House tax writers are discussing a gradual phase-in forPresident Donald Trump and Republican leaders' proposed corporatetax-rate cut — on a schedule that would put the rate at 20% in2022, according to a member of the chamber's tax-writing committeeand a person familiar with the discussions.

The phase-in plan is under discussion, but isn't yet final, saida member of the House Ways and Means Committee, who asked not to benamed because the discussions are private. Other members said theyplanned to discuss the proposal during a private meeting Mondayafternoon.

House Ways and Means Chairman Kevin Brady told reporters Mondaythat there hasn't been a decision yet. When asked whether a phasein was being considered, he said only: “We want to get the growthup front.”

The phase-in proposal would reduce the rate from its current 35%rate by three percentage points a year starting in 2018. Ifadopted, it would delay some of the economic effects Trump and hisadvisers have sought to emphasize from their tax cuts. U.S. stocksfell to session lows and Treasuries pushed higher on the news.

Trump wants to immediately cut the rate, White House PressSecretary Sarah Huckabee Sanders said during a press briefingMonday.

“The president laid out his principles and it doesn't includethe phasing in, so we're still committed to that moving forward,”Sanders said. “I don't have any reason to believe we have changeson that front at this point.”

Treasury Secretary Steven Mnuchin emphasized that stance duringan interview while traveling in the Middle East. “The objective isnot to have that phase in, but we will see how that goes,” he said.Mnuchin added he's been talking to Brady and Senate membersthroughout his trip, including calls in the middle of the night todiscuss tax efforts.

The Ways and Means panel plans to release the text of a bill onWednesday, ending a secretive drafting process that has hadcorporate lobbyists on edge. The broad framework that Trump andcongressional Republican leaders released last month calledfor the 20% corporate rate as one of several tax-rate cuts forbusinesses and individuals.

Two GOP members of the Ways and Means committee — Rep. DavidSchweikert of Arizona and Rep. Devin Nunes of California — saidMonday that they wanted to see how the math worked out beforetaking a position on the phase-in proposal.

The corporate cut was estimated to cost $1.6 trillion over adecade, according to estimates from the Tax Foundation, aWashington policy group — but it would be less costly under aphased-in schedule. Under budget rules Republican leaders have saidthey plan to follow, tax cuts that aren't offset with enoughrevenue-enhancing provisions to avoid adding to the long-termdeficit would have to expire.

Trump had argued for cutting the corporate rate to 15% — thoughin September as the GOP framework emerged, he quickly embraced the20% target, calling it “a perfect number.”

His White House has since argued that cutting the rate to 20%would speed up economic growth enough to eventually make the U.S.economy 3% to 5% larger than it otherwise would be. That analysis,by Trump's Council of Economic Advisers, has also found thatcutting the corporate rate would increase average household incomeby at least $4,000. Other economists have questioned thatclaim.

Budget Issues

A possible phase-in for the corporate rate has been rumored forweeks, according to two people close to the debate who asked not tobe named. GOP tax writers are looking for ways to limit theirbill's net revenue loss to $1.5 trillion to satisfy the parametersof the budget resolution that the House and Senate haveadopted.

Brady told some of his panel members about the phase-in proposalSunday night, said a Washington lobbyist who was familiar with thediscussions. During a meeting at the White House as recently aslast week, the phase-in idea wasn't mentioned, said the lobbyist,who asked not to be named because the discussions are private.

It's possible that Brady will use the phase-in proposal as abargaining chip in drafting the legislation, the lobbyist said.

Conservative tax lobbyist Ryan Ellis said a proposed phase-infor the corporate rate would be “very disappointing if true.” Hesaid it would “delay business allocation of capital by the samefive years.”

Some anti-tax activists, including Grover Norquist, the head ofAmericans for Tax Reform, have urged Republicans to frontload thetax cuts in order to deliver economic benefits immediately. Theysay that delaying them would mean Republicans couldn't tout them bythe 2018 midterm elections.

Lloyd Greif, CEO of Greif & Co., an investment bank in LosAngeles, said phasing in the corporate tax cut would cause “plainhavoc” in corporate executive offices nationwide and mute thepotential growth effects.

Delays in economic growth, a core GOP goal and promise, mightcause voters to turn against Republicans in the 2020 elections,Greif said. That in turn could raise the question of “will taxpolicy be unwound?” he said. In the interim, “boards are going todefer making investment decisions.”

From: Bloomberg News

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