Officials to Release Tax Plan Principles This Week -- 2nd Update

Top congressional Republicans and Trump administration officials plan to release their tax-policy principles at the end of this week, said two people briefed on those discussions.

The plan will include high-level principles, said one of the people. An administration official said the statement will reflect areas of agreement in the group.

The so-called Big Six officials on tax policy have been meeting for months and are gathering Wednesday afternoon, in what is expected to be their final session before the congressional summer recess.

It is unclear what conclusions they will reach and how those will go beyond what they have already said. The broad strokes -- lower tax rates in a deficit-neutral tax-code revamp -- have generally been agreed on for months.

What isn't clear yet is how the principles released this week will address the House GOP's plan for border-adjusting the corporate tax. House members have been sticking to that idea -- taxing imports and exempting exports -- even though it has faced heavy criticism for months from senators and retailers.

The six officials are Treasury Secretary Steven Mnuchin, White House economic policy chief Gary Cohn, House Speaker Paul Ryan, Senate Majority Leader Mitch McConnell, Senate Finance Committee Chairman Orrin Hatch and House Ways and Means Chairman Kevin Brady.

When Congress returns, lawmakers expect to start the more-detailed tax-policy work. Members of the group have said they hope to pass a new law by the end of the year but will need to move quickly on policy decisions and votes to meet the goal.

Mr. Mnuchin told a Senate committee on Wednesday that he was "very close" to putting out a more detailed tax plan.

The principles from the Big Six aren't expected to include legislative text, which would have to be hashed out by lawmakers later this year.

Rep. Mark Meadows (R., N.C.), head of the conservative House Freedom Caucus, said he welcomed the principles as a way of clarifying where Congress is heading, but that doesn't mean House members will accept it.

"History shows you that when six people get together and agree on anything, it doesn't necessarily make for 218 votes in the House," he said Wednesday.

Mr. Meadows said he expected the principles to rule out border adjustment.

"At this point if it doesn't say no border adjustment tax either clearly or almost as clear as no border adjustment tax, then the gang of six should pull what they worked on," he said. "They should deep-six it."

Removing border adjustment would solve some problems, but it would leave others, including $1 trillion in forgone revenue over 10 years. Also, if Republicans eliminate the tax on U.S. companies' foreign earnings, they need some way to prevent companies from shifting profits to low-tax countries.

Border adjustment helped do that, and no ready alternative has emerged yet.

Beyond that, there are still many unknowns, as well as political and procedural hurdles.

President Donald Trump said Tuesday in an interview with The Wall Street Journal that he wants to focus on middle-class tax cuts and hinted at scaling back tax cuts for high-income households. Some Republican senators balked at versions of the health-care bill because it featured tax cuts for top earners' investment income.

The GOP plans, including Mr. Trump's, all feature lower rates on businesses, which are largely owned by high-income households. The plans all repeal the estate tax and eliminate the alternative minimum tax, which primarily benefit high-income households. They all lower taxes on capital gains and dividends, which are received mostly by high-income households.

Procedurally, even to get to a tax bill that can pass the Senate without Republican votes, the House and Senate must agree on a budget. The House doesn't plan to vote on its budget until September and the Senate hasn't made significant progress on its plan.

The GOP health-care push remains in flux and may leave in place taxes that Republicans had been banking on repealing before they got to the tax bill.

As with health care, lawmakers will have to live within the constraints imposed by the so-called reconciliation rules that allow speedy consideration without Democratic votes. The plan can't increase long-run budget deficits. And, because Republicans have just 52 votes in the Senate, any three GOP senators can band together to make demands.

Kate Davidson, Nick Timiraos and Siobhan Hughes contributed to this article.

Write to Richard Rubin at richard.rubin@wsj.com

(END) Dow Jones Newswires

July 26, 2017 16:05 ET (20:05 GMT)