The House Ways and Means Committee held its first hearing on its tax reform proposal this week. But this step forward for the GOP’s legislative agenda was overshadowed by the media storm surrounding the Trump Administration, its supposed ties to Russia and the President’s firing of the FBI Director. There was also growing concern expressed in the media and in K street circles that the “drama” at the White House would slow down all legislative action, including tax reform.
The four-hour hearing focused on the economy and job creation. The members and five witnesses were aligned on the need for permanent tax reform that doesn’t add to the deficit. The witnesses all called for permanent, sweeping tax reform instead of 10-year tax cuts—a goal many committee members on both sides of the aisle, and leaders in the House and Senate, have been calling for.
The hurdle to permanent tax reform is finding a way to pay for the tax cuts. The White House has prioritized tax cuts over deficit-neutral tax reform, and their one-page plan would likely add trillions to the budget gap over the long term. However, their plan does not include a border adjustment tax (BAT) or other alternatives that can offset the tax cuts. Because of the Senate’s strict rules for budget reconciliation, Republicans would need to make their tax bill temporary if it will add to long-term deficits.
One witness took issue with the House GOP tax plan on the provision that ends interest deductibility. He argued that lawmakers would need to use “reasonable transition rules” if they did so. On this issue, some members of the Senate object to this method and Secretary Mnuchin has recently said that the White House is considering keeping the deductibility as is.
Some Republicans on the Committee were hoping to hear some openness about tax reform from their Democratic colleagues at the hearing. Instead, they only heard concerns about witnesses not including more small businesses, minorities and the middle class. Bringing a panel that was mostly made up of officials from large companies won’t help lawmakers make decisions that help the middle class, they said. In response, Chairman Brady (R-TX) said Democrats are allowed to pick one witness for each panel. Ways and Means ranking member Richard E. Neal (D-MA) said he will raise the issue that Democrats should get about 45 percent of the witness representation, since that’s the breakdown of the committee.
The committee is set to hold a hearing on May 23 regarding the controversial border adjustment provision-. During this week’s hearing, protestors held up signs outside the building in protest of the border adjustment provision. Major interest groups concerned about the BAT’s impact on imports of oil to refineries and retail goods announced multimillion-dollar campaigns to oppose the BAT, but support tax cuts. If lawmakers can’t agree to border adjustment, or an alternative, which is the revenue raiser for the House tax reform package, they may need to resort to a set of tax cuts instead.
Despite these initial hiccups, Republicans in Congress are still meeting regularly with the White House economic team in the hopes of bridging their differences to come up with a unified tax plan that Congress and the Administration can agree on by late spring or early summer.
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- Senators Press Zinke for Details on Implementation Plans
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ENERGY TAX NEWS
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RENWEABLE ENERGY NEWS
FROM THE CHART ROOM
More Russian Crude Comes to the U.S., While Bakken Crude Heads Overseas
IEA released its monthly report on crude markets this week, and like the EIA’s report, the key takeaway is that the market appears well supplied for the time being. The IEA has kept its projection for global oil demand growth unchanged at more than 1.3 million barrels per day, while forecasting OECD inventories continuing their decline from the month prior. However OECD stocks remain above 3 billion barrels, although product inventories fell into their five-year range due to lower refinery output. So talk of rebalancing from the IEA and OPEC and Russian assurances of extended production cuts, have not been enough to encourage oil markets higher.
However new trends in global crude oil supplies are showing up. The U.S., and particularly the West Coast, is now a regular recipient of Russian crude, with 40,000 bpd of Russian crude imported to the U.S. last year. Light sweet Sokol accounted for nearly two thirds of the volume.
This year, there has also been a new development, the first delivery of Russian crude to the East Coast since at least 2012. Earlier this month, 686,643 barrels of Urals was delivered to PBF’s Delaware City refinery, and 35,000 barrels delivered to PBF’s Paulsboro refinery.
The U.S. still imports crude from Asia, despite sending more barrels in the opposite direction. Bakken crude will now be heading off to Asia, as the DAPL pipeline prepares to get up and running. The first cargo of Bakken crude is currently arriving in Malaysia, after departing Enterprise’s Beaumont terminal on March 27, and subsequently transferring her cargo to a VLCC, the Maran Canopus. This is only the second time Bakken crude is being shipped to a foreign country other than Canada. Read more at Fuel Fix.
Michael Best Strategies’ Energy Team
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