Putting gun to their heads...

House Freedom Caucus ties food stamp, TANF changes to tax reform

By AARON LORENZO

House Freedom Caucus members will push for changes to two major welfare programs — food stamps and Temporary Assistance for Needy Families — as part of tax reform legislation, the group's chairman told POLITICO.

Rep. Mark Meadows (R-N.C.) also said the hardline conservative group's still-in-development bill wouldn't include a controversial tax on imports or immediate write-offs for business investments — known as full expensing — backed by House GOP leaders. The first is too unpopular and the second too expensive, he said.

Meadows and others in the caucus expect to unveil more information about their plan at a Heritage Foundation event Friday

Republican congressional leaders and Trump administration officials have stepped up their efforts to reach a consensus on tax reform, hoping to enact the legislation this year. The Freedom Caucus's plans are likely to add another hurdle to that effort.

Meadows said it helps the tax reform math to leave out full expensing if the tax on imports, known as a border adjustment, is also jettisoned. House GOP leaders are counting on border adjustment — which would also make exports tax-free in a bid to bolster domestic production — to generate more than $1 trillion over 10 years to help keep tax cuts from blowing a hole in the federal budget.

But the idea has split business leaders, with import-heavy companies like retailers fiercely opposing it and exporters pushing for it. It has also caused fissures within the congressional GOP — Meadows estimated 75-80 House Republicans oppose it, along with up to half of Senate Republicans.

Meadows said adding in changes to the Supplemental Nutrition Assistance Program, or food stamps, and TANF would provide another $400 billion over 10 years, Meadows said.

Such additions and subtractions are aimed at a Freedom Caucus package that includes a corporate tax rate of 20 percent and an equal or just slightly higher rate on unincorporated businesses known as pass-throughs, Meadows said.

House Speaker Paul Ryan (R-Wis.) has pushed for a 20 percent corporate rate and 25 percent for pass-throughs. President Donald Trump has proposed a single 15 percent tax on all business income.

“How do we get to a 20 percent corporate and make sure there’s a pass-through to LLCs and sole proprietorships and at the same time making sure that it’s not just a corporate tax cut but we actually make it fundamentally better for the person on Main Street?” Meadows said. “We believe it has to have both components.”

For similar reasons, Freedom Caucus members don’t want to alter the mortgage interest deduction, said Meadows. It could have too much impact on consumption in the U.S. economy, he said. (Congressional leaders and the Trump administration have also kept the mortgage deduction off limits.)

“We’re trying to look at how to make it better for consumers, not worse, so we really haven’t looked at that at all,” Meadows said.

The caucus is trying to push the envelope on tax reform sooner rather than later.

Time is of the essence, Meadows said, who in recent days called for canceling the annual August recess for Congress in order to advance tax reform. Tax writers need to drop the discussion of border adjustment, he said, adding that White House officials have drawn the same conclusion.

Ryan and House Ways and Means Committee Chairman Kevin Brady (R-Texas) have yet to back off the idea, though. While the Freedom Caucus hasn't taken an official position on border adjustments, Meadows said the entire GOP conference needs to arrive at some type of an agreement on what’s going to be included in a tax package and what’s going to fall by the wayside.

“It’s important that we start discussing principles and concepts that need to be in place so that we act in the next few weeks, not the next few months, at least on starting the ball rolling with legislative text where we can all start to review it,” Meadows said.

The Freedom Caucus had a hand in reshaping health care overhaul legislation that ultimately passed the House after weeks of fits and starts. The caucus, which Meadows said counts 36 members, wants to influence tax reform at an earlier stage in the debate, he has said.

To get tax reform, Republicans need to reach a budget agreement among various moderate and conservative factions on spending levels, Meadows said, pointing to a budget maneuver — known as reconciliation — that would let Republicans get around a Democratic filibuster in the Senate.

“We do have a seat at the table,” he said. “Probably the biggest leverage has nothing to do with tax reform. It has more to do with the budget and budget reconciliation.”