House Ways and Means Committee Chairman Kevin Brady (R-Tex.). (Chip Somodevilla/Getty Images)
The world’s biggest corporations have high hopes for the tax package currently wending its way through Congress. But as the House Ways and Means Committee takes up the package with the aim of approving it in a matter of days, some of those global behemoths are getting heartburn.
The source of the multinationals’ pain: A new excise tax on certain transactions involving their U.S. subsidiaries. The proposal — a surprise when it surfaced in the package that panel Chairman Kevin Brady (R-Tex.) unveiled last Thursday — intends to prevent companies with operations around the world from engaging in complex maneuvers to minimize their tax burden here.
The provision is complex enough that those who stand to get pinched by it are still sorting through precisely what it would mean. And Republicans late Monday offered a tweak to soften the blow. In essence, though, the measure would work by applying a 20 percent levy on an American subsidiary’s profit when it sells a good or service to a foreign affiliate. Under the current system, companies can deduct the cost of payments between subsidiaries from their U.S. tax bill — a feature that the Ways and Means Committee says incentivizes profit-shifting and offshoring of jobs.
Here's Bloomberg on the industries in the crosshairs: "The tax would apply to billions of dollars in intellectual-property royalties that technology and pharmaceutical firms make to their overseas affiliates each year -- payments often linked to tax-avoidance strategies. But it would also hit U.S. companies’ imports of generic drugs, cars and other products from their affiliates. Global insurers would incur the levy on the cost of “reinsurance” they buy from foreign affiliates."
The excise tax threatens to divide even further the traditional GOP coalition of business interests that has worked in the past to enact the Republican agenda. Powerful groups like the National Federation of Independent Businesses and the National Association of Homebuilders have already promised to leverage their considerable weight against the plan -- and the possibility of this new tax on global giants is another ominous sign for an effort that needs all the help it can get.
On its face, the measure looks like a step toward fulfilling President Trump’s “America First” vision.
But those mobilizing against the tax say that it does just the opposite.
Groups affiliated with the Koch brothers' network argue the tax would raise prices for American consumers. They’re criticizing it as a reprisal of the border adjustment tax, the idea that formed the core of the House Republican tax agenda until stiff opposition sunk it over the summer.
“Mitigating harm on consumers from the excise tax is our biggest concern with the House plan,” Americans for Prosperity’s Levi Russell says. “We’ve started raising the alarm directly through our lobbying.”
An employee inspects a pallet of Anheuser-Busch InBev aluminum beer cans at the Ball Corp. beverage can manufacturing facility in Findlay, Ohio. (Luke Sharrett/Bloomberg)
Foreign companies with direct investments in the U.S. are also worried. Nancy McLernon, president and CEO of the Organization for International Investment, which represents firms headquartered abroad with operations here, said the provision would chase job-supporting investments to other corners of the globe.
That doesn't seem terribly compatible with Trump's populist agenda of bringing American jobs home.
“It has a disproportionate impact on international companies that have made a really deliberate decision to invest here and employ people,” she said. “And it would disincentivize locating part of a global supply chain in the U.S. because it would subject the entire supply chain to that tax.”
McLernon’s association represents nearly 200 companies — think Anheuser-Busch, GlaxoSmithKline, Siemens, and Unilever — employing 7 million people across the country. She wants the GOP Congress to make changes.
American-based companies with extensive operations abroad are also weighing how to respond. For some, the proposal amounts to a disaster, more than erasing whatever benefits they hoped to gain from a lowered corporate rate and a transition to a territorial tax system. Yet as of Monday, none were ready to speak out publicly — a reticence that involved lobbyists chalked up both to fear of opposing an existential Republican priority and hope that the measure can be fixed in the Senate.
But as introduced late last week, the tax would raise an estimated $155 billion over a decade, a significant sum for Republicans badly in need of revenue to finance their tax-cutting ambitions. With the GOP hewing to an accelerated schedule for wrapping work on the entire package, it will only get harder for private interests to claw back provisions biting their bottom lines.
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Here’s what we know about the mass shooting at a church in Sutherland Springs, Tex. that left 26 people dead and 20 injured. The massacre came amid a “domestic situation” between the alleged gunman, 26-year-old Devin Patrick Kelley, and his family, some of whom attended the First Baptist Church. In suggesting a motive behind the attack, officials pointed to his issues with his relatives, report Eva Ruth Moravec and Mark Berman, noting the gunman sent “threatening texts” to his mother in-law, who was not at church when he opened fire Sunday morning.
Kelley, who was discharged from the Air Force for bad conduct after being convicted for assaulting his then-wife and stepson and serving 12 months in confinement,
should not have been able to buy a gun.
The Air Force “failed to follow policies for alerting federal law enforcement,” about the gunman’s past, our colleague Alex Horton reports. “enabling the former service member... to obtain firearms before the shooting rampage.”
Speaking in Seoul yesterday, President Trump insisted that tougher gun laws would not have prevented the mass shooting. Instead he spoke of a man, Stephen Willeford, who grabbed his own gun and exchanged fire with the gunman outside the church. Trump called Willeford a “brave man” and said “if he had not had a gun, instead of having 26 dead, you would have had hundreds more dead… It’s not going to help,” David Nakamura reports. Read Sen. Chris Murphy’s (D-Conn.) plea here for his colleagues to “think about whether the political support of the gun industry is worth the blood that flows endlessly onto the floors of American churches, elementary schools, movie theaters, and city streets.”
Here’s what we know about the lives lost in Texas. A state official said Monday the victims ranged in age from 18 months to 77 years. And the New York Times wrote about the Holcombes, who lost eight members of their extended family in the shooting.
William Dudley, president and chief executive officer of the Federal Reserve Bank of New York. (Peter Foley/Bloomberg)
Apres Dudley. With William Dudley officially on his way out at the New York Fed, what's it mean for the central bank? Reuters's Jonathan Spicer: "The New York Fed’s board said its search committee had already begun its work, and aims to name a successor by the middle of next year. The announcement, which Reuters reported on Sunday, accelerates a revolution in Fed leadership that could upend its cautious approach to raising interest rates and to shedding some of the $3.5-trillion in bonds purchased to stimulate the economy in the face of the 2007-2009 crisis and recession...
'It clears the deck for a Powell-led Fed,' said Peter Hooper, chief economist at Deutsche Bank Securities. The New York Fed president’s 'bully pulpit is an important one' on both monetary and regulatory policy, he said, adding Trump’s selection of Powell and not a more reform-minded nominee for Fed chair may have allowed Dudley to retire early."
He's not going quietly. NYT's Landon Thomas and Tiffany Hsu: "Only hours after his early retirement was announced, Mr. Dudley delivered a stark public warning against rolling back laws aimed at keeping large banks and Wall Street firms in check — the latest Fed official to voice concerns about a trend toward deregulation under the Trump administration. Mr. Dudley’s pointed comments, while delivered with the care and caution of a seasoned technocrat, come as President Trump looks to remake the Federal Reserve with policymakers who are more in tune with his anti-regulatory mind-set. Last week, he announced that he was nominating Jerome H. Powell to replace Janet L. Yellen as the new Fed chairman...
In his speech on Monday, Mr. Dudley cautioned against making broad changes to the Dodd-Frank Act, the web of rules and regulations put in place in the wake of the 2008 financial crisis to prevent a repeat meltdown. He urged that any alterations be made “with a paring knife, rather than with a meat cleaver.” He specifically counseled against watering down rules that require banks to hold extra capital to absorb unexpected losses."
Williams: Time to change how rates are set. Reuters: "San Francisco Fed President John Williams on Monday laid out a case for an approach to setting U.S. interest rates that, if adopted today, would translate to keeping rates lower for longer in order to give a firmer boost to inflation. Using so-called price-level targeting, either alone or combined with another approach like a higher inflation target, would help stabilize inflation and keep unemployment low not only when interest rates are near zero but also even when they are higher, Williams told reporters ahead of the paper's release. Unlike some well-known monetary policy rules, it works "even if policymakers have a very imperfect understanding of the levels of potential output or other structural changes affecting the economy," he wrote in the paper, published in the bank's latest Economic Letter."> Stocks Rise as Trump Talks Asia Trade; Bonds Gain: Markets Wrap U.S. stocks climbed and bonds advanced, while the dollar slipped as President Donald Trump tried to tackle trade on his Asia tour. A crackdown on corruption in Saudi Arabia sent oil soaring to its highest price in more than two years.
Bloomberg> Dollar sags as U.S. yields slip over tax plan uncertainty The dollar sagged on Tuesday, knocked away from an eight-month highs versus the yen down as Treasury yields slipped on uncertainty over whether the Republicans can pass their tax bill in a timely manner.
MONEY ON THE HILL
House Ways and Means Committee Chairman Kevin Brady (R-Tex.). (Alex Wong/Getty Images)
Modest edits. The Post's Mike DeBonis: "
House Republicans on Monday again rejected President Trump’s push to use their tax bill to repeal a critical piece of the Affordable Care Act, instead making only modest changes to their legislation as they attempt to move it closer to a vote on the House floor...
Brady... offered an amendment that would tweak the way the bill would tax the earnings of investment managers, cross-border transactions by multinational corporations and the endowments of private universities. The amendment did not make other, more costly changes to business taxation or repeal the Affordable Care Act’s insurance mandate, which requires most Americans to obtain some form of health insurance."
Vox has more on Brady's changes, including the text of his amendment, here.
Working class will see a hike. More from Mike: "Thomas A. Barthold, chief of staff of the nonpartisan congressional Joint Committee on Taxation, testified Monday that up to 38 million Americans with annual incomes between $20,000 and $40,000 would, on average, see a tax increase starting in 2023 under the House GOP plan."
Brady: Growth alone won't wipe out deficit. CNBC: "Economic growth generated by GOP tax cuts won't be enough by itself to wipe out the federal budget deficit, top House tax writer Rep. Kevin Brady said Monday on CNBC. 'We know tax reform done right can grow the economy in a big way. But that alone won't get us back to a balanced budget,' said the Texas Republican, chairman of the House Ways and Means Committee. 'You have to eliminate dozens, if not hundreds of provisions out of the code to lower those rates and move us back to a balanced budget.' 'Growth alone, I acknowledge, won't get us back there,' Brady admitted on 'Squawk Box.'
The Trump administration has suggested previously the proposed tax cuts will be paid for entirely through economic growth and the cuts would not increase the budget deficit. Critics counter by saying that Republicans can't count on the economic growth to pay for the tax cuts, and that the GOP package as designed would add to the deficit and put the federal budget further out of balance."
Never mind. The Tax Policy Center had to retract its latest analysis of the House GOP tax bill on Monday after discovering an error in its math. The Post's Heather Long: "Someone familiar with the error who was not authorized to speak publicly said the revised report would likely come to a similar conclusion overall, but that exact numbers of how many Americans are helped and hurt would be different. TPC's now-retracted findings echoed what the nonpartisan Joint Committee on Taxation — the official congressional body that analyzes tax bills — found: that some in the middle class would see a tax increase under the bill."
Some millionaires win, others lose. NYT's Jim Tankersley: "The Republican tax bill picks winners and losers across the income scale, including among millionaires. It is good news for people like President Trump but bad news for professional athletes.
The bill delivers large breaks to high-earning owners of certain businesses, known as pass-through entities, which comprise most of Mr. Trump’s business empire, and to heirs of large estates, such as Mr. Trump’s children. So-called passive owners of businesses like real estate partnerships and hedge funds or even a local landscaping service, the example that Republicans pointed to when unveiling the plan last week, would enjoy the largest tax cut of all individual taxpayers under the bill. In part, that’s because the legislative text includes a carve-out allowing these earners to maintain their state and local income tax deduction — a valuable benefit that all other individual taxpayers could lose under the bill.
millionaires who earn money solely from their high-salaried employment — such as professional athletes — would see their taxes go up if the bill becomes law, because of a steep increase in their personal tax rates."
Some growth, with a housing dent. That's the takeaway from a Bloomberg survey of 33 economists of the tax plan's likely impact. More: "Trump’s planned tax overhaul is likely to boost U.S. economic growth by about a quarter percentage point in 2018, yet it will also dent demand for housing and fail to lower the chances of a recession, according to a Bloomberg News survey. Three-quarters of 33 economists responding from Friday to Monday expect Congress to pass a version of the House tax bill announced last week. Of those expecting passage, all 22 responding predicted some boost from the $1.5 trillion, 10-year proposal, with gains ranging from 0.05 to 0.9 percentage point and a median of 0.28 point."
Lobbying sprint. Politico's Theodoric Meyer: "House Republicans kept their tax bill under wraps for as long as possible to hold back a deluge of lobbyists. After trade groups spent the weekend poring over the details, the flood is on. The release of Republicans’ long-awaited tax bill has sent trade groups representing everything from architects to universities scrambling to secure changes to legislation they fear would harm their industries... 'You basically have this week' to sway the House, said Jerry Howard, the chief executive of the National Association of Home Builders. 'Realistically, the timeframe in the House is narrow, which is why we’re beginning in earnest on the Senate side,' Howard added."
Pence to the Hill today. Politico's Matthew Nussbaum: "Vice President Mike Pence will meet separately with House Majority Whip Steve Scalise and House Republican Conference Chair Cathy McMorris Rodgers on Tuesday as Republicans’ tax reform push kicks into high gear. Pence will also attend the weekly Senate Republican policy luncheon on Tuesday, something of a weekly tradition for him. The Senate is expected to unveil its own tax reform plan on Thursday, the same day House leaders hope to clear the tax bill through the Ways and Means Committee — the first hurdle to getting the bill to President Donald Trump’s desk. The vice president’s visit comes as White House officials huddled separately with both House and Senate tax-writers at the Capitol on Monday, according to a senior administration official."
Dems to the WH. The Post's Ed O'Keefe: "A group of Democratic senators is set to huddle with a top White House official to discuss potential changes to the Republican tax plan Tuesday, according to people familiar with the meeting. Marc Short, the White House director of legislative affairs, and Gary Cohn, director of the National Economic Council, are set to meet at the U.S. Capitol with at least eight Democrats, Sens. Joe Manchin III (W.Va.), Heidi Heitkamp (N.D.), Claire McCaskill (Mo.), Joe Donnelly (Ind.), Jon Tester (Mont.), Ron Wyden (Ore.), Thomas R. Carper (Del.) and Sherrod Brown (Ohio), according to multiple aides who spoke on the condition of anonymity to speak frankly about private meetings.
What, if any, substantive change to the emerging proposals might come out of the meeting is unclear — but
it will allow the White House and these moderate Democrats to claim that they are at least trying to forge bipartisan consensus. The meeting came at the request of Manchin, who spent the last few days organizing the guest list, aides said."
Ivanka, Mnuchin: Regular joes. The pair spent Monday pitching the GOP tax plan as a boon to working families. Are these the administration's most relatable messengers to middle-class voters? Politico's Henry Jackson: "Trump’s daughter and his treasury secretary pressed the case Monday that GOP-led tax legislation is about bringing relief to the middle class, not offering cuts to wealthy Americans. In interviews with Fox News, Ivanka Trump and Treasury Secretary Steve Mnuchin made similar pitches about the legislation, focusing on what they said were benefits to the middle class."
Donald Trump Jr. (AP /Carolyn Kaster)
Trump Jr.'s hint. Bloomberg's Irina Reznik and Henry Meyer: "A Russian lawyer who met with...Trump’s oldest son last year says he indicated that a law targeting Russia could be re-examined if his father won the election and asked her for written evidence that illegal proceeds went to Hillary Clinton’s campaign... Veselnitskaya said she went to the New York meeting to show Trump campaign officials that major Democratic donors had evaded U.S. taxes and to lobby against the so-called Magnitsky law that punishes Russian officials for the murder of a Russian tax accountant who accused the Kremlin of corruption. 'Looking ahead, if we come to power, we can return to this issue and think what to do about it,’' Trump Jr. said of the 2012 law, she recalled. 'I understand our side may have messed up, but it’ll take a long time to get to the bottom of it,' he added, according to her."
A "private conversation." From The Post's NatSec team: "Carter Page, a foreign policy adviser to President Trump’s campaign whose visit to Moscow during the election has drawn scrutiny, sent an email to fellow Trump aides during his trip describing “a private conversation” with a senior Russian official who spoke favorably of the Republican candidate, according to records released late Monday by congressional investigators. Page also wrote that he had been provided “incredible insights and outreach” by Russian lawmakers and “senior members” of Russian President Vladimir Putin’s administration during the trip. The email appeared to contradict earlier statements by Page, who had said he had only exchanged brief greetings with the senior Russian official, Deputy Prime Minister Arkady Dvorkovich, after he delivered a speech at a Russian university."
Russian from the start. WSJ's Mark Maremont and Rob Barry: "Kremlin-backed support for Donald Trump’s candidacy over social media began much earlier than previously known, a new analysis of Twitter data shows. Russian Twitter accounts posing as Americans began lavishing praise on Mr. Trump and attacking his rivals within weeks after he announced his bid for the presidency in June 2015, according to the analysis by The Wall Street Journal."
Dems: Investigate Ross. The Post's Karoun Demirjian: "Several Senate Democrats are calling for new hearings and an inspector general’s investigation into Commerce Secretary Wilbur Ross after a trove of leaked documents showed he has interests in a company with ties to Russian President Vladimir Putin’s son-in-law. The calls from Democratic members of the Senate Commerce Committee were prompted by reports detailing how shipping company Navigator Holdings, in which Ross holds a stake, did business with Russian energy company Sibur, which is partially owned by Putin’s son-in-law Kiril Shamalov and Russian oligarch Gennady Timchenko, Putin’s close friend."
Ross, meanwhile, signals he will probably sell his stake in the company. NYT: "In an interview with Bloomberg, Mr. Ross said that he would 'probably not' keep his Navigator investment, but that it did not pose a conflict of interest. He also defended Navigator’s business dealings with Sibur, saying there was 'nothing whatsoever wrong with it.'"
Justin Trudeau, Canada's prime minister, center, arrives to deliver a speech at the Senate of the Republic in Mexico City last month. (Brett Gundlock/Bloomberg)
NAFTA talks head south. Reuters: "U.S., Mexican and Canadian officials will kick off some of the next round of talks to rework the North American Free Trade Agreement slightly ahead of schedule on Nov. 15, four officials familiar with the process said on Monday. The fifth round of NAFTA negotiations is due to be held between Nov. 17 -21 in Mexico City. However, some groups from the three nations will begin meeting from Nov. 15, the four officials said, speaking on condition of anonymity. 'Some topics that will likely be discussed during those days include textiles, services, labor, and intellectual property. It’s very possible other topics will be added,' one of the officials said."
POCKET CHANGE> After a Tax Crackdown, Apple Found a New Shelter for Its Profits The tech giant has found a tax haven in the island of Jersey, leaving billions of dollars untouched by the United States, leaked documents reveal.
NYT> 21st Century Fox has been holding talks to sell most of the company to Disney: Sources Disney would not purchase all of Fox, according to people with knowledge of the talks.The company could not own two broadcast networks and would therefore not buy the Fox broadcast network. It would not buy Fox's sports programming assets.
CNBC> Sprint Gears Up for Battle After T-Mobile Merger Talks Collapse Sprint Corp.’s lifeboat sailed away, and now it’ll sink or swim on its own. With deal talks with T-Mobile US Inc. officially over, Sprint can’t count on a big merger to take care of its troubles.
Scrapping another Obama-era rule. The House votes today on a bill to reverse a ruling from the National Labor Relations Board that made employers subject to liability if their subcontractors violated labor law. The Hill's Lydia Wheeler: "Business groups have been fighting to change that definition [since 2015], claiming it blurred the lines of responsibility in disputes over working conditions, wages and work they have no control over. Franchisors in particular fought hard against the rule, claiming it threatened their business model."> U.S. Treasury’s First Director of Office of Financial Research to Leave Post Economist Richard Berner plans to leave his post as the Treasury Department’s first-ever director of the Office of Financial Research at the end of the year.
From The Post's Philip Bump: "Virginia's economy is doing well, despite Trump's get-out-the-vote pitch:">
POST PROGRAMMING: The Post and Live Nation will bring the “Can He Do That?” podcast to a live audience at the Warner Theatre today. In this live taping, political reporters Bob Woodward, David Fahrenthold and Karen Tumulty will join host Allison Michaels to review the past year in President Trump’s White House and the biggest moments that made people wonder “Can He Do That?” Tickets can be purchased now at Live Nation. Attendees will also receive a free 30-day digital subscription to The Washington Post.
- Federal Reserve Chair Janet Yellen and former Chair Ben Bernanke honored with the Paul H. Douglas Award for Ethics in Government.
- The Urban Institute-Brookings Institution’s Tax Policy Center holds an discussion featuring Sen. Ron Wyden (D-Ore.).
- The Small Business Subcommittee on Agriculture, Energy and Trade will hold a hearing on investing in small businesses.
- The House Financial Services Subcommittee on Housing and Insurance holds a hearing on sustainable housing finance.
- The House Financial Services Subcommittee on Monetary Policy and Trade holds a hearing on “Examining Federal Reserve Reform Proposals.”
- The Senate Banking, Housing and Urban Affairs Committee holds an executive session to consider the Banking Restrictions Involving North Korea Act of 2017.
- The Washington Examiner holds an event on the tax reform bill with House Speaker Paul D. Ryan (R-Wis.) on
- The House Financial Services Subcommittee on Monetary Policy and Trade holds a hearing on “Administration Priorities for the International Financial Institutions” on
- The Professional Risk Managers’ International Association holds an event on redefining financial services regulation on
- The House Financial Services Subcommittee on Terrorism and Illicit Finance holds a hearing on “Treasury’s Role in Safeguarding the American Financial System” on
- The Peterson Institute for International Economics holds an event on the policy implications of sustained low productivity growth on
- The House Financial Services Subcommittee on Housing and Insurance holds a hearing on “The Role of Ginnie Mae in the Housing Finance System” on
The Post's Tom Toles on President Trump's response to the mass shooting in Texas:>
The nine talking points that are repeated after every mass shooting:
What you need to know about semi-automatic rifles like the AR-15:
Stephen Colbert responds to the Texas shooting:
Seth Meyers takes a closer look at the Russia investigation that's escalating as President Trump travels in Asia:
Source : https://www.washingtonpost.com/news/powerpost/paloma/the-finance-202/2017/11/07/the-finance-202-surprise-tax-in-house-gop-plan-roils-global-giants/5a00edbb30fb0468e765418d/