Washington Insider -- Friday

Tax Reform Timelines Appear Optimistic

Here’s a quick monitor of Washington farm and trade policy issues from DTN’s well-placed observer.

Reports: EPA to Reject Proposal to Shift RFS Compliance

The Environmental Protection Agency (EPA) will reject a proposal by billionaire investor Carl Icahn to shift the responsibility of blending biofuels as part of the Renewable Fuels Standard away from oil refiners and to blenders, according to news wires reports.

Icahn, a special advisor to President Donald Trump, had pushed the White House to make the controversial point of obligation shift, which would have saved CRV Energy, a refiner he has a majority stake in, millions of dollars.

Indications are EPA had been ready to act on the petition for several months, but reports said the White House Office of Legal Counsel told EPA to wait for the DC Circuit Court of Appeals to rule in an omnibus case of RFS challenges. The decision was issued and the court rejected a request by refiners to require EPA to decide on the obligation question in every annual RFS rule.

While neither EPA or Icahn commented on the reports, Reuters quoted a POET official as welcoming the decision. "Changes to the point of obligation would have created market confusion, raised fuel prices and removed incentives for offering cleaner-burning biofuel blends to consumers across the country,” said Rob Walther, the manufacturer’s vice president of federal advocacy. "This is not only a huge win for the biofuels industry, but also for public health, the environment and our economy."

The expectation is that EPA will issue their decision within a couple of weeks, according to the reports.

US Soybeans Reportedly on Potential China Retaliation List

U.S. soybeans are reportedly part of China’s potential tit-for-tat plan if the U.S. announces trade sanctions, according to Bloomberg.

The Trump administration continues to mull action on China regarding intellectual property (IP) concerns. U.S. trade officials have long criticized China's IP enforcement regime for failing to stem alleged online piracy of music, films, books, software, and video games. The Office of the U.S. Trade Representative (USTR) also alleges that hackers affiliated with the Chinese government and military infiltrated the computer systems of U.S. companies and stole terabytes of data to provide commercial advantages to Chinese enterprises.

China’s Commerce Ministry warned against procedures outside the WTO framework. Ministry of Commerce spokesman Gao Feng said that China pays "high attention" to intellectual property and wants to maintain good cooperation with the U.S. As part of the WTO's creation in 1994, the U.S. agreed to follow the WTO dispute settlement process for any alleged Section 301 violations and receive judgment before imposing retaliatory trade actions. The U.S. did not restrict its ability to retaliate against any “unreasonable or discriminatory” foreign policies that are not covered by WTO rules.

China has several counter measures it could take in any official trade spat, including legal constraints on foreign companies and import curbs on specific sectors. The need to project strength domestically is compounded by the looming twice-a-decade leadership reshuffle that may further entrench President Xi Jinping’s power via the 19th Party Congress.

Chinese officials have mulled stemming U.S. imports should retaliation be necessary. Under a draft plan, Bloomberg reports, soybeans have been singled out as the top product that can be dialed back, according to people familiar with the matter. Autos, aircraft and rare-earth commodities have also been identified as potential categories for restriction, the people said.

Washington Insider: Tax Reform Timelines Appear Optimistic

Informa Economics is commenting on the range of differing views on when tax reform can be expected, and the guesses range from yet in 2017 into 2018. The failure of the U.S. Senate to come to agreement on a healthcare reform plan is still fresh in Washington. While attention has quickly shifted to taxes, the range of timelines that various players are offering is nearly as broad as the options for tax reform itself.

Nevertheless, the White House says it expects tax reform legislation to move through Congress this fall, advancing through the House in October and clearing the Senate in November, according to legislative director Marc Short.

That appears to be an optimistic timeline, many veteran congressional analysts say. Markups would start in September, Short said. "So that, I think, is an aggressive schedule but that is our timetable,” he remarked, noting that even some Democrats could come to back the effort, particularly those up for reelection in 2018.

There are others in the 2017 camp who think tax reform could be completed in Congress in September and signed into law within a month. Americans for Tax Reform founder Grover Norquist told Bloomberg. And, Senate Majority Leader Mitch McConnell, R., Ky., said Tuesday he sees the effort being completed by the end of 2017.

The view that it could stretch into 2018 is held by House Ways and Means member Rep. Peter Roskam, R-Ill., who said it does not have to be done yet in 2017. "I’m not somebody who says it’s got to be done for sure by the end of 2017, but you’ve got to know where you’re going to land by the end of 2017 otherwise this basically becomes the fish that will have gotten away,” Roskam told Bloomberg. However he has previously echoed sentiments of others like House Speaker Paul Ryan, R-Wis., who have said it has to happen in 2017 or get snarled by the 2018 elections.

There are other factors at play. Senate Finance Committee member Chuck Grassley, R-Iowa, said it almost has to get done in 2017 in order to give the IRS time to get things ready for taxpayer filings to start in January. "It’d better be," Grassley said, when asked if the legislation could pass by November. "It’s almost got to be signed by the president by that time because IRS has to have that much time so you can file taxes in January."

Are the legislative tools in hand? Republicans have eyed using budget reconciliation to get the measure through, a path that would almost assure there being little if any Democratic help. Grassley indicated the plan could move without support from the other side of the aisle, but tax reform is certainly a chance to find some bipartisanship.

If Republicans still want to use reconciliation to push a tax code overhaul, they first must pass a Fiscal 2018 budget resolution to authorize it, and that could take some time to accomplish. Rep. Mark Meadows, R-N.C., chairman of the ultra-conservative House Freedom Caucus, has warned the measure lacks majority support in its current form. House Budget Chairwoman Diane Black, R-Tenn., said she was still rounding up votes for the resolution, but said the elimination of the border tax “does help me a little bit.”

In addition, there are several other fights that could spill over and complicate the aggressive tax timeline: Keeping the government funded beyond September 30 and raising the debt limit are two, observers say. Both are decisions that will also present challenges for lawmakers.

Informa says lawmakers and the White House are clearly laying out an aggressive agenda and timeline on tax reform, given the laundry list of items still be to accomplished and the record so far. That puts a "prove it" situation ahead for lawmakers who have had difficulty in reaching agreement – with the exception of Russian sanctions legislation. Republicans, as well as Democrats, often dream of a tax reform plan that can have that kind of support, but it isn’t likely. Informa reminds that the last major tax reform was in 1986, more than 30 years ago in a very different, bipartisan Washington.

So, we will see. It is clear that the basic preferences among lawmakers differ widely, and have been very difficult to bridge. This issue may be more amenable to a deal, but the agendas being discussed likely will be a challenge, Washington Insider believes.

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