Washington Insider -- Friday

Fencing Over Tax Proposals

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

White House Tells EPA to Back Down From Biofuel Changes: Reports

The Trump administration will back away from plans to reduce the volume of biofuels in the nation's motor fuel supply, according to news reports from Bloomberg and others, amid growing pressure from corn- and soybean-producing states that stand to lose jobs and revenue from the proposal.

Iowa Governor Kim Reynolds, R., spoke with President Donald Trump and EPA Administrator Scott Pruitt Wednesday, highlighting the plan by EPA to lower biofuels targets under the Renewable Fuel Standard (RFS) via a lower mandate level for biodiesel in 2018 and 2019. "Both of them personally affirmed to me their continued commitment to the renewable fuel standard," Reynolds said after the discussion, labeling it "very productive." However, she said she would keep pressure on the administration until the state's concerns are addressed.

White House press secretary Sarah Huckabee Sanders confirmed Trump's call to the Iowa governor but said, "no definitive decision was made on RFS."

Reynolds' press secretary Brenna Smith said a decision was not able to be made until after the public comment period on the issue of reducing the biodiesel mandate ends today (October 19).

The situation has been in focus this week in Washington, with Sens. Chuck Grassley, R., Iowa, Joni Ernst, R., Iowa, and others meeting with EPA Administrator Scott Pruitt Tuesday.

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US Dairy Groups Applaud USTR's Dairy Proposal Re: Canada

U.S. milk producers roundly approved of a U.S. Trade Representative (USTR) proposal telling Canada that its problematic dairy policies must be addressed in the negotiations over the North American Free Trade Agreement. "We are gratified that our trade negotiators have heard the concerns of America's dairy farmers and cooperatives, and made dairy trade a key objective in the U.S.-NAFTA agenda," National Milk Producers Federation President and CEO Jim Mulhern said in a statement.

"The problems created by Canada's dairy system must be resolved as part of the current negotiations." The industry group praised USTR for proposing an aggressive request for Canada to open its market to more U.S. imports and demanding that Ottawa rescind a dairy pricing program that has squelched U.S. exports of ultra-filtered milk north of the border.

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Washington Insider: Fencing Over Tax Proposals

The Senate has begun its tax debate by "elbowing" Democrats over tax cuts for the rich, according to news reports. Senate Republicans killed two Democratic proposals that sought to draw a line against tax breaks for the wealthy—a provision to prevent cuts to Medicaid and reduce any tax breaks the wealthy might receive went down by a 51-47 margin, according to Bloomberg reports.

A second amendment to bar tax cuts for the top 1% of earners was also shot down by 52-46; Sen. Heidi Heitkamp, D., N.D., was the only Democrat who voted against it. A Heitkamp aide said the senator was concerned the language in the amendment was overly broad and could affect taxes on some businesses rather than just individuals.

What is happening is that these broad issues are surfacing as part of the congressional process to approve a budget resolution needed to allow the GOP to pass a tax bill with just 50 Senate votes. Republicans, who control 52 seats in the chamber, have a slim margin for error as they try to seize on what the press calls "President Donald Trump's last best chance for securing a major legislative achievement this year." As with their failed effort to replace the 2010 Affordable Care Act, three GOP defections would kill their tax bill unless they gain Democratic votes.

The amendments proposed Wednesday appear to reveal Democrats' strategy to paint the tax overhaul as a giveaway to the wealthiest Americans. Sen. Jeff Merkley, D., Ore., called the vote against the 1 percent amendment "shameful." But Republicans are anxious for a legislative win. "We need to get this done by Thanksgiving," said Sen. John Kennedy, R., La. "Period."

Still, Republicans have differences to deal with on how to tax upper earners that could resurface during a debate of the actual legislation. While most GOP lawmakers want to reduce rates across the board, Sen. Susan Collins, R., Maine, said she would support a surtax on people who make more than $1 million. She said the 1 percent measure, offered by Sen. Bernie Sanders, I., Vt., set the threshold too low. In 2014, the top 1 percent included individuals who made at least $465,626.

"If he had offered it as a millionaires and billionaires tax, then he would've had my vote," Collins said.

The final budget is expected to emerge this week, but narrowly. Then comes the hard part -- drafting a tax bill, passing it through committee, then through the full Senate, and combining it with a House version into one. In fact, many tax details remain unknown, including where Republicans will set the individual income-tax brackets. The GOP framework released Sept. 27 called for across-the-board tax cuts, balanced with many unspecified revenue-raisers.

Some of the provisions to be considered are enormously controversial. Sen. Claire McCaskill, D., Mo., facing re-election in 2018, said the Republican framework is a "nonstarter" for her because the elimination of tax breaks, such as personal exemptions, could affect lower earners with large families in her state.

She also criticized the rate cut from 39.6% to 25% for "pass-through" entities, including partnerships and limited liability companies, as mostly benefiting the wealthy. McCaskill said she needs more details on what the GOP is proposing, and told Trump during a bipartisan meeting Wednesday, "Mr. President, you've got a deserved reputation for being a great negotiator. Would you ever negotiate when you have no idea what the other side is proposing?"

Non-controversial amendments were proposed earlier by Collins, seeking to boost small business, and by Sen. Dean Heller, R., Nev., floating a family tax credit. Both were passed unanimously. Although they're vague and non-binding, the amendments to the budget provide a window into the priorities of Senate members ahead of the tax debate.

The votes came hours after Trump told Republicans and Democrats on the Senate Finance Committee that he didn't want to benefit from a tax bill, Bloomberg said. But Democrats were skeptical. Senator Ron Wyden, the ranking member on the Finance Committee, said he conveyed that there is "an enormous chasm between the rhetoric and the reality of the Trump tax plan."

More amendments were scheduled later in the week, and Democrats intend to force votes on matters such as requiring Trump to release his tax returns, preserving deductions for state and local taxes and mortgage interest payments, barring middle-class tax increases, and preventing a tax bill from increasing the deficit. Some of the measures could split off senators, such as Sen. Bob Corker, R., Tenn., who say they don't want tax changes to add to the debt, or others, such as Sen. Rand Paul, R., Ky., who say nobody in the middle class may see a tax hike.

Republicans also plan on proposing amendments, including measures calling for cutting the state and local deduction, which primarily benefit high earners in Democratic-leaning states, and providing tax relief to farmers and ranchers.

So, the immediate outlook is for controversial and contentious debates on important issues, which may well persist through the fall, and which should be watched closely as they emerge, Washington Insider reported.


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