Scandal-Weary Republicans Return to Their First Love: Tax Reform

The odds of major tax legislation are growing longer, but GOP leaders held an initial hearing on Thursday to show they’re determined to forge ahead.

Representative Kevin Brady, chairman of the House Ways and Means Committee (Susan Walsh / AP)

The odds that congressional Republicans can accomplish their once-in-a-generation goal of rewriting the federal tax code this year are growing longer with every passing, scandal-plagued day of the Trump administration.

But they are determined to show everyone that they’re forging ahead anyway.

That appeared to be the rationale of a much-hyped hearing the House Ways and Means Committee held on Thursday to formally kick off the GOP’s push to pass a major tax bill in the next few months. Party leaders had touted the hearing as evidence Republicans were forging ahead with their agenda in spite of the daily drama emanating from the White House, which has forced members of Congress to spend as much time investigating the president as they are legislating on his agenda. “Sure, drama is not helpful in getting things done,” Speaker Paul Ryan said on Thursday morning. “But we are getting things done!”

Ryan is the former chairman of the Ways and Means Committee, and tax reform would be his biggest prize. It is most definitely far from being done.

On one hand, the hearing itself was a procedural step beyond what Republicans did as they advanced health-care legislation earlier this year without calling a single expert witness to testify. Yet while lawmakers debated the intricacies of tax policy for nearly four hours on Thursday, the testimony hardly illuminated new arguments on a well-trod issue. Leaders of the committee invited a group of four business executives representing companies large and small—along with one dissenting Democratic investment adviser—to tell Republican lawmakers what they already believed to be true: Comprehensive, permanent tax reform, including a steep reduction in the rate paid by corporations, should be an urgent priority of Congress.

“Lower the rate, create a cycle of virtuous investment, and do it right away,” John Stephens, the chief financial officer of AT&T, testified to the committee in a statement that summed up the nearly four-hour hearing.

Republicans have been talking about doing exactly that for years, but there is a growing concern within the party that their best opportunity to enact tax reform is rapidly slipping away. The GOP’s struggle to move a health-care bill through the House initially delayed the effort, and lawmakers in the House and Senate remain divided over key details. The distraction and political damage of investigations involving the White House is only making the task more difficult.

At the center of Thursday’s hearing were questions that have long bedeviled Republicans as part of the tax-reform debate: How will cutting the corporate tax rate benefit middle-class Americans (and not just the rich), and how can the party cut taxes without further exploding the federal debt?

To the delight of GOP lawmakers, most of the panelists testified that cutting corporate taxes would make U.S. businesses more competitive with their global rivals, leading to more and better-paying jobs domestically. They pushed not only for lower overall rates, but also for a provision Republicans have already proposed that would allow businesses to write off new capital investments. “The more we can invest, the more we can grow, the more we can hire,” said Zachary Mottl, an executive at an Illinois tool works company based in the district of Representative Peter Roskam, a top Republican on the committee.

For Democrats, the arguments were the same ones they had been fighting for decades. “I’ve been listening to theories about trickle down economics ever since I’ve been able to read and ever since I’ve been able to hear,” groused Representative Danny Davis of Illinois. Representative John Lewis of Georgia surveyed the five white men before the committee and found a decided lack of diversity. “Where are the women?” he asked. “Where are the minorities? Where are the low people?”

Democrats were allowed to select one out of the five witnesses, and they picked Steven Rattner, himself a wealthy investor who ran former President Barack Obama’s task force to rescue the auto industry in 2009. Like many Democrats, Rattner supports the concept of comprehensive tax reform so long as it does not add to the deficit and does not skew in favor of the wealthy. He dutifully poked holes in the Republican argument that the bounty of corporate tax cuts would flow to average, middle-income workers. “There’s no real meaningful direct benefit,” Rattner said of the GOP proposal. “You would have to believe that all of these business tax cuts would have secondary and tertiary effects that would benefit those people.”

What is holding back Republicans, however, is not Democrats arguments for equitable tax policy, but their own internal disagreements over policy. Trump and his advisers have prioritized tax cuts over deficit-neutral tax reform, and the one-page plan the White House released would likely add trillions to the budget gap over the long term. Because of the Senate’s strict rules for budget reconciliation, Republicans would need to make their tax bill temporary if it added to long-term deficits. “It will have to be revenue-neutral,” Senate Majority Leader Mitch McConnell told Bloomberg News earlier this week, in his sharpest break with the White House on the issue of taxes. “We have a $21 trillion debt.”

House Republicans are also pushing for the inclusion of a $1 trillion border-adjustment tax on imports to offset the rate cuts, but that faces opposition from Senate Republicans and skepticism from the White House. McConnell said that provision was unlikely to make it through the Senate, where Republicans would need the support of 50 out of their 52 members.

Those disagreements were on display at Thursday’s hearing, as Republicans on the Ways and Means Committee urged their witnesses to make the case for permanent, deficit-neutral tax reform, including the so-called BAT. Democrats sought to exploit the GOP’s fiscal quandary throughout the hearing. At one point, Representative Terri Sewell of Alabama read aloud a tweet that Vice President Mike Pence sent during the day, in which he vowed that President Trump would sign “the most consequential tax cut in American history.”

“It can’t just be another tax cut, gentlemen. It has to be true comprehensive tax reform,” Sewell said.

As much as anything, what the hearing made clear is that Republicans are getting antsy. Several times, they pressed their witnesses to confirm that the years-long delay in enacting tax reform was itself harmful, holding back the economy and depressing jobs and wages. “We’ve been talking of tax reform for years now on this panel and yet we continue to let the perfect be the enemy of the good,” said Representative Pat Tiberi of Ohio.

Mottl, the small-business owner, attributed Wednesday’s sharp drop in the stock market to investors’ worry that amidst an expanding scandal at the White House, Congress would fumble its pro-business agenda. “They’re concerned we’re not going to get things done here,” he said.

It’s a fear Republicans on Capitol Hill clearly share, and one that Thursday’s initial, modest step forward on tax reform could only begin to ease.