WASHINGTON -- The Republican tax negotiators in Congress and the Trump administration announced Thursday that they had reached an agreement on the core principles of how they will press forward with an overhaul of the tax code.
They also pledged to redouble their efforts to pass tax legislation before the end of the year.
The long-awaited sign of progress arrives as President Donald Trump's promise to repeal the Patient Protection and Affordable Care Act remains in limbo and as infighting plagues the White House.
The most notable development in the Republican tax statement was the dropping of the proposed border adjustment tax on imports. House Speaker Paul Ryan had suggested it a year ago as a central plank of the Republican tax plan. But the idea drew the ire of retailers, energy companies and the billionaire Koch brothers. Trump was cool to it from the beginning, and many Republicans in the House and Senate began voicing concern about it in recent months.
"We are now confident that, without transitioning to a new domestic consumption-based tax system, there is a viable approach for ensuring a level playing field between American and foreign companies and workers, while protecting American jobs and the U.S. tax base," the congressional leaders said in their statement, acknowledging that there were too many "unknowns" in the idea.
The so-called big six -- Ryan of Wisconsin; Kevin Brady of Texas, the House Ways and Means Committee chairman; Mitch McConnell of Kentucky, the Senate majority leader; Orrin Hatch of Utah, the Senate Finance Committee chairman; Steven Mnuchin, the Treasury secretary; and Gary Cohn, the National Economic Council director -- huddled Wednesday evening to hash out differences ahead of the August recess.
Republicans plan to heed the lessons from their health care legislation efforts and use a more conventional process to get a tax bill done. Policy staff members for the House Ways and Means Committee and for the Senate Finance Committee are expected to work through August to write the tax legislation. Trump is expected to spend time next month barnstorming the country to make the case for the tax overhaul.
The statement on Thursday said Republican leaders were prioritizing permanent tax changes that reduce tax rates for all American businesses, encouraging companies to bring back cash that is parked abroad and allowing "unprecedented capital expensing."
"Above all, the mission of the committees is to protect American jobs and make taxes simpler, fairer, and lower for hard-working American families," they wrote.
No major changes have been made to the tax code since 1986, so Republicans face big obstacles as they try to reach their goal of passing a bill in 2017. Delays in passing health care legislation laid bare the deep divisions within the Republican Party and suggest that sweeping changes to tax laws -- which are generally considered more complicated -- could take even longer and drag into next year.
Congress must also conclude its effort to repeal the Affordable Care Act, raise the debt ceiling and pass a budget resolution before it can expect to fully dig in to a tax bill. Despite nods to bipartisan action, Republicans are planning to use the Senate's reconciliation process to pass a tax bill without Democrat votes.
Armies of lobbyists have been trawling Washington, preparing to fight for, and against, changes to the tax code. Taxation of small businesses, the deductions for corporate interest expenses and the state and local tax deduction are expected to lead to the biggest battles.
In his earlier tax plans, Trump has come under fire for promoting policies that would primarily benefit top earners. But the president suggested this week in an interview with The Wall Street Journal that he was open to raising the top individual tax rate to help pay for middle-income tax cuts.
To avoid getting bogged down, some Republicans have said the party should simply push through short-term tax cuts even if they would add to deficits and expire in 10 years. So far, however, Republican leaders remain committed to a deficit-neutral tax plan that would not reduce tax revenue.
The announcement Thursday came as Wall Street and business groups have grown increasingly impatient that the centerpiece of Trump's economic agenda is stalling. The statement of progress was welcomed as a sign of hope that something might get done.
"We believe that tax legislation is a political necessity for Republicans so this political reality will jolt the party into passing a budget resolution and, ultimately, tax reform," said Brian Gardner, an analyst at the investment bank Keefe, Bruyette & Woods.
A Section on 07/28/2017