On 27 July 2017, US Administrations and Congressional Republican leaders released a joint statement1 outlining key principles and goals for comprehensive tax reform. The brief statement is the product of tax reform discussions by a working group, known as the Big 6,” that includes Treasury Secretary Steven Mnuchin, White House National Economic Council Director Gary Cohn, House Speaker Paul Ryan (R-WI), Senate Majority Leader Mitch McConnell (R-KY), House Ways and Means Committee Chairman Kevin Brady (R-TX), and Senate Finance Committee Chairman Orrin Hatch (R-UT). Members of the Big 6 and their staffs have been meeting regularly since early May and also have been seeking input on tax reform from Members of Congress, business groups, and other interested parties.
The statement notes a “shared commitment to fixing America’s broken tax code” and indicates that the US President “fully supports these principles and is committed to this approach”. The statement also calls for tax reform that makes taxes “simpler, fairer, and lower” for American families, and provides “lower rates for all American businesses”. The statement sets a goal to produce tax reform legislation that “reduces rates as much as possible, allows unprecedented capital expensing, places a priority on permanence, and creates a system that encourages American companies to bring back jobs and profits trapped overseas”.
The most significant element of the joint statement is the announcement that the House Republican Blueprint proposal2 from June 2016 for a Border Adjusted Tax (“BAT”) has been dropped from further consideration. The statement cites debate both over the “pro-growth benefits” of border adjustability and the “many unknowns” associated with the proposal. As a result, a decision was made to “set this policy aside in order to advance tax reform”.
The statement calls for Congress to begin moving tax reform legislation through the House and Senate tax committees “under regular order” this fall, to be followed by consideration on the House and Senate floors. Later, Marc Short, the White House Director of Legislative Affairs, released the timeline for US tax reform showing that the final tax bill is likely to be completed and delivered to the US president by this year. Notably, the statement only mentions the general picture of the tax reform without addressing in details each measure proposed in the one-page tax reform principles unveiled on 26 April (the “Tax Reform Principles”)3 or the House Republican Blueprint (the “Blueprint”) released in June 2016. In this regard, what will be covered in the tax bill is yet unknown. In this issue of News Flash, we will share with you the highlights of the statement and the tax reform legislation process.