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Speaker Paul Ryan tries to save 'crown jewel' of GOP agenda: Tax reform

  • House Speaker Paul Ryan warned Tuesday against watering down the sweeping overhaul of the nation's tax code he laid out a year ago.
  • Ryan called for tax reform by the end of 2017.
  • But conceded that a border adjustment tax will need to be reworked.
House Speaker Paul Ryan of Wis., speaks during the National Association of Manufacturers (NAM) 2017 Manufacturing Summit in Washington, Tuesday, June 20, 2017.
Carolyn Kaster | AP
House Speaker Paul Ryan of Wis., speaks during the National Association of Manufacturers (NAM) 2017 Manufacturing Summit in Washington, Tuesday, June 20, 2017.

House Speaker Paul Ryan is warning against watering down the sweeping overhaul of the nation's tax code he laid out a year ago and calling on Washington to enact permanent reforms this year.

Tuesday's speech is intended to mark the start of Ryan's concerted campaign for what an aide called the "crown jewel" of the GOP agenda amid the turmoil engulfing the White House and growing skepticism of lawmakers' ability to reach consensus on the details of a plan.

The speaker, often deemed a policy wonk, did not delve into the weeds or defend the controversial border adjustment tax. Instead, he focused on framing reform as the key to bolstering economic growth and restoring confidence among households and businesses.

"I am here to tell you: We are going to get this done in 2017," Ryan said. "You know why we're going to get this done in 2017? Because we have to get this done in 2017. ... Transformational tax reform can be done, and we are moving ahead. Full speed ahead."

Ryan delivered his remarks in Washington at a conference held by the National Association of Manufacturers. Among the principles he outlined: permanent rather than temporary changes and comprehensive reform for individuals and businesses.

He also pushed for adoption of a territorial tax system for multinational corporations. Currently, the United States is one of only a handful of countries that tax businesses on worldwide earnings once they are brought back into the country — encouraging companies to shift their headquarters and profits overseas.

"We are actually very unique in the world in the way we discourage capital from coming back to America and how we incentivize off-shoring jobs," Ryan said in his prepared speech. "This is not the kind of exceptionalism we should aspire to. … We must think differently, so that once again we make things here and export them around the world."

The tax plan Ryan unveiled a year ago tried to address that problem by allowing companies to deduct the cost of goods made in America. The measure, which became known as the border adjustment tax, would have raised the cost of imports but lowered the cost of exports, and it faced stiff opposition from retailers.

Ryan conceded Tuesday that his plan lacks support within the White House. But he doubled down on the need to move to a territorial system.

Since Republicans took control of Washington, however, the hurdles to tax reform have grown higher. Lawmakers are still mired in debate over repealing and replacing the Affordable Care Act, commonly known as Obamacare. They must vote on that bill before they can move on to approving a 2018 budget that would open the door to tackling tax reform. In addition, lawmakers are facing a September deadline for raising the nation's borrowing limit, which is another potentially bruising and time-consuming fight.

But the biggest obstacle could prove to be the White House, which has been engulfed by investigations into senior officials' ties to Russia that have consumed Washington.

"Political setbacks, a lack of consensus on policy priorities, the distraction of fiscal deadlines, and the prolonged consideration of health legislation have delayed consideration of tax reform and diminished expectations of major policy changes more generally," a Goldman Sachs note earlier this month said.

Still, the investment bank remained optimistic about the potential for a tax package to be enacted, though likely not this year. Goldman also downgraded its estimate for the size of any tax cuts to $1 trillion over the next decade. IHS Markit also dialed back its expectations this month for how far Republicans will cut the corporate tax rate: from 20 percent as Ryan has proposed to 25 percent.

"If the current political turmoil were to escalate into a full-blown crisis, then the chances of any tax stimulus or reforms being implemented would diminish considerably," IHS Markit chief economist Nariman Behravesh wrote in a research note.

The White House is also working on a more detailed tax proposal than the one-page outline unveiled in April. On Monday, senior administration officials emphasized during a meeting with the financial services industry that they intended to unveil their plan in late summer or early fall, according to two people familiar with the discussions. Ryan and other members of Republican leadership have met with Treasury Secretary Steven Mnuchin and National Economic Council Director Gary Cohn three times to discuss the framework.