Rep. Brady pushes U.S. business growth in defense of tax plan

WASHINGTON -- Chief Republican tax writer Rep. Kevin Brady defended the Republicans' recently announced tax reform plan, saying high taxes have left Americans at an unfair disadvantage in the global economy.

The Texas Republican, who heads the House Ways and Means Committee, argued for an "America first" tax policy, unveiled Wednesday by President Donald Trump, of lower individual tax rates, a repatriation holiday for overseas earnings and various provisions to make small businesses more competitive.

"Less American-made products are hitting the market, and more of our jobs are getting shipped overseas," Brady said Thursday.

The plan, which seeks to simplify the tax code by moving to three income tax brackets from seven, would raise the lowest rate to 12 percent from 10 percent for the first $9,325 an individual earns.

Democrats have said the GOP tax reform proposal would punish poor Americans, but Brady told an audience at the conservative Heritage Foundation that Democrats were being dishonest.

"Really, the 10 percent bracket today goes to 0 percent," said Brady, citing a larger child tax credit and an increased standard deduction for low-income earners.

Some analysts said it was too soon to tell if that were true.

"We don't even know where the brackets are breaking, so we can't yet have a serious conversation," Howard Gleckman, senior fellow at the Urban-Brookings Tax Policy Center, said in an interview. "All we can say is, 'It depends.' But I suspect when it all washes out, low-income Americans will be paying about the same thing they do now."

The GOP proposal would reduce rates for the highest earners, which Republicans such as Brady argued would be revenue-neutral by growing the economy. Democrats and some analysts disagreed.

"These deficits that are created by tax cuts at the high end do not pay for themselves," House Democratic leader Nancy Pelosi said Wednesday. "That notion is not true; it's nonsense."

Brendan Duke, tax policy analyst at the left-leaning Center on Budget and Policy Priorities, agreed.

"The relationship between tax cuts and economic growth isn't that strong," he said. "The fact that they think this can generate $1.5 trillion in growth while there are still so many question marks says it all -- it's not a credible figure."

Brady's nationalist appeal extended to his push for U.S. companies to bring their overseas cash back to the United States.

"Unlike all our international competitors, America still forces its businesses to pay up on what they earn overseas," Brady said. "It's past time we move to a 21st century tax system that encourages our businesses to invest right here at home."

Currently, American corporations that repatriate their earnings receive a foreign tax credit to offset the portion of U.S. taxes that the corporation otherwise would have had to pay. A corporation in the 35 percent tax bracket that repatriates $1 million but already paid $200,000 in taxes would owe an additional $150,000 to the United States. Under the Republicans' plan, corporations could avoid this through a one-time tax holiday to bring money home, as well as a permanent corporate tax reduction to 20 percent.

"Our nation can't be globally competitive unless our businesses can compete anywhere in the world," he said.

However, repatriated profits would not necessarily be spent on capital investment.

"When you look at the amount of money U.S.-based companies are already sitting on, they're not investing that," said Gleckman. "So we have no reason to believe that they'd invest repatriated earnings, too."

If Republicans are able to pass a budget, they would be able to use a process called budget reconciliation to pass tax legislation with 51 votes in the Senate, bypassing the need to get 60 votes to break an inevitable Democratic filibuster. Brady said the party was up to the task.

"I'm confident we'll have tax reform on President Trump's desk by the end of the year," he said.