Washington Insider -- Wednesday

Tax Reform Wars Begin

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

Senate Agriculture Committee Approves Two USDA Nominees

The nominations of Stephen Censky to be the next USDA deputy secretary and Ted McKinney to be undersecretary of Agriculture for trade and foreign agricultural affairs were approved easily in a voice vote by the Senate Agriculture Committee Monday evening. The two must now clear a vote by the full Senate, but no date has been set yet. Senate Ag Committee Chairman Pat Roberts, R-Kan., said he will push for the vote as soon as possible.

If that does not happen by Friday, the process will be delayed until at least Oct. 16, when the chamber returns from a weeklong recess. Meanwhile, Senate Ag Committee Ranking Democrat Debbie Stabenow, D-Mich., says she wants a meeting with controversial USDA nominee Same Clovis, the White House choice to be undersecretary for research, extension and economics. "Our farmers and ranchers depend on science. The whole idea of a chief scientist is someone who has a commitment to science,” she said. “I don’t think this gentleman meets the criteria.”

House Panel Vote Coming On Ag Guest-Worker Bill

Revamping and expanding the agricultural guest-worker program is the goal of a bill introduced recently by House Judiciary Chairman Bob Goodlatte, R-Va.

Goodlatte had scheduled a vote for Wednesday in the House Judiciary Committee on the measure that would significantly modify the H-2A in its current form, rename the visa program H-2C and house it within USDA. The program, which now provides guest-worker visas for temporary/seasonal agricultural jobs, would allow agricultural employers in need of year-round workers to apply. It would give workers in specialized and hard-to-fill jobs an initial stay of 36 months, and subsequent visas would offer an 18-month work period. Employers would not be required to provide housing and transportation to workers.

Goodlatte’s bill would offer 500,000 visas annually, and include provisions for an increase if that number is reached.

Note: While Goodlatte had planned to vote on this bill Wednesday, he announced Tuesday night the committee meeting was postponed.

Washington Insider: Tax Reform Wars Begin

Well, the political war over tax reforms is already ramping up, even though the main details of the plan have not been released, Bloomberg says this week. It reports that Senator Bob Corker, R-Tenn., questioned whether GOP has fortitude for tax overhaul because Republicans seem to be “split on whether the plan can add to the deficit.”

And, he tagged the White House with a show of "softness" over whether to end a $1.3 trillion federal tax deduction for state and local taxes. He warned on Monday that this “waver” could imperil a tax overhaul.

The framework that President Donald Trump and Republican leaders released last week calls for deep rate cuts and would abolish some tax breaks to help pay for them. Without such “pay-fors,” Congress might have to settle for only temporary cuts.

Corker, who insists he won’t vote for a tax bill that adds a penny to the deficit, told Bloomberg that he’s concerned about the early signals from the White House. On Friday National Economic Council Director Gary Cohn said that ending the state and local tax break was negotiable.

“That’s the easiest one,” said Corker. “Some of the others are actually more offensive and produce lesser amounts of money.”

The budget rules that Senate leaders plan to use to pass the legislation require that any changes that boost the federal deficit must expire in time. But the nine-page framework released Wednesday provided few details on revenue raisers. It calls for eliminating deductions, but doesn’t specify them.

White House Budget Director Mick Mulvaney has also hinted at flexibility, saying on CNN Sunday that decisions about deductions remain up in the air. He added that a tax plan that doesn’t add to the deficit won’t spur growth.

“I’ve been very candid about this. “If we simply look at this as being deficit-neutral, you’re never going to get the type of tax reform and tax reductions that you need to get to sustain 3 percent economic growth.”

GOP leaders have been laying the groundwork to get tax legislation through the Senate without Democratic support. They need 50 votes to pass a bill, and hold 52 seats, leaving little margin for error.

In line with the White House view, a growing number of GOP members, such as Senator Rand Paul, R-Ky., and Representative Jim Jordan, R-Ohio, have said they prefer tax cuts that would stimulate growth, even if they add to the deficit.

“This bill when it comes out of the House and Senate will increase the deficit,” said Steve Bell, a former Senate Republican staff director. “That’s going to be a stumbling block for some people.”

Despite the unified framework that enjoyed broadly positive reviews from within the party last week, the House and Senate are still likely to pass separate tax bills, according to Senator Pat Toomey, a Pennsylvania Republican. Then, they’ll have to be merged into one bill that can pass both chambers.

Congress has a Dec. 8 deadline to keep the government funded, which threatens to distract from the tax debate. With just 35 legislative working days left this year, some congressional Republican aides privately have said the issue could get pushed into 2018, an election year.

The tax-writing committees in the two chambers may also disagree over whether to tax top earners at a rate above 35 percent or to follow through on the promise to provide the middle class with a tax cut.

Senator John Thune, R-S.D., said Republicans are committed to maintaining a progressive tax code and the tax-writing panels will have to “ensure the people on the high end, as the president has said, aren’t getting a big tax cut.”

That won’t be easy. The framework includes tax breaks for some top earners by creating a new rate of 25% for pass-through businesses. It also repeals the Alternative Minimum Tax and estate tax, which hit high earners and the wealthy, respectively. The Tax Policy Center’s analysis last week found that about half the plan’s tax breaks would go to the highest earners.

Thune said there have been discussions about having a “top-end surcharge” of more than 35% on the highest incomes to mitigate the high-end tax break. Sen. Orrin Hatch, R-Utah, cast doubt on that prospect, saying he prefers to limit it to three brackets, but hinted that political pressure could motivate the White House to add a fourth one.

“If they get beaten up enough, they might want to,” Hatch said.

Corker warned that raising trillions of dollars to pay for the individual and business tax cuts will require making “very tough decisions” that’ll be made tougher “when the army of lobbyists roll in here” to protect their treasured carve-outs.

So, we can certainly expect to see some high stakes log-rolling and horse trading in the weeks ahead, and there’s real uncertainty about how it all will turn out. This is certainly a debate producers should watch closely as it proceeds, Washington Insider believes.

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