Eversheds Sutherland Tax Reform Law Blog
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Abandonment of Border Adjustment Tax may lead to Shallower, Shorter Tax Cuts

The GOP’s decision to abandon the controversial border adjustment tax (BAT) increases the chances that ensuing tax cuts will be both temporary and shallower than envisioned.  Without the BAT’s estimated $1 Trillion in revenue, and with no other plan to raise significant funds, analysts estimate the lowest possible revenue-neutral rate for corporate taxes is about 27%, significantly higher than either the White House or the House Republican’s Blueprint called for.  While the GOP has stressed its desire for permanent cuts, if the proposed tax bill is not revenue-neutral over the course of ten...
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House Ways and Means Committee Democrats Critical of Republicans’ Joint Statement on Tax Reform

In response to Congressional Republicans’ and the Trump Administration’s unveiling of their joint statement on taxes, several Democratic members of the House Ways and Means Committee issued condemnatory press releases: Ranking Member Richard Neal expressed his disappointment over the Republicans’ decision to exclude Democrats from the tax reform process, stating that partisan tax reform is doomed to fail.  Rep. Neal suggested that he and his fellow Democrats are ready to cooperate with Republicans to make tax reform a reality. Neal Statement on GOP Tax Reform Update Lloyd Doggett criticized...
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Joint Statement on Tax Reform Issued; BAT Abandoned

Today, House Speaker Paul Ryan, Senate Majority Leader Mitch McConnell, Treasury Secretary Steven Mnuchin, National Economic Council Director Gary Cohn, Senate Finance Committee Chairman Orrin Hatch (R-UT), and House Ways and Means Committee Chairman Kevin Brady (R-TX) issued a joint statement on tax reform that sets out a broad framework for moving forward on tax reform. Most notably, the statement announces that tax reform legislation will not include the controversial border adjustment tax (“BAT”) that has been championed by House Republicans.  The group has concluded that without the BAT...
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GOP to Release Tax Reform Framework

The top Republican tax negotiators are expected to unveil a broad set of agreed tax reform principles prior to the Congressional recess.  The anticipated framework is the result of ongoing deliberations between the “big six”:  Speaker of the House Paul Ryan, House Ways and Means Committee chairman Kevin Brady, Senate majority leader Mitch McConnell, Senate Finance Committee chairman Orrin Hatch, Treasury Secretary Steven Mnuchin and National Economic Council director Gary Cohn.  While details are few, tax lobbyists are hoping the tax reform outline addresses key points of interest, including...
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President Trump Reiterates His Commitment to Lower Tax Rates on Corporations and Middle-Class Taxpayers

In a wide-ranging interview with the Wall Street Journal, President Trump stated that his next priority, after healthcare, was tax reform that lowers corporate rates and reduces the tax burden on middle-class families.  While he did not offer any new proposals on lowering individual tax rates, he stated that he was willing to consider taxing wealthier taxpayers more in order to offer a tax break to the middle class.  He also reiterated his goal of lowering the corporate rate to 15 percent. Read more: Trump Eyes Tax-Code Overhaul, With Emphasis on Middle-Class Break; Trump says tax reform...
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Opposition to Border Adjustment Tax Continues

Critics, including the House Freedom Caucus and the Koch-brothers-backed Freedom Partners, as well as the retail, oil refining, and auto industry sectors, remain resolute in their position that tax reform legislation should not include a border adjustment tax (BAT).  House Speaker Paul Ryan and Ways and Means Chairman Kevin Brady remain the BAT’s strongest supporters, but apprehension exists that their continued stance could delay a vote on the House budget resolution containing reconciliation procedures the GOP is relying on to pass tax reform in the Senate with a simple majority.  Despite...
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Business Community Urges Congress to Pass Tax Reform

Corporate America is encouraging Congress to pass tax reform legislation as quickly as possible.  Amid apprehension that tax reform could experience delays similar to those facing other items on the Republican agenda, business leaders have pressed congressional leaders to move forward with a budget resolution to facilitate tax reform.  Business groups will launch campaigns during Congress’s August recess, aimed at lawmakers and the public, endorsing the need for lower tax rates for small businesses and corporations and more internationally competitive rates. Business groups push for quick...
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Senator Hatch Weighing Corporate Integration System; Former Treasury Officials Testify in Favor

The staff of Senator Hatch, Chairman of the Senate Finance Committee, is reportedly investigating a proposal that will permit a corporation to deduct 40% of the dividends it pays to shareholders.  Senator Hatch has previously promoted similar corporate integration measures—plans that eliminate or reduce the double taxation corporations face.  The proposal is reportedly being explored as an alternative to eliminating interest deductibility, as proposed by the House Republican’s Blueprint.  Interest deductibility is argued to favor debt over equity financing.  Senator Hatch’s plan would...
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Ways and Means Committee Hears Testimony on Simplifying the Broken Tax Code

On Wednesday July 19th, the House Ways and Means Tax Policy Subcommittee, led by Subcommittee Chairman Peter Roskam, held a hearing on tax reform, titled “How Tax Reform Will Simplify Our Broken Tax Code and Help Individual Families.”  The hearing focused on individual tax reform.   Subcommittee Chairman Roskam, in his opening statement, touted the introduction of a postcard-sized  individual tax return which eliminates all but two deductions and significantly reduces the number of tax brackets.  The prepared Opening Statement is available here. The witnesses offering testimony before the...
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Republicans Close to a Unified Tax Reform Framework

House Speaker Paul Ryan, addressing an audience at the New Balance shoe factory in Massachusetts, stated that White House and Congressional leaders are nearing agreement on a tax reform framework.  Speaker Ryan suggested that lowering the current corporate tax rate of 35 percent to a 20 percent rate, through the closing of loopholes and special interest deductions, is a realistic goal.  He did not mention the border adjustment tax as a means to pay for lower corporate tax rates, which may indicate that the House GOP is conceding the controversial proposal. Ryan says us tax reform consensus...
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House Committee Approves 2018 Budget Resolution

The House Budget Committee, with members voting along party lines, voted to send the recently introduced budget resolution to the House floor for consideration by the full chamber.  Opposition is anticipated not only from Democratic members, but also from within the GOP rank and file, with Republican moderates disagreeing with the proposed steep cuts and Republican conservatives arguing that the cuts are not large enough.  Both the House and the Senate must approve the measure to access the reconciliation process, which would allow the passage of tax reform in the Senate by majority vote. ...
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White House Reconsidering Corporate Tax Rate Goal

The Trump Administration, according to White House officials and advisors, is considering a corporate tax rate of 20 percent to 25 percent.  While this estimate is higher than the 15 percent rate set forth in the Administration’s one-page tax proposal issued in April, one senior administration official explained that the April figure was a starting point for negotiations, with the ultimate goal of a corporate tax rate near 20 percent.   President Trump is expected to begin campaigning in support of a unified Republican tax reform plan next month, which White House and Congressional leaders,...
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House Republicans Disclose Budget Plan

The House GOP has unveiled its budget plan, calling for extensive cuts in federal spending, including federal employee benefits, financial industry regulations and welfare expenditures, that total over $200B.  Along with anticipated accelerated economic growth, these cuts are intended to produce a balanced budget over the next decade.  While divisions among the House Republicans make it difficult to predict if the budget can survive a floor vote, White House budget director Mick Mulvaney has strongly endorsed the blueprint, stating that “… this budget lays a pathway for Congress to pass and...
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House Ways and Means Committee Plans to Permit Interest Deductions for Small Businesses

Rep. Peter Roskam, the Chairman of the Subcommittee on Tax Policy for the House Ways and Means Committee, has commented that they are “actively working” to exempt small businesses from the provision contemplated by the House Republican Blueprint that would deny deductions for net interest expense.  The Chairman noted that they are sensitive to those who have no access to capital except through borrowing, such as farmers, and that the tax code should ensure those businesses maintain their ability to borrow. With respect to the proposed 25% tax rate for pass-through businesses, the Chairman...
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Strategists Predict Regardless of Healthcare Reform’s Outcome, Tax Reform will Happen

Political strategists predict a tax reform bill will be signed into law next year, regardless of the outcome of efforts to enact a healthcare bill.  Their expectations are for smaller corporate and individual tax cuts than initially hoped, with a new corporate tax rate around 23 percent and individual cuts focused on the lower and middle class taxpayers.  However, tax reform efforts could be delayed as Congress directs its attention toward the looming budget resolution and debt ceiling issues. Tax reform and tax cuts are coming even if health-care bill fails — political...
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