Politics

Republicans want to talk taxes but can’t, because of Trump-Flynn saga

In this Jan. 3, 2017, file photo, Michael Flynn, then President-elect Donald Trump’s nominee for national security adviser, arrives at Trump Tower in New York. As House Republicans try to turn attention to a tax overhaul plan, they’re being hammered instead with questions about Flynn and Trump.
In this Jan. 3, 2017, file photo, Michael Flynn, then President-elect Donald Trump’s nominee for national security adviser, arrives at Trump Tower in New York. As House Republicans try to turn attention to a tax overhaul plan, they’re being hammered instead with questions about Flynn and Trump. AP

As the Trump White House plunges into turmoil and markets tumble, Republicans in Congress are trying to salvage one piece of their legislative agenda: overhauling the nation’s tax system.

Republicans in the House of Representatives were ready to move forward this week on slashing personal and corporate tax rates, a priority of Speaker Paul Ryan for years.

But a constant barrage of bombshell stories on President Donald Trump’s relationship with fired National Security Adviser Michael Flynn, teamed with a volatile stock market, has undermined the attempt by House Republicans to have their tax message heard outside Washington.

On Wednesday, Ryan and Ways and Means Chairman Rep. Kevin Brady, R-Texas, had led off the House leadership’s weekly news conference by highlighting Thursday’s tax overhaul hearing.

“It’s time for Washington to lead on this issue now, and that’s what we are doing,” Brady had said. “Tomorrow, Ways and Means Republicans will hold a major hearing on tax reform related to growth of jobs and wages and the U.S. economy, and we encourage all Americans to tune in.”

But they didn’t get to answer a single question from reporters about taxes. Trump’s relationships with Flynn and former FBI Director James Comey dominated the conversation instead.

The Trump administration unveiled its tax overhaul plan April 26 during the daily press briefing. White House National Economic Council Director Gary Cohn said the plan is “the most significant tax reform legislations since 1986.”

“I think people in America turn on the TV and they think this is all that’s happening,” Ryan said. “That’s just not the case. I want the American people to know that we’re busy, hard at work fixing their problems. The point I want to make here is . . . we’re going to walk and chew gum at the same time. We’re going to keep doing our jobs.”

Even the business leaders asked to testify before Congress on Thursday were concerned that the controversy surrounding Trump would make it harder for Ryan and Brady to overhaul the tax code.

“We saw what happened with the markets yesterday because people were concerned that we’re not going to get things done here,” Zach Mottl, chief alignment officer at Atlas Tool and Dye, based in Lyons, Illinois, said during Thursday’s hearing.

The U.S. stock market dropped by 370 points on Wednesday, the largest single-day drop in eight months.

Revamping the nation’s tax code will require a lot of political muscle from House Republicans, and significant changes have not been achieved since Ronald Reagan’s administration.

The White House released a broad tax plan in April that would dramatically cut taxes for corporations but did not explain how the government would pay for the massive tax reductions.

I think people in America turn on the TV and they think this is all that’s happening. That’s just not the case.

House Speaker Paul Ryan

The plan includes a 15 percent corporate tax rate – a 20 percentage-point drop from the current rate – along with the elimination of all tax deductions except for mortgage interest and charitable giving. There would be three tax brackets for personal income – 10, 25 and 35 percent – instead of the current seven.

Steven Rattner, a former investment banker who served as the lead adviser for President Barack Obama’s auto industry task force in 2009, was skeptical of Trump’s tax plan during Thursday’s hearing.

“To pay for the Trump plan, we would need average growth of 4.5 percent per year,” said Rattner, who was invited by the committee’s Democrats. “That hasn’t happened on a sustained basis in modern history and is highly implausible in the future given our current aging and productivity trends.”

In addition to the Trump turmoil, Republicans themselves are not united over the tax plan devised by Ryan last year.

The plan includes a 20 percent tax on imported goods, known as a border adjustment tax, that proponents say will raise $1 trillion over 10 years to offset the cost of lower taxes and make American manufacturing more competitive with international companies. Opponents argue the tax will result in everyday goods being more expensive for American consumers.

Brady has scheduled a hearing on the proposed border adjustment tax for next Tuesday. The Houston-area Republican said he wants to accomplish a major tax overhaul effort by the end of the year.

Alex Daugherty: 202-383-6049, @alextdaugherty

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