OMAHA (DTN) -- Congressional Republicans plan to release their framework for tax reform on Wednesday as Congress knows President Donald Trump will be intently focused on the success of the tax package.
Sen. Charles Grassley, a senior member of the Senate Finance Committee, told reporters Tuesday the plan will offer a broad outline of the direction House and Senate tax writers intend to go. However, the plan might not get into the weeds of some specific tax breaks.
"There won't be very many details in this framework," Grassley said. "My goal is to make the tax code simpler, fairer and more competitive for Iowa agriculture and the country as a whole."
Grassley said overhauling the Tax Code, "presents a real opportunity for rural America."
Trump said Tuesday before meeting with leaders of the House Ways & Means Committee that the Tax Code needs to be fairer and simpler. He also said the framework released on Wednesday will be "a very comprehensive report, and it will be a very, very powerful document."
Trump said the tax plan "will cut taxes tremendously for the middle class." Along with that, he said there will be lower tax rates for businesses. The president continues to argue the U.S. has the highest tax rates in the developed world. Trump said of the new tax rates -- "they are set." The president did not indicate whether the corporate rate would be capped at 15%, which he wants, or the 20% reportedly agreed to by congressional leaders.
The Washington Post reported Tuesday the top tax rate for individuals of 39.6% will be lowered to 35% under the plan. The Post also reported the president is going to Indiana on Wednesday to rally support for the tax plan. The president has been targeting his tax pitch in states with possibly vulnerable Democratic senators in 2018. Indiana Democrat Joe Donnelly is up for election in 2018, and Trump last month touted tax reform in visits to Missouri and North Dakota, home of Sens. Claire McCaskill and Heidi Heitkamp, respectively.
P[L1] D[0x0] M[300x250] OOP[F] ADUNIT T
The president and other GOP leaders also maintain that the tax package will be focused on bringing back business dollars parked overseas. The president said close to $3 trillion is being held by U.S. businesses overseas. The tax legislation will lead to that money being invested back in the U.S., he said.
The tax package is expected to generate $1.5 trillion in tax savings over 10 years. Grassley said, however, that the tax cuts would not then require cuts in spending to offset the lost revenue.
When asked by DTN if the tax cuts would later force spending cuts in the farm bill, Grassley said the farm bill and tax cuts are separate items and cuts to the farm bill would not be expected because of lower revenue.
"Two separate items. They are not going to be connected," Grassley said. "If you get changes in the farm bill, it's because of changes in the farm bill, and the tax issues are going to be decided probably a long time before the farm bill, though there is going to be some work on both going on simultaneously. But I think you are going to see more definitive action on the tax bill earlier than you will see definitive action on the farm bill, so you have got to see them as not connected."
Instead, the senator said, higher economic growth from the tax cuts would generate higher federal revenue. "This is based on the proposition that if we have just 0.25% (one quarter of a percent) of increase in Gross Domestic Product, it will make up for what is cut," Grassley said. "That is economic growth bringing in more revenue, based upon patterns of tax bills going back to the Mellon tax cuts of the 1920s."
Those were tax cuts crafted by Treasury Secretary Andrew Mellon in the 1920s. The senator also cited other tax cuts in past decades where he said revenues increased despite the tax cuts. "I think that's the way you have to look at it," Grassley said.
Among the specific changes Grassley wants to see in a final tax bill, is for Congress to transfer the benefit of the $1-a-gallon biodiesel tax credit. A plan he and another senator proposed earlier this year would switch the beneficiary of the tax credit so domestic biodiesel producers receive the credit rather than companies that blend. There have been ongoing problems with companies collecting the tax credit on imported biodiesel.
"You can understand why we shouldn't be giving the same tax credit to incentivize our domestic industry and then import and pay some foreigners the same tax credit for stuff they import into our country," Grassley said.
On another topic, Grassley said he wants to ensure the estate tax is repealed. He said the tax is a burden for farmers. Farm assets generally make up about 2.5% of all assets taxed under the estate tax, but farm groups have emphasized the need to eliminate the tax, which generates about $17 billion a year in federal revenue.
"Under current law, family farms, ranchers and small businesses are really in the crosshairs of federal tax policy slapping extraordinary tax penalty on survivors after the death of a loved one," Grassley said. "Eliminating this death tax will be a top priority."
There was talk last week that Republicans might abandon the estate-tax repeal. Grassley said he thinks elimination of the tax is still on the table. "I think they are still going to pursue the repeal of the estate tax," he said.
The big issue if lawmakers choose to eliminate the estate tax is what Congress would then do about the basis of the inherited assets. Heirs now receive stepped-up basis for those assets. Grassley said there are questions about what would happen there because such assets, when sold, could be subject to capital gains.
Grassley also added it's important to preserve some other tax breaks farmers frequently use, such as Section 179 business expensing to purchase equipment.
Chris Clayton can be reached at Chris.Clayton@dtn.com
Follow him on Twitter @ChrisClaytonDTN
© Copyright 2017 DTN/The Progressive Farmer. All rights reserved.