Yesterday, the dollar slumped and yields dropped after a WaPo report claimed that the corporate tax cut could - the core piece of GOP tax reform - would be delayed by up to a year, a clear indication that there may be irreconcilable differences in the Senate regarding tax reform. Then, moments ago, Axios confirmed as much, reporting that the Senate "won't release its version of the GOP tax bill tomorrow", citing a senior GOP aide. On Tuesday Mitch McConnell said that the bill would come out on Thursday. That said, the aide reportedly said "this wasn't a delay, because the release of the Senate bill was always going to start after the House Ways and Means Committee finished marking up its bill."
As Axios explains, the delaying introduction of the bill is problematic "because it not only gives off the impression that things aren't going well (whether it's true or not), but also removes one more day that could have been spent getting the caucus on board with the bill."
Meanwhile, speaking on Bloomberg, Treasury Secretary Mnuchin said that the White House's preference would be to start the corporate tax rate cut next year, which again implies a material probability of delay.
“Our strong preference is that the corporate tax rate starts next year. The longer we wait, the worse it is for the economy,” Mnuchin said in interview on Bloomberg TV.
Asked whether he rules out delaying corporate tax cuts: “Again, I’d just say, the president’s strong preference -- he feels very strongly that he wants to start this right away. But having said that, we’ll have to look at the entire Senate package -- I assume it’s just a money issue -- as to how they’re moving the different pieces around”
“It’s not a philosophical issue; I’m sure they’d like to start this just as soon as they can”
Some other soundbites courtesy of Bloomberg:
- MNUCHIN: STATE ELECTIONS DIDN'T CHANGE OUR TAX STRATEGY
- MNUCHIN: WE'RE GOING THROUGH HEALTHY PROCESS ON TAXES ON CMTEES
- MNUCHIN: PRESIDENT WOULD LIKE TO KILL HEALTH CARE MANDATE
- MNUCHIN: KILLING HEALTH CARE MANDATE WOULD FREE UP LOT OF MONEY
- MNUCHIN: HOUSE MOVE ON CARRIED INTEREST STEP IN RIGHT DIRECTION
- MNUCHIN: WE'RE SENSITIVE TO NEED OF STATE TAX EXEMPTION
- MNUCHIN: THERE ARE SHORT-TERM CONCERNS ABOUT FX IMPACT ON TRADE
- MNUCHIN: PART OF DOLLAR STRENGTH REFLECTS U.S. ECONOMY
- MNUCHIN: I DON'T THINK YELLEN HAS MADE DECISION ON STAYING
In the final update, CNBC reports that "the Senate tax plan is not expected to include a controversial 20 percent excise tax on imports by multinational companies, according to three people briefed on the issue."
The tax is a critical revenue raiser in the House bill—worth about $155 billion over a decade—and applies to purchases by U.S. subsidiaries of multinational businesses from their foreign counterparts. Among the most vocal opponents of the new fee is the conservative advocacy group Heritage Action, which called it a "backdoor border adjustment tax."
The fee covers both intangible goods such as intellectual property as well as consumer parts. But unlike the border adjustment tax—a proposal that Republicans have discarded—the transactions must occur within a single parent company. Business groups such as the Organization for International Investment also fear the tax could disrupt international supply chains and raise costs for multinational companies—and ultimately consumers.
"It's an extraterritorial reach into global supply chains that were never part of the U.S. tax base," OFII President Nancy McLernon said. "It will have a disproportionate impact on international companies that have made a deliberate decision to invest and create jobs in the United States."
Last week, House Ways and Means Committee Chairman Kevin Brady defended the tax as a crucial to ensuring that companies do not shift profits overseas. He said that the border adjustment tax was abandoned months ago and that the excise tax in the current bill bears no resemblance to that proposal.
With so many moving parts and even more conflicting opinions, it will be surprising if a one day delay by the Senate is all it boils down to.