In separate addresses to a National Association of Manufacturers summit, Ryan and Pence said 2017 is the year Congress will rework the tax system.
Notably, the speaker spoke about “transformational tax reform,” while the vice president talked about “tax cuts.”
“Real tax reform means slashing our corporate tax rate as low as possible,” said Ryan, a Wisconsin Republican. “This means eliminating special-interest carve-outs and replacing them with lower tax rates for all businesses.”
While the administration may generally agree with that goal, President Donald Trump and Pence have more frequently referred to cutting taxes and avoided talk of eliminating deductions and credits.
“We’re going to pass the largest tax cut since the days of Ronald Reagan, and we’re going to do it this year,” Pence told summit attendees.
The vice president mentioned some of the proposals from the administration’s one-page tax overhaul plan, such as lowering the corporate tax rate to 15 percent, doubling the standard deduction for individuals and repealing the alternative minimum tax and the estate tax. He did not offer new insight into what the White House is looking for in a tax overhaul.
“Discussions will continue,” Pence said. “Details are being worked out.”
Ryan said the House and Senate are working on fleshing out Trump’s tax principles into legislation. While the Republicans’ formal target is to get a tax bill passed by the end of the calendar year, the speaker said his personal goal is to get it done by the start of deer-hunting season, which begins the Saturday before Thanksgiving in Wisconsin.
Rather than write separate bills like they’ve effectively been doing on health care, House and Senate Republican leaders are working with the White House to get everyone on the same page and come up with a unified tax plan, but they have many differences to work through.
Ryan downplayed those differences in his speech. He carefully avoided mentioning the most contentious aspect of the House Republicans’ plan, the 20 percent border adjustment tax on imports. Rather, he spoke generally about the need to end incentives for companies to move their operations overseas.
“We must think differently, so that once again we make things here and export them around the world,” Ryan said. “There are so many different ways to achieving this. We in the House have our own idea, and that is one of the things that we are discussing with the administration so we can get this right. But the bottom line here is this: We cannot accept a system that perpetuates the drain of American businesses overseas.”
In an interview with CNBC after the speech, Ryan said the border adjustment tax is not dead but noted that the Senate is developing an alternative.
“What we’re doing right now, the tax writers, is we’re just comparing and contrasting various versions of reform to get the best possible one that gives us the lowest possible rates and the most internationally competitive tax system and the best one we can pass,” he said.
In his speech at the manufacturing summit, Ryan made the case for permanent tax changes, rather than temporary tax cuts that some Republicans have floated as an option. To be permanent under the budget reconciliation process that Republicans plan to use to advance a tax overhaul, the legislation needs to be deficit neutral.
“Every expert agrees that temporary reforms will only have a negligible impact on wages and economic growth,” the speaker said. “Businesses need to have confidence that we will not pull the rug out from under them. They need the certainty from permanent tax cuts to hire more workers, invest in their businesses, and plan for the future.”
Ryan also walked through some aspects of the House Republicans’ plan, such as moving to a territorial system of international taxation, lowering rates for corporations and small businesses, collapsing the seven individual tax brackets into three, doubling the standard deduction and simplifying the tax code to the point in which a tax form can be the size of a postcard.
“We will clear out special interest carve-outs and excessive deductions, and focus on keeping those that make the most sense: home ownership, charitable giving, and retirement savings,” he said.
Ryan’s office had billed his remarks as a “major speech,” but he said nothing he hasn’t said before in so many words. The only change was that he notched up his rhetoric on the importance of completing a tax overhaul, calling it a chance for Congress “to do something transformational — something that will have a truly lasting impact long after you and I are gone.”
The speaker pre-emptively dismissed varying and constantly changing forecasts about a tax overhaul being dead or on life support.
“The defenders of the status quo — and there are many — are counting on us to lose our nerve, to fall back, or put this off altogether,” Ryan said. “But we will not wait for a path free of obstacles because it does not exist. And we will not cast about for quick fixes and half-measures.”
“Transformational tax reform can be done, and we are moving ahead,” he said. “Full speed ahead.”