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The Finance 202: Is the GOP really backing off tax cuts for the rich? We’ll see. – Washington Post

THE TICKER

To hear some on the left tell it, the GOP coalition in the Trump era remains glued together, barely, by the hope of securing tax cuts for the rich. In a year when Republicans can’t agree on much else, this line of criticism goes, easing the wealthy’s burden remains a rare, unifying ambition.

So it was a surprise to learn Tuesday that the White House is considering some potentially serious changes to its approach to taxes, including scaling back proposed cuts for the wealthy. My colleagues Damian Paletta and Mike DeBonis have the scoop, reporting that the administration is looking at preserving the top income tax rate of 39.6 percent for individuals and giving up on a push to repeal the estate tax, which is levied on the estates of individuals who die with more than $5.49 million.

Republicans spent months this year arguing that cutting taxes for those at the top of the economic ladder would fuel growth by encouraging them to invest and hire. And they demonstrated their commitment to the argument through their approach to policymaking. To recap: 

  • The party spent the opening months of the year on an Obamacare overhaul drive that would have scotched the law’s investment income tax, 90 percent of which is borne by the top 1 percent of earners. 
  • The Trump administration’s April framework for a tax code rewrite was “highly regressive,” with 40 percent of the benefits accruing to the top 1 percent, a Tax Policy Center analysis found
  • Treasury Secretary Steven Mnuchin this spring rejected an attempt by Sen. Ron Wyden (D-Ore.) to hold him, and thereby the administration, to a commitment that an overhaul wouldn’t cut taxes on the rich. 
  • Neither would House Ways and Means Chairman Kevin Brady (R-Tex.) rule out breaks for the wealthiest percentile, telling Bloomberg News in an August interview that the overhaul is “all about growth.”
  • And Senate Majority Leader Mitch McConnell (R-Ky.) has identified the Democratic insistence that an overhaul not cut taxes for the top 1 percent as a key dealbreaker for bipartisan cooperation. 

Given all that, skeptics could reasonably respon by asking Republicans to prove it. As with everything else in this debate, ultimately only the numbers matter. So when Senate Finance Committee Chairman Orrin G. Hatch (R-Utah) says that the plan as it stands is “basically not cutting taxes very much for the wealthy,” the definitions of “basically” and “not very much” become highly relevant.  

Wyden, for one, said it is “just absurd” to think the Trump tax plan won’t end up benefiting the richest: “In virtually all this stuff where they go out, they use the presidential megaphone to say this will be for the middle class, it won’t be for the wealthy. But then people like me start going through the fine print, and all you do is see are these big gifts to the rich and few,” Damian and Mike report. Trump last week told reporters that taxes on the wealthy will remain “pretty much where they are,” and “if they have to go higher, they’ll go higher, frankly.”

Rep. Tom Reed (R-N.Y.), who was sitting to the president’s left as he made the comments in a bipartisan meeting at the White House, heard Trump’s comments as a call for bipartisanship. “It sends the message to the other side, he’s willing to take on a hard issue that from our perspective is something which is kind of a litmus test,” Reed told reporters later that day, according to Damian and Mike.

But on the Hill, where the sausage gets made, Republicans are forging ahead with a plan to cut Democrats out of the process. Senate Republcans made a breakthrough Tuesday in doing just that. Sens. Pat Toomey (R-Pa.) and Bob Corker (R-Tenn.) — who represent the GOP poles on the Senate Budget Committee between maximizing tax cuts and minimizing the deficit — struck a deal on a budget resolution that would allow Republicans to pass a tax bill with a bare majority. 

Toomey has backed slashing tax collections by as much as $1.5 trillion over a decade. Corker said he wants the measure to pay for itself. In announcing their deal, they didn’t name the target number on which they compromised.

Where they settled, and whether it sticks, could go a long way toward determining how much Republicans may end up handing out to the wealthiest. 
 

FED CENTRAL:

The unwinding begins. The Fed is expected to announce today it will begin reversing the easy-money policies its used to prop up the economy since the financial crisis. “What comes next is anyone’s guess,” The Wall Street Journal’s Daniel Kruger, Akane Otani and Chelsey Dulaney write. “Many investors are taking the expected Fed action as a vote of confidence that the economy can grow without persistent support. They add that the Fed has signaled its intentions clearly enough that a disorderly debt-market decline similar to the 2013 ‘taper tantrum’ appears unlikely. Yet U.S. government debt prices have fallen for six-straight days, pushing up the yield for the benchmark 10-year U.S. Treasury note to 2.230% on Monday. Bond yields rise as prices fall.”

Officials will release their quarterly economic projections at 2 p.m. and Yellen holds a press conference at 2:30 p.m.. 

— The Wall Street Journal’s David Harrison on what to watch

Markets remained largely calm on Tuesday — even as President Trump threatened to “totally destroy” North Korea in his speech to the United Nations General Assembly — as investors waited for the Wednesday action from the Fed. 

TAX FLY-AROUND: 

Big Six back off 15 percent corporate rate. The lead tax negotiators may finally be willing to acknowledge the blindingly obvious: A 15 percent corporate rate ain’t happenning. “Instead, a new announcement with fresh tax reform details expected next week will likely point toward a top corporate rate of 20 percent or lower, these people said,” Politico’s Ben White and Josh Dawsey:write. “They added that the announcement is also likely to move away from the idea of allowing businesses to immediately deduct the cost of new capital investments from their taxes.”

Freedom Caucus leaders in WSJ op-ed: We need details. “The House Freedom Caucus will gladly start the process if we are confident the tax plan will actually cut taxes for families, simplify the code and create jobs” Reps. Mark Meadows (R-N.C.) and Jim Jordan (R-Ohio) write. “We will gladly pass the budget when basic questions are answered: What are the personal rates? What’s the corporate rate? What’s the repatriation rate? How are small businesses treated? The biggest question: Why the reluctance to show the American people the plan? Is the bill being written behind closed doors because it will only help the connected class and their high-paid consultants?”

CEOs warn failure will crimp hiring. The Wall Street Journal’s Sharon Nunn: “Leaders of the U.S.’s largest companies plan to ramp up hiring in the coming months, as management teams eye regulatory rollbacks and the possibility of a tax overhaul… ‘They will hire less. They will invest less than they currently have planned on the books,’ [Business Roundtable president and CEO Josh] Bolten said. ‘So there’s a big opportunity on the table here for the administration and Congress. There’s also a risk to the economy if they fail to get tax reform done in a timely fashion.'”

Health-care Hail Mary would keep Obamacare’s biggest taxes. Bloomberg’s Sahil Kapur writes that the Graham-Cassidy bill uses them to fund block grants to states: “The new repeal bill would keep levies on top earners — a 3.8 percent tax on net investment income and a 0.9 percent Medicare surtax for individuals earning more than $200,000 or couples above $250,000. It would also preserve a tax on health insurers. Each of those levies would raise more than $100 billion in revenue over a decade, according to the nonpartisan Congressional Budget Office. But the bill would repeal three smaller taxes: a 2.3 percent sales tax on medical devices, a tax on over-the-counter medication and levies on contributions to health savings accounts.”

EQUIFAX FALLOUT:

Massachusetts AG sues. The Wall Street Journal’s AnnaMaria Andriotis: “Massachusetts Attorney General Maura Healey filed a lawsuit against Equifax on Tuesday over the company’s failure to protect consumers’ personal information, the first official enforcement action brought against the hacked credit-reporting company. The complaint, filed in Suffolk Superior Court, alleges Equifax violated Massachusetts consumer protection and data privacy laws due to the massive breach that exposed vital personal information of potentially 143 million Americans. The attorney general alleges that nearly three million Massachusetts residents’ personal information was potentially compromised by the hack.”

It’s likely to be the first of many: “Dozens of attorneys general from other states, including Pennsylvania, New York, Illinois and Connecticut, have asked Equifax for information about the hack and its response. The Federal Trade Commission and Federal Bureau of Investigation are investigating as well.”

— Equifax lobbied to limit its liability. The Post’s Renae Merle and Hamza Shaban: “Before Equifax discovered a massive computer breach that exposed sensitive information about millions of Americans, the company lobbied Congress on legislation to limit how much it could be forced to pay if sued by consumers, and it pressed lawmakers to roll back the powers of its regulators. Since at least 2015, the credit reporting agency has repeatedly lobbied lawmakers on issues related to ‘data security and breach notification,’ according to federal disclosure forms.”

The company is giving consumers the runaround. The Post’s Michelle Singletary tried to sign up for the free credit monitoring that Equifax is offering in the wake of its data breach. “I was told it could take up to 72 hours,” she writes. “Six days and counting and I’ve still not received a link. I checked and double-checked my spam folder. Nothing. And I’m not alone.”

 

RUSSIA WATCH: 

Trump tapping RNC funds for legal bills. “The Republican National Committee is using a pool of money stockpiled for election recounts and other legal matters to pay for President Trump’s ballooning lawyer fees related to the multiple Russia investigations, directing more than $230,000 to his attorneys in August alone, party officials confirmed Tuesday,” The Post’s Matea Gold writes. “The RNC will report a payment of $100,000 to Trump’s personal attorney John Dowd and a payment of $131,250 to Jay Sekulow, another member of his legal team, in a Federal Election Commission report set to be filed Wednesday.”

Senate intel panel cancels Cohen interview. The Post’s Karoun Demirjian and Rosalind S. Helderman: “Michael Cohen, a close associate of President Trump and former lawyer for his business, has agreed to speak to the Senate Intelligence Committee for a public hearing next month, after investigators abruptly canceled a private Tuesday session with him. The Oct. 25 hearing is part of the committee’s ongoing investigation into Russia’s interference in the 2016 election, and it came together just hours after committee investigators dismissed Cohen from the private interview… In a joint statement, committee Chairman Richard Burr (R-N.C.), and ranking Democrat Mark R. Warner (Va.) said the session was canceled because Cohen made public statements before his interview ‘in spite of the Committee’s requests that he refrain from public comment.'”

Another cabinet secretary who prefers flying private. As if Treasury Secretary Steven Mnuchin’s misadventures in private travel weren’t enough of a headache for the administration, here comes Health and Human Services Secretary Tom Price, who just last week “took private jets on five separate flights for official business, at a cost of tens of thousands of dollars more than commercial travel,”  Politico’s Dan Diamond and Rachana Pradhan report.

Those flights included a trip all the way from Washington, D.C. to… wait for it… Philadelphia: “The secretary’s five flights, which were scheduled between Sept. 13 and Sept. 15, took him to a resort in Maine where he participated in a Q&A discussion with a health care industry CEO, and to community health centers in New Hampshire and Pennsylvania, according to internal HHS documents… Price, a frequent critic of federal spending who has been developing a plan for department-wide cost savings, declined to comment.”

CFPB could have fined Wells $10 billion. “A consumer regulator calculated it could have pursued a $10 billion penalty against Wells Fargo WFC 1.23% & Co. over its sales practices scandal before settling on a much smaller fine, according to government documents released by House Republicans on Tuesday,” The Wall Street Journal’s Yuka Hayashi and Emily Glazer write. “A July 2016 memo written by Consumer Financial Protection Bureau lawyers also said the bank had fired or disciplined around 10,000 employees related to its sales practices scandal, far higher than previously disclosed. The internal CFPB memo was written two months before regulators took action against Wells Fargo.”

Warren renews call for Fed to remove Wells board. Sen. Elizabeth Warren (D-Mass.) turned up on CNBC’s “Mad Money” with Jim Cramer, of all places, to call again for the Fed to step in. “This is the Fed’s chance to step up and say, ‘When you cheat consumers, when you open fake accounts, when you force place insurance on them that they don’t need, when you charge them money that they don’t owe, then we, the Federal Reserve, are going to say, those who are in charge, those who are responsible are gone. We can’t trust you to run a company of this size,'” she said. “I really want to see the Fed step here. The Fed has to power to do it. They just need to step up and do it.”

From The Post’s Philip Bump: “For the first time, Trump’s approval rating has increased for three weeks in a row.”

Coming Up

  • The Federalist Society holds an event on funding the government on Friday.

  • The American Enterprise Institute holds an event on  how extreme monetary policy has changed the banking system on October 10.

From The Post’s Tom Toles: “President Trump explains responsibility to the United Nations”

Watch highlights from President Trump’s speech at the U.N. in 4 minutes:

Jon Huntsman says there’s “no question” Russia meddled in the presidential election:

Stephen Colbert gave Hillary Clinton a “cheeky” endorsement:

And Jimmy Kimmel slammed Sen. Bill Cassidy (R-La.) for failing to ensure his bill met the Jimmy Kimmel test:

The Finance 202: Is the GOP really backing off tax cuts for the rich? We’ll see. – Washington Post}

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