Washington Insider -- Thursday

Tax Reform and Politics

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

Chamber Of Commerce Offers Strong Criticism of NAFTA Trade Proposals

The U.S. Chamber of Commerce is typically one of the backers of foreign trade, but they are deploying resources to warn of "existential threat" to NAFTA as the several proposals from the Trump administration in the talks are a "poison pill" for the deal.

“We've reached a critical moment, and the Chamber has had no choice but to ring the alarm bells,” Chamber head Tom Donohue said. He said tightening U.S. rules of origin on autos is among the counterproductive U.S. proposals that would send business overseas.

Plus the talked about sunset provision for the agreement is another potential component that will not foster a pro-investment environment in the U.S. The group has deployed a host of NAFTA backers to Congress to make their case for keeping NAFTA as the fourth round of talks get underway.

Perdue Visits Europe

USDA Secretary Sonny Perdue is in London as part of a week-long trip to Europe that will include the G7 ministerial. Today, Perdue will meet with Michael Gove, Britain’s Secretary of State for Environment, Food, and Rural Affairs, and with members of the House of Commons’ Committee on Environment, Food, and Rural Affairs.

Perdue also will travel to Rome where he and the other G7 agriculture ministers will join Pope Francis at the World Food Day observance next Monday. He then will stop in Madrid to meet with his Spanish counterpart before returning home October 18.

Washington Insider: Tax Reform and Politics

Well, taxes and tax reform is the issue on everyone’s mind just now, and almost everyone agrees that dealing with the issue will be very, very tough. Bloomberg points out this week that a “caustic feud with Senator Bob Corker, R-Tenn., is just one obstacle President Donald Trump faces in uniting Republican senators around his goal of delivering what he’s called the biggest tax cuts ever.”

Republicans hold a slim 52-seat majority in the Senate, so the White House can only afford to lose two GOP senators before tax legislation unravels under the special fast-track procedure Senate leaders plan to use, unless the President can convince Democratic senators to support the effort, Bloomberg says. So far, he is framing tax reform as a partisan issue, and that “Democrats want MASSIVE tax increases & soft, crime producing borders.” But, he said, “Republicans want the biggest tax cut in history & the WALL!”

In the meantime, pressure on the issue seems to be growing, Bloomberg thinks. It quoted Sen. Corker as insisting that a tax cut must not add a penny to the deficit or “there is no way in hell I’m voting for it.” Still, Bloomberg noted that the Tennessee budget hawk has left himself wiggle room, even though the size of the revenue loss contemplated in a Senate budget resolution is as much as $1.5 trillion. He says he’s open to using a maneuver that would ease some of the perceived deficit impact and is and willing to consider “reasonable” growth that might result from tax changes. He even signaled last week that he may be open to using a different scorekeeper to evaluate the plan, rather than the traditional referee, the Congressional Budget Office.

Other senators have different objections or demands, Bloomberg notes. Sen. Rand Paul, R-Ky., a libertarian who helped thwart a Trump-backed bill to replace the 2010 Affordable Care Act, has criticized the GOP tax framework for its middle-class impact. He says any middle-class tax hike as unacceptable.

That’s a difficult obstacle, Bloomberg says. The framework’s call to scrap the state and local deduction and dependent exemptions is projected by the nonpartisan Tax Policy Center to raise taxes on at least some middle-class Americans. House GOP leaders dispute that finding, saying it doesn’t factor in unspecified details like how much the child tax credit will be increased by and where income brackets will be set.

“What I will not accept is a tax hike on the middle and upper middle class, sacrificing their paychecks on the altar of ‘reform,”’ Paul wrote in a Forbes op-ed.

Appeasing the Paul flank of the party could mean steeper tax cuts that could risk alienating the Corker wing by adding to the deficit, Bloomberg says. It says this is the sort of tightrope Trump and his allies will have to walk to placate tension between competing factions among congressional Republicans.

Bloomberg also noted what it called “two mavericks,” Sen. John McCain, R-Ariz., the self-styled maverick who voted against Republican-pushed tax cuts in 2001 and 2003 due to deficit concerns and demonstrated his willingness to deal Trump a defeat in the health-care debate, and who says he’d like to see a regular-order process for a tax bill with bipartisanship.

A different kind of maverick may join the Senate before year’s end. Roy Moore, the Senate nominee in Alabama is the front-runner in the special election slated for Dec. 12. He wants to eliminate income taxes and rely on a flat tax on goods and services purchased. He also says he will “go to war” with Senate Majority Leader Mitch McConnell, R-Ky., prompting worries from leadership that he won’t be a team player.

Another challenge, Bloomberg says, is Sen. Susan Collins, R-Maine, the most moderate member of the GOP, who is expected to announce on Friday whether she’ll run for governor of Maine next year. She has previously voted against a repeal of the estate tax, one of Trump’s priorities. The loss of the state and local tax break also would hit Maine more than other states.

There also is Sen. Murkowski, R-Alaska, another independent-minded Republican who helped thwart Obamacare repeal. She isn’t facing re-election until 2022, relieving her from political pressure for the foreseeable future. Collins and Murkowski were pivotal votes in scuttling the Trump-backed Obamacare legislation that failed in the Senate last month.

“I don’t know of a single Republican senator who defends the status quo tax code,” House Ways and Means Chairman Kevin Brady said Tuesday, when asked about the GOP’s narrow margin in the Senate. “So I fully expect each of those 52 Republican senators to weigh in in a positive way and deliver tax reform.”

So, we will see. The current debate in the media is extremely active, and is challenging even some administration assertions regarding the economic impacts of current proposals that can be expected, especially in extreme cases like those in Kansas where effects of sharp cuts have been mixed. Clearly, the debate is important and should be watched closely by producers as it proceeds, Washington Insider believes.

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