Ways and Means Chair Kevin Brady joined me this morning to discuss the status of the tax bill:
HH: I’m pleased to begin this hour with one of our very favorite guests, Congressman Kevin Brady from the great state of Texas, who is chairman of the House Ways and Means Committee. He’s going to have an incredibly busy week, and I appreciate the time this morning. And Congressman, I’m genuinely sorry that the few times you’ve joined me over the last few months have been, the background have been so much tragedy and suffering in Texas. It just doesn’t stop.
KB: I know. I know. It is, this is the one, all of them are so hard, and here is, it’s hard to describe just the one family who lost eight members of their family, just the dozen or so who are still fighting for their lives. This is just hard to comprehend this much evil and the damage it’s done. So it is, yeah, this is just, the state, I think the whole country is mourning right now.
HH: Yeah, three hurricanes, one terrible fire in California, the Las Vegas massacre, the Sutherland Springs massacre, and the terrorism truck driver in New York, and that’s in two months.
KB: Yeah, I know.
HH: It’s crazy, but you have a job to do, and it’s at the Ways and Means this week, and I very much appreciate you coming back as you told me you would after the bill…
KB: No, no, glad to, Hugh.
HH: Let’s start with, I have a piece in the Washington Post about raising revenue, like getting the gas tax up and a delivery fee. But the key is the Obamacare mandate. And last week, you told me you didn’t think that was going to happen. Has the ground shifted on that, the repeal of the Obamacare mandate?
KB: Well, yeah, not necessarily, but in this sense. So as we talked, you know, I’ve asked for an updated score so I know exactly what that provision would raise. We’re listening to our members here in the House about how they’d react to that. And so I’ve been asked to consider it. We are doing exactly that. But in the meantime, what we’re doing is we are moving forward with a tax bill, look, that cuts taxes on an average family of $59,000, you know, by $1,200 dollars a month, and even more for others. And so yeah, this is, all this is incredibly important.
HH: You meant $1,200 dollars a year, didn’t you, Congressman?
KB: Yes, sir.
HH: Yeah, okay. So let’s go through the biggest objections. The home mortgage interest deduction for a year, the Speaker and others told me that that was not going to be in the plan. But in fact, you cap it at half a million bucks, which will have the effect of incentivizing people staying in their home with larger mortgages, which will at a minimum reduce supply. It’s a perverse incentive to stay when you might move. Is there a chance that one’s going to evolve?
KB: Well, so I see it differently, because one, about 95% of Americans have mortgages smaller than the half a million dollars. And this keeps all the existing mortgages in place. So where you’re at in your home and all that, we’re able to do that. Secondly, so we do restore the property tax deduction up to $10,000. That’s twice the national average. That, we think is important. But here at the end of the day, you know this in California and across the world, you know, you get home values up, you get more sales, you get better prices when the economy is stronger. And we’ve seen for the last ten years how damaging that’s been. So this tax plan is all about getting growth going. That is good for home builders. It’s good for home owners like you and me.
HH: Well, it certainly is good to get the economy going, but it does create some really unusual incentives for people with mortgages larger than a half million to stay in their house, which creates a supply problem at the top, which trickles down to a supply problem at the bottom of the housing, it’s all one housing market. We all know that.
KB: Yeah, yeah…
HH: And so…
KB: I will just say, my only point, Hugh, here is that you know, we’ve looked over the last 50 years in home prices, home sales, home values go up when you have a strong economy. The other thing, Hugh, I appreciate you writing that editorial. It’s really helpful to have you stepping out, talking about these bold ideas. But yesterday, I think the biggest news was this liberal tax policy center having to abandon their analysis because they got it wrong. I mean, here’s the group that put out an analysis before there was a tax bill. Then they put out their grand analysis, and said oops, we got that one wrong, too. So it’s really, it illustrates just how far some of these “non-partisan” groups will go basically to stop any tax cuts.
HH: Has there been any discussion of a delivery fee, Congressman Brady, because it just seems to me that the new economy is really booming on the backs of the old infrastructure for which built largely out of sale tax at the local level which they don’t pay, but this is a delivery fee for using that infrastructure.
KB: Yeah, so no, sir, there has not. In fact, that’s been one of the first times I’ve heard it when I read your op-ed. And so that is obviously a new idea of where we are, of those three items you talked about. The area that we are looking at carefully to try to determine how it fits is the individual mandate and getting rid of it.
HH: All right, let’s talk about the criticisms so that I can air them out. The adoption tax credit is of deep, symbolic and real value to the pro-family movement in the United States. Will it be returned?
KB: So to be determined, and here’s why. I’m an adoptive dad of two kids as well. We know how important this is. But it doesn’t help a lot of families, and under a simple tax code where only one out of ten people will itemize, my worry is that even fewer Americans, especially those who adopt through their church or who adopt locally rather than the expensive international, I worry about them being left behind. So we’re going to have the discussion in the Ways and Means Committee, and with Republicans on do we want to stick with the old credit, which leaves fewer and fewer people behind, and helps one time in your life, or do we go with the tax cuts that provide about $2,000 dollars a year, and the new family credit that helps you with your child every year of their life? And so this really is a debate between the old approach and a newer approach that can help more people.
HH: So it is on the table, though, and being discussed?
KB: We’re having, absolutely we’re having these discussions. For me as a pro-life dad and my wife as a pro-life mom, we understand, look, we understand the joys of adoption, because we have a family where none existed before.
HH: There’s also a growing small rebellion among faculty members at colleges in the United States who have always received tuition waivers for their children. It makes them possible for their kids to attend college for a reduced or no fee whatsoever either in the consortium of colleges that exist or at their home college. And the argument I’ve heard that is most persuasive is that if you’re going to end that, you ought to end that in four years, because a lot of kids made decisions on where to attend college based upon an incentive that will not be there, and that it’s just genuinely unjust to them. How do you respond to that, Congressman?
KB: You know, I think it is important to have these transition rules. At the end of the day, as you can tell, what we’re doing is we’re taking provisions that affect some, which can be very good, and instead we’re eliminating those and lowering rates for everybody, including those kids who don’t get help because their folks don’t work at that college. And so we’re really trying to shift more tax relief to more families so they can decide how best to use it, but of course, we’re always open to transition periods that smooth that to a simpler, fairer, it’s a much fairer tax system.
HH: Well, a transition rule on the college thing, I think, saves, makes it very easy for people to swallow, not easy, but easier.
HH: Finally, state and local taxes. I got an email last night from one of my law partners. He’s a Republican. Because LLP’s are eliminated, and you’re taking away the California income tax, he said I’m done with this bill. I’ve got to do everything I can to beat it. LLP’s don’t get the subchapter S advantages that many businesses do, and he’s going to end up paying, you know, the California rate on top of it. Is there a transition being talked about for the state and local income tax deduction elimination?
KB: So not at this time, there isn’t, but I just want to be aware for all pass-through’s, including partnerships, you know, there’s two ways to get tax relief here. One is they don’t get it through the wage type of split. But if they show that they have capital, they own their building, they’re acting like business owner/operators, they do receive tax relief in the small business area. In fact, we’re putting about a half trillion dollars toward helping our small businesses get tax relief, compete and win. And so I think he should look a little deeper into this, because I think he may see tax relief as well, because I know in California, we’re showing tax relief all throughout the state.
HH: There’s an article in the Weekly Standard today by Matt Labash, who is a 25% maximum rate payer. He hates your bill, because he thinks he’s losing all of his deductions. I don’t know if you’ve had a chance to read it, yet. I just send you there. Let’s conclude, Congressman…
KB: Yeah, I tell you what, that person is exactly who we’re focused on providing tax relief to, and so yes, please send that to me. I’d love to see it.
HH: All right, let’s close by talking about schedule, because if this thing’s going to go, it’s got to go quick because of political realities. What’s the markup look like? When do you expect to get it to the Senate?
KB: Yeah, so we’ll conclude this markup after four full days of debate and open discussion, send it to the floor next week, and the Senate begins their process as well. So we’re still on a timetable for getting it to the President’s desk by the end of the year.
HH: So whatever comes out of Ways and Means is not going to be subject to amendment on the floor of the House. Am I correct?
KB: Not on the floor of the House, but we’ll work to continue to improve it at every step, including as we send it to the House floor.
HH: And so how big is Ways and Means? I want Democrats to understand Democrats can offer committee ideas. This is not a closed system. This is regular order.
KB: Absolutely. Absolutely, and we expect dozens and dozens and dozens of amendments starting here in about an hour. And so Hugh, I’ve got to go if you don’t mind.
HH: All right. I appreciate you taking the time. Good luck and God speed, Congressman.
HH: I appreciate it very much.
End of interview.