the president’s travel ban):
I have just ordered Homeland Security to step up our already Extreme Vetting Program. Being politically correct is fine, but not for this!
— Donald J. Trump (@realDonaldTrump) November 1, 2017
The terrorist came into our country through what is called the “Diversity Visa Lottery Program,” a Chuck Schumer beauty. I want merit based.
— Donald J. Trump (@realDonaldTrump) November 1, 2017
— Tightening apace. FT’s Sam Fleming: “Janet Yellen will on Wednesday chair what may be one of her final meetings at the helm of the US Federal Reserve as the spotlight falls on whether monetary policy will shift after her expected departure.President Donald Trump is expected to nominate a replacement for Ms Yellen this week but the central bank’s slow but determined course towards tighter monetary policy seems set to endure, as Jay Powell, her most likely successor, inherits an established strategy and strengthening recovery… ‘The strategy under Yellen is probably set to survive for a long time — we are on a gradual path to higher rates and that will suit Powell fine,’ said Roberto Perli of Cornerstone Macro, a research firm.”
— Powell’s rich. The Post’s Heather Long: “In some ways, though, Powell, who goes by the nickname “Jay,” fits the mold of a typical Trump pick for a premium post. He’s a Republican who built a vast wealth as a partner at Carlyle. Powell’s latest financial disclosure from June lists his net worth between $19.7 million and $55 million. If he gets the job, Powell would be the richest Fed chair since banker Marriner Eccles, who held the position from 1934 to 1948, according to Washington Post reviews of former Fed chair financial disclosures and former Fed historian Gary Richardson…
But the expected decision to tap Powell highlights how Trump is willing to compromise the bomb-throwing mentality that has characterized much of his time in Washington and many of his appointments. Powell has developed a reputation in Washington as a consensus builder who prefers to operate behind the scenes. President Barack Obama felt comfortable enough with Powell to nominate him to the Fed board in 2012, renominating him again in 2014.”
— Stacking the Fed. Politico’s Danny Vinik: “No president has ever had a chance to rewrite the course of the Federal Reserve as completely, and as quickly, as President Donald Trump. When Trump picks a new head of the Federal Reserve—a move expected to happen on Thursday—it will be just the midpoint of his reshaping of the nation’s most important financial body. He’s likely to fill three more critical positions at the Fed: the vice chair, and two spots on the Fed Board of Governors. Combined with Governor Randy Quarles, who was confirmed by the Senate in October, Trump has a chance to nominate five of seven Fed governors by early next year. But just what Trump will do with that power remains unclear.”
— Mess of a salesman. The Post’s John Wagner and David Nakamura on Trump’s ability to pitch a tax cut under the gathering cloud of the Russia probe: “Aides insisted the twin challenges at home and abroad would not be undermined by the indictments, but the frustration of the president — whose job approval ratings hit a new low this week in Gallup polling — was evident Tuesday. He started the day with a spate of tweets in which he lashed out at the media and “Crooked Dems” and urged a focus instead on the “Massive Tax Cuts” he has promised to deliver by Christmas. In a bid to show he remains focused on the tasks at hand, Trump later in the day allowed reporters to witness the start of a White House meeting with business leaders at which he boasted that the December signing of the yet-to-be-unveiled GOP tax bill would be ‘the biggest tax event in the history of our country.'”
— Mnuchin: No market crash imminent. NYT’s Alan Rappeport: “Mr. Mnuchin came under fire in recent weeks after reports that he was threatening lawmakers that financial markets would tank if the tax bill faltered. But he said that he made no such warning and had only suggested that stock markets would do even better if the tax cuts passed. ‘If you look at the stock market, as I’ve said, the stock market is clearly up in anticipation of economic activity and economic growth from the Trump administration plan,’ Mr. Mnuchin said.
— An unpopular plan. CNBC’s John Harwood: “President Trump and congressional Republicans begin their drive to cut taxes with lackluster public support, according to the new NBC News/Wall Street Journal poll. The survey shows that just 25 percent call the Trump tax plan a good idea, while 35 percent call it a bad idea. The remaining 40 percent say they have no opinion. ‘For what is a major legislative objective of the president and his party, tax reform is in very mushy shape,’ said Bill McInturff, the Republican pollster who helps produce the NBC/WSJ poll… As the debate gets underway, the poll shows, just 14 percent of Americans believe they’ll get a tax cut, while 25 percent expect their taxes to go up. Similarly, just 19 percent of Americans say the tax legislation will significantly improve the economy. At the same time, 35 percent expect it will substantially increase the budget deficit.”
— Biggest ever? Trump claims the superlative again for a tax bill that hasn’t premiered yet:
The Republican House members are working hard (and late) toward the Massive Tax Cuts that they know you deserve. These will be biggest ever!
— Donald J. Trump (@realDonaldTrump) November 1, 2017
It depends how you measure — and on what the bill can achieve, the WSJ’s Richard Rubin writes: “The clearest way to measure the size of a tax cut is by comparing it to the size of the economy. That way, inflation and increases in population don’t obscure the magnitude, and the effect of changes in tax breaks are measured along with changes in tax rates. By that yardstick, the proposed tax cut of about $150 billion a year, is 0.7% of gross domestic product over the next four years. The Treasury Department tracks this exact statistic, and the largest single tax cut by this measure is the 1981 plan pushed by President Ronald Reagan, at 2.89% of GDP over the first four years… A White House spokeswoman says the metric being used is the reduction in the corporate tax rate to 20% from 35%. By that stat, the president’s claim is correct. The corporate rate has been above 20% since 1940, and the largest previous one-time drop was in the 1986 tax bill, which lowered it to 34% from 46%.”
— Trick or tax. There isn’t much for Democrats to do these days in the tax debate, since Republicans have mostly locked them out of it. So they’re focusing on messaging against the plan. This week, that’s meant getting in the Halloween spirit, for better or worse. Here was House Ways and Means Committee Democrat Lloyd Doggett (Tex.):
And here was apparently the best effort from Senate Democrats:
— Tech giants face heat. WSJ’s Byron Tau and Deepa Seetharaman: “Senators pressed representatives from three technology giants to explain why they didn’t recognize Russia-linked accounts earlier, as the officials struck a contrite tone about the role their services played in stoking political tensions during the 2016 campaign. Facebook Inc., Alphabet Inc.’s Google and Twitter Inc. were all summoned in front of a subcommittee of the Senate Judiciary Committee on Tuesday, where officials told members of Congress that they were actively developing better policies for how to curb foreign activity on their platforms and ensure that foreign governments, terrorists and criminals aren’t able to abuse social media for nefarious purposes. The officials also faced questions about voter-suppression efforts and whether Silicon Valley can or should police speech.”
Sen. Al Franken (D-Minn.) was particularly tough. Watch him grilling the tech executives here:
— Trump holds back. The Post’s Phil Rucker and Bob Costa: “Debate intensified in President Trump’s political circle Tuesday over how aggressively to confront special counsel Robert S. Mueller III, dividing some of the president’s advisers and loyalists as the Russia investigation enters a new phase following charges against three former Trump campaign officials. Despite his growing frustration with a federal probe he has roundly dismissed, Trump has been cooperating with Mueller and lately has resisted attacking him directly, at the urging of his attorneys inside and outside the White House.
But several prominent Trump allies, including former White House chief strategist Stephen K. Bannon, have said they think the president’s posture is too timid. Seeing the investigation as a political threat, they are clamoring for a more combative approach to Mueller that would damage his credibility and effectively kneecap his operation by cutting its funding. Still, Bannon and others are not advising Trump to fire Mueller, a rash move that the president’s lawyers and political advisers oppose and insist is not under consideration.
Senate Republicans, for their part, said Tuesday they won’t support any efforts to cut off Mueller’s funding or otherwise short-circuit his investigation.
— What Mueller’s thinking. The Post’s Matt Zapotosky: “If Mueller can find evidence that members of Trump’s team conspired in Russia’s hacking effort — by directing it or aiding in another way — they might face criminal charges, legal analysts said. Papadopoulos’s plea says that he discussed some of his efforts to broker a meeting with the Russians with other, more senior Trump campaign officials — although some seemed to treat him warily… Mueller could be working to convince Manafort and Gates to cooperate, and he could also be trying to send a message to others in Trump’s orbit that he will leave no stone unturned and that those who deceive investigators will be charged, legal analysts said. But Mueller also could be signaling a charge he could pursue in connection with the coordination case — a conspiracy to defraud the United States by coordinating with Russia.”
— No coffee boy. The Post’s Roz Helderman, Karen DeYoung and Tom Hamburger: “President Trump on Tuesday belittled former foreign policy adviser George Papadopoulos, who pleaded guilty this week to lying to federal agents investigating Russia’s interference in the 2016 election, tweeting that ‘few people knew the young, low level volunteer named George, who has already proven to be a liar.’ But interviews and documents show that Papadopoulos was in regular contact with the Trump campaign’s most senior officials and held himself out as a Trump surrogate as he traveled the world to meet with foreign officials and reporters.
Papadopoulos sat at the elbow of one of Trump’s top campaign advisers, then-Sen. Jeff Sessions, during a dinner for campaign advisers weeks before the Republican National Convention, according to an individual who attended the meeting. He met in London in September 2016 with a mid-level representative of the British Foreign Office, where he said he had contacts at the senior level of the Russian government. And he conferred at one point with the foreign minister of Greece at a meeting in New York.”
— Hope Hicks speaks! But not publicly. “Trump’s longtime aide and current communications director, Hope Hicks, is scheduled to speak with special counsel Robert Mueller’s team in mid-November, following the president’s trip to Asia,” Politico’s Anni Karney and Josh Dawsey write. “Mueller’s team is also expected to interview three or four other current White House officials as early as this week, according to an administration official.”
— Hensarling retiring. “Rep. Jeb Hensarling, a Texas Republican who led conservative opposition to the Troubled Asset Relief Program and has been among Congress’s fiercest foes of federal regulations, said Tuesday he will retire after his term ends,” The Post’s Mike DeBonis writes. “Hensarling is set to leave the House as his term as chairman of the Financial Services Committee expires. In his six years in that post, he has pushed numerous conservative bills to pull back the federal role in overseeing the financial sector, including a bill that passed the House earlier this year repealing major parts of the Dodd-Frank law passed after the financial crisis of 2008.
‘Although service in Congress remains the greatest privilege of my life, I never intended to make it a lifetime commitment, and I have already stayed far longer than I had originally planned,; he said in a statement. Noting the loss of his committee gavel, he said that ‘the time seems right for my departure.’
Hensarling has seen several of his legislative priorities frustrated by the Senate or by the wishes of more-moderate Republicans. The Dodd-Frank repeal bill, known as the Financial Choice Act, has not gotten Senate consideration. He has been unable to unravel the powers of the Consumer Financial Protection Bureau, an agency he has strongly opposed. And a bill he supported this year to reconfigure the National Flood Insurance Program was placed on the back burner after the devastation of Hurricane Harvey.”
The announcement will heat up the race to replace him. Politico’s Zachary Warmbodt: “The lawmaker long seen as a top contender is Rep. Patrick McHenry (R-N.C.), who serves as the committee’s vice chairman and the House GOP’s chief deputy whip. McHenry could pursue a higher-ranking House leadership position instead if the opportunity presented itself. Other names that have been in the mix include Reps. Blaine Luetkemeyer (R-Mo.), Frank Lucas (R-Okla.), Ed Royce (R-Calif.) and Pete King (R-N.Y.). Sources following the race also said Reps. Sean Duffy (R-Wis.) and Bill Huizenga (R-Mich.) were worth watching.”
If Hensarling inspired any Halloween costumes, we missed them. But his Democratic counterpart did:
— Crapo, Brown talks break down. The bipartisan talks between the top senators on the Senate Banking Committee — Chairman Mike Crapo (R-Idaho) and Sherrod Brown (Ohio) — toward a regulatory relief package for smaller financial institutions reportedly have hit a brick wall:
Brown says he and Crapo were unable to reach a compromise that “protects consumers while supporting small banks and credit unions”
— Zachary Warmbrodt (@Zachary) October 31, 2017
Now that talks w/ Brown are over, Crapo is expected to move ahead with proposals to ease bank regs but will need support from moderate Dems
— Zachary Warmbrodt (@Zachary) October 31, 2017
— Garrett gets his hearing. WSJ’s Kristina Peterson and Byron Tau: “President Donald Trump’s choice to head the Export-Import Bank, who has twice voted to shut it down, plans to reverse his position at his nomination hearing on Wednesday, a move that comes amid wavering GOP support for him getting the job. Former Rep. Scott Garrett will pledge to fully support the operations of the Ex-Im Bank, according to testimony prepared for the hearing released Tuesday. ‘If I am confirmed, the Export-Import bank will continue to fully operate, point-blank,’ Mr. Garrett said in the testimony. ‘It will continue to approve the many loans that support our American manufacturers’ ability to export their products.'”
We’ll see if that’s enough to sway skeptical Republicans on the panel, namely Sens. Tim Scott (S.C.) and Mike Rounds (S.D.). Business groups that champion the bank have already gone way out on a limb to try to sink Garrett’s candidacy.
— Cruz rings alarm on NAFTA. Sen. Ted Cruz (R-Tex.) warned Tuesday that the U.S. will face “massive economic costs” if Trump pulls out of the landmark trade pact. The Toronto Star’s Daniel Dale: Cruz said “NAFTA has created millions of jobs across the United States,” and he said “Texans believe in international trade.” He expressed concern that Trump, whom he generally supports, would seek to use the ongoing NAFTA renegotiation to reduce trade and erect protectionist barriers rather than to expand trade… Trump, he said, is being pulled in two different directions by pro-trade and anti-trade voices in his administration. ‘Which direction will the administration go? I will tell you candidly: I don’t know,’ Cruz said. He added: ‘I think it depends which voices will be listened to.'”
Some trade experts believe the administration’s goal is to “to blow up the entire legal framework governing world trade,” the NYT’s Eduardo Porter writes. “What Washington truly seems to want is the kind of free hand it had in the 1980s to coerce one country after another into bringing its surplus with the United States down to zero.”
— Post-Podesta shockwaves. Politico’s Theodoric Meyer: “Washington lobbyists who represent foreign powers have taken comfort for decades in the fact that the Justice Department rarely goes after them for potentially breaking the law. That all changed on Monday. The news of Tony Podesta’s resignation from his namesake firm and indictment of Paul Manafort and Rick Gates sent K Street scrambling, as lobbyists rushed to make sure they’re in compliance with the rules. The developments also renewed calls for Congress to pass legislation beefing up the Justice Department’s enforcement of the law, which lawmakers in both parties have derided for lacking teeth…
Sen. Chuck Grassley (R-Iowa) introduced a bill along with Rep. Mike Johnson (R-La.) on Tuesday designed to strengthen enforcement of foreign lobbying laws. Grassley said the measure had been in the works long before the Manafort indictment was unsealed. The bill would give the Justice Department power to demand the production of documents and compel testimony.”
— Trump signs arbitration rule. Politico’s Lorraine Woellert: “The president’s decision comes despite a personal appeal from CFPB Director Richard Cordray and veterans groups, who opposed a congressional vote to overturn the consumer watchdog’s rule using the Congressional Review Act.”
From Richard Hunt, chief executive officer of the Consumer Bankers Association, who’s attending the signing: ““The CFPB’s rule was never about protecting consumers; rather, it was about protecting trial lawyers and their wallets.”
The Senate, Banking, Housing and Urban Affairs holds a hearing on various nominations.
The House Energy and Commerce Subcommittee on Digital Commerce and Consumer Protection holds a hearing on “Securing Consumers’ Credit Data in the Age of Digital Commerce.”
The House Financial Services Subcommittee on Financial Institutions and Consumer Credit holds a hearing on data security.
The House Financial Services Subcommittee on Oversight and Investigations holds a hearing on “Examining the Community Development Block Grant-Disaster Recovery Program.”
The Federal Deposit Insurance Corporation holds an Advisory Committee Meeting.
Google, Facebook and Twitter testify before the House Intelligence Committee.
The Consumer Financial Protection Bureau holds its Fall 2017 meeting on Thursday in Tampa, Fla.
The House Financial Services Subcommittee on Housing and Insurance holds a hearing on sustainable housing finance on Thursday.
The National Economists Club holds an event with the American Chemistry Council’s chief economist Kevin Swift on Thursday.
Carter Page testifies before the House Intelligence Committee on Thursday.
The Institute for Financial Markets holds the Smart Financial RegulationRoundtable on Thursday and Friday.
The Heritage Foundation holds an event on reforming FINRA on Friday.
The House Financial Services Subcommittee on Capital Markets, Securities and Investment holds a hearing on “Legislative Proposals to Improve Small Businesses’ and Communities’ Access to Capital” onFriday.
The Washington Examiner holds an event on the tax bill with House Speaker Paul D. Ryan (R-Wis.) on November 8.
From the New Yorker:
A post shared by The New Yorker Cartoons (@newyorkercartoons) on Oct 31, 2017 at 7:44am PDT
Stephen Colbert says all “of our broken hearts” go out to those in New York City, saying “New Yorkers will never live in fear:”
See Seth Myers take on Sarah Huckabee Sanders:
Bob Woodward talks about the “Saturday Night Massacre:”
The Finance 202: Tax overhaul delayed while GOP haggles over details – Washington Post}