RYAN RELEASES “BETTER WAY” TAX PROPOSAL
Lost in the fallout of the Brexit vote or even the Democratic sit-in on the floor of the U.S. House of Representatives regarding gun control was Friday's release of the Republican's long-awaited blueprint on tax reform, a 35-page document outlining what the tax code would look like if Speaker Paul Ryan had his way. A few observations before diving in...
- This blueprint only represents the thoughts of Republicans, specifically House Republicans.
- The blueprint is a narrative, not legislation; nor will it be offered as legislation anytime before the election.
- Congressional Democrats resoundingly condemned it, including Senator Ron Wyden (D-OR) who would be chairman of the Finance Committee if the Senate flips.
- The presumptive presidential nominees were both silent on the matter, and we expect that to remain the case. No matter who wins in November, the president lately drives tax reform (at least for the past 50 years that has been the case), so we're sure whoever is elected will have their own ideas to offer.
So, what's in it? Perhaps the most headline-grabbing elements of the plan are the proposed new tax rates: a corporate rate of 20%; a pass-through business rate of 25%; and individual rates of 12%, 25%, and 33% (without identifying the income thresholds).
While not proposing a change to the mortgage interest or charitable deductions, the proposal scraps the remainder of most itemized deductions and instead increases the standard deduction. And on the business side, the blueprint calls for a shift to a territorial tax system while proposing a border adjustment tax on products, services, and intangibles imported into the U.S. Importantly, the blueprint calls for 100% first-year expensing for businesses while removing many business-related deductions and credits from the code, including interest deductibility.
So what does it all mean? In our estimation, it's worth noting how much energy and resources House Republicans and Speaker Ryan are devoting to this rollout, even if it's not receiving much play. Of course, Ryan is a former Chairman of both the Budget and Ways and Means Committees; and though in releasing this blueprint he characterized it as a start to a conversation, we're quite certain what he unveiled is a clear indication of where Ryan's baseline negotiation will be with the next president (and perhaps next Senate majority leader and chairman of Senate Finance Committee). What is crystal clear from this blueprint -- one of six such task force reports the GOP produced over the last month, and probably the one most ripe for deal-making with a potential Clinton presidency -- is that this particular one is more than a messaging document; for Ryan, tax reform is his lodestar, and with this blueprint he wrote his latest chapter.