Another Delay: Senate Won"t Release Tax Bill On Thursday As Mnuchin Admits Corp Tax Cut Delay Likely

Yesterday, the dollar slumped and yields dropped after a WaPo report claimed that the corporate tax cut could - the core piece of GOP tax reform - would be delayed by up to a year, a clear indication that there may be irreconcilable differences in the Senate regarding tax reform. Then, moments ago, Axios confirmed as much, reporting that the Senate "won"t release its version of the GOP tax bill tomorrow", citing a senior GOP aide. On Tuesday Mitch McConnell said that the bill would come out on Thursday. That said, the aide reportedly said "this wasn"t a delay, because the release of the Senate bill was always going to start after the House Ways and Means Committee finished marking up its bill."

As Axios explains, the delaying introduction of the bill is problematic "because it not only gives off the impression that things aren"t going well (whether it"s true or not), but also removes one more day that could have been spent getting the caucus on board with the bill."

Meanwhile, speaking on Bloomberg, Treasury Secretary Mnuchin said that the White House"s preference would be to start the corporate tax rate cut next year, which again implies a material probability of delay.

“Our strong preference is that the corporate tax rate starts next year. The longer we wait, the worse it is for the economy,” Mnuchin said in interview on Bloomberg TV.

Asked whether he rules out delaying corporate tax cuts: “Again, I’d just say, the president’s strong preference -- he feels very strongly that he wants to start this right away. But having said that, we’ll have to look at the entire Senate package -- I assume it’s just a money issue -- as to how they’re moving the different pieces around”

“It’s not a philosophical issue; I’m sure they’d like to start this just as soon as they can”

Some other soundbites courtesy of Bloomberg:

• MNUCHIN: STATE ELECTIONS DIDN"T CHANGE OUR TAX STRATEGY


• MNUCHIN: WE"RE GOING THROUGH HEALTHY PROCESS ON TAXES ON CMTEES


• MNUCHIN: PRESIDENT WOULD LIKE TO KILL HEALTH CARE MANDATE


• MNUCHIN: KILLING HEALTH CARE MANDATE WOULD FREE UP LOT OF MONEY


• MNUCHIN: HOUSE MOVE ON CARRIED INTEREST STEP IN RIGHT DIRECTION


• MNUCHIN: WE"RE SENSITIVE TO NEED OF STATE TAX EXEMPTION


• MNUCHIN: THERE ARE SHORT-TERM CONCERNS ABOUT FX IMPACT ON TRADE


• MNUCHIN: PART OF DOLLAR STRENGTH REFLECTS U.S. ECONOMY


• MNUCHIN: I DON"T THINK YELLEN HAS MADE DECISION ON STAYING

In the final update, CNBC reports that "the Senate tax plan is not expected to include a controversial 20 percent excise tax on imports by multinational companies, according to three people briefed on the issue."

The tax is a critical revenue raiser in the House bill—worth about $155 billion over a decade—and applies to purchases by U.S. subsidiaries of multinational businesses from their foreign counterparts. Among the most vocal opponents of the new fee is the conservative advocacy group Heritage Action, which called it a "backdoor border adjustment tax."

 

The fee covers both intangible goods such as intellectual property as well as consumer parts. But unlike the border adjustment tax—a proposal that Republicans have discarded—the transactions must occur within a single parent company. Business groups such as the Organization for International Investment also fear the tax could disrupt international supply chains and raise costs for multinational companies—and ultimately consumers.

 

"It"s an extraterritorial reach into global supply chains that were never part of the U.S. tax base," OFII President Nancy McLernon said. "It will have a disproportionate impact on international companies that have made a deliberate decision to invest and create jobs in the United States."

Last week, House Ways and Means Committee Chairman Kevin Brady defended the tax as a crucial to ensuring that companies do not shift profits overseas. He said that the border adjustment tax was abandoned months ago and that the excise tax in the current bill bears no resemblance to that proposal.

With so many moving parts and even more conflicting opinions, it will be surprising if a one day delay by the Senate is all it boils down to.

"We're Very Angry": Why Trump Wants To Expand America's Nuclear Arsenal

Shortly before the market close on Thursday, retailers stumbled on one single Reuters headline: Trump says he supports "some form" of border tax.

As Reuters elaborated, President Donald Trump on Thursday spoke favorably about an export-boosting border adjustment tax proposal being pushed by Republicans in the U.S. Congress, but did not specifically  endorse it. Trump had previously sent mixed signals on the proposal at the heart of a Republican plan to overhaul the U.S. tax code for the first time in more than 30 years.

"It could lead to a lot more jobs in the United States," Trump told Reuters in an interview, using his most positive language to date on the proposal. Trump had sent conflicting signals about his position on the border adjustability tax in separate media interviews in January, saying in one interview that it was "too complicated" and in another that it was still on the table. 

"I certainly support a form of tax on the border," he told Reuters on Thursday.

"What is going to happen is companies are going to come back here, they"re going to build their factories and they"re going to create a lot of jobs and there"s no tax." Trump also said his administration will tackle tax reform legislation after dealing with Obamacare, the health insurance system put in place by his predecessor, President Barack Obama.

Trump"s latest U-turn means that the BAT debate, having been largely assumed to be over, following vocal opposition from both senators and the retail lobby, is again back front and center. And since "some form" of border adjustment would force retailers to pass on rising import costs to consumers, it promptly sent the retail sector tumbling to day lows:

* * *

However, it was a separate series of comments to Reuters that drew just as much attention, as Trump appeared to revive the second coming of the nuclear arms race - something he hinted at several months ago - when he said that he wants to build up the U.S. nuclear arsenal to ensure it is at the "top of the pack," saying the United States has fallen behind in its atomic weapons capacity. Trump also complained about Russian deployment of a cruise missile in violation of an arms control treaty and said he would raise the issue with Russian President Vladimir Putin when and if they meet.

In his first comments about the U.S. nuclear arsenal since taking office on Jan. 20, Trump said the United States has "fallen behind on nuclear weapon capacity."

“I am the first one that would like to see everybody - nobody have nukes, but we’re never going to fall behind any country even if it’s a friendly country, we’re never going to fall behind on nuclear power. 

"It would be wonderful, a dream would be that no country would have nukes, but if countries are going to have nukes, we’re going to be at the top of the pack," Trump said. The new strategic arms limitation treaty, known as New START, between the U.S. and Russia requires that by February 5, 2018, both countries must limit their arsenals of strategic nuclear weapons to equal levels for 10 years. Russia has 7,300 warheads and the United States, 6,970, according to the Ploughshares Fund, an anti-nuclear group.

The treaty permits both countries to have no more than 800 deployed and non-deployed land-based intercontinental and submarine-launched ballistic missile launchers and heavy bombers equipped to carry nuclear weapons, and contains equal limits on other nuclear weapons.

Analysts have questioned whether Trump wants to abrogate New START or would begin deploying other warheads. In the interview, Trump called New START "a one-sided deal.  "Just another bad deal that the country made, whether it"s START, whether it"s the Iran deal ... We"re going to start making good deals," he said.

The United States is in the midst of a $1 trillion, 30-year modernization of its aging ballistic missile submarines, bombers and land-based missiles, a price tag that most experts say the country cannot afford.

Trump also complained that the Russian deployment of a ground-based cruise missile is in violation of a 1987 treaty that bans land-based American and Russian intermediate-range missiles.

"To me it"s a big deal," Trump said.  Asked if he would raise the issue with Putin, Trump said he would do so "if and when we meet." He said he had no meetings scheduled as of yet with Putin.

Speaking from behind his desk in the Oval Office, Trump  declared that "we"re very angry" at North Korea"s ballistic missile tests and said accelerating a missile defense system for U.S. allies Japan and South Korea was among many options available.

"There"s talks of a lot more than that," Trump said, when asked about the missile defense system. "We"ll see what happens. But it"s a very dangerous situation, and China can end it very quickly in my opinion.

"It"s very late. We"re very angry at what he"s done, and frankly this should have been taken care of during the Obama administration," he said. According to Japanese news reports, the Japanese government plans to start debate over the deployment of a U.S. missile defense system known as the Terminal High Altitude Area Defense, or THAAD, and the land-based Aegis Ashore missile defense system to improve its capability to counter North Korean ballistic missiles.

Trump vowed during his campaign to step up missile defense efforts and within minutes of his Jan. 20 inauguration, the White House announced that the administration intended to develop a "state of the art" missile defense system to protect against attacks from Iran and North Korea.

It did not provide details on whether the system would differ from those already under development, its cost or how it would be paid for.