Sen. Ted Cruz (R., Texas) will lay down a marker in the tax debate on Wednesday, endorsing full and immediate deductions for capital investment by businesses.
In a speech at a Tax Foundation event, Mr. Cruz will emphasize that such full expensing instead of current multiyear depreciation schedules would make the tax code simpler and direct tax benefits to new investments, according to a person familiar with his remarks. By getting all those deductions up front in the first year instead of over the life of an investment, companies would have a bigger incentive to invest in factories and equipment.
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In contrast, lowering the corporate tax rate -- which is also a central piece of the emerging GOP tax plan -- benefits companies with both newer and older investments.
The fate of full expensing, like the rest of the GOP tax plan, is up in the air as lawmakers begin negotiating the details. The House Republican tax blueprint called for full expensing, but lawmakers may scale that back as they balance competing goals and try to comply with budgetary rules. Money used for full expensing couldn't also be used for rate cuts.
A July joint statement from the top Republican negotiators in the administration in Congress said only that the plan would strive for "unprecedented capital expensing." They haven't defined what that means.
The votes of Mr. Cruz and nearly every other Senate Republican will be crucial. The party is planning to use a procedure known as reconciliation, which allows them to pass a tax bill without Democratic votes. Still, they would probably need at least 50 of the 52 Republican senators to back the same tax plan and each member will have different priorities.
Mr. Cruz's speech, in other areas, echo the GOP's aims of simplifying tax returns so they could fit on a single piece of paper and emphasizing economic growth. As a presidential candidate last year, Mr. Cruz proposed a much more dramatic tax change that would have replaced payroll and corporate taxes with a consumption tax and a 10% individual income tax.
Meanwhile, President Donald Trump met with a bipartisan group of senators on Tuesday night in hopes of getting some Democratic support for the emerging tax plan. His guests at a White House dinner were the only three Democratic senators -- Joe Manchin of West Virginia, Heidi Heitkamp of North Dakota and Joe Donnelly of Indiana -- who didn't sign a statement vowing to oppose tax cuts for high-income households. All three are up for re-election next year in states Mr. Trump won.
All three senators issued statements welcoming the conversation. Mr. Manchin said he favored lowering tax rates without "adding to our staggering debt." That could put him at odds with Republicans, who are considering calculating the cost of their tax cuts in ways that could allow them to claim they aren't increasing the debt.
Ms. Heitkamp said she wanted more details about the effects on farmers and retirees. Mr. Donnelly said he was focused on proposals to limit tax breaks for companies that shift jobs abroad.
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(END) Dow Jones Newswires
September 13, 2017 06:14 ET (10:14 GMT)