Rep. Erik Paulsen tries to sell tax code overhaul

U.S. Rep. Erik Paulsen pitched an overhaul of the U.S. tax code Thursday at Best Buy headquarters, trying to build support for one of his own top priorities as Republicans in Washington struggle for major accomplishments.

Paulsen and colleague U.S. Rep. Kevin Brady of Texas, who chairs the powerful House Ways and Means Committee, said that they expect by the end of the year to send President Donald Trump a major tax bill that he will sign. It will lower tax rates for families and businesses, they said, and also make the tax code simpler.

Standing in their way: an army of lobbyists who will fight for every special deduction, exemption, credit and carve-out currently in law; political headwinds headed into next year's election; and Trump's flagging poll numbers and habit of repeatedly distracting from the Republican policy agenda.

Still, Paulsen said Republicans have a once-in-a-generation opportunity to make the tax system simpler while lowering rates.

"The key principles are building for growth. New jobs, higher wages," Paulsen said in an interview, which followed a closed-door meeting with Best Buy employees.

The Richfield-based company has much riding on tax reform and, along with other retailers including Target, helped to kill a House Republican proposal to tax goods imported into the U.S.

Paulsen, a former state legislator and Target business analyst, represents Minnesota's Third Congressional District, made up principally of western Twin Cities suburbs. He has much riding on the success of the tax reform effort: Despite cruising to an easy re-election in 2016, Democrat Hillary Clinton won his district by more than nine points. He already faces several challengers, including wealthy businessman and philanthropist Dean Phillips.

To avoid increasing the deficit by cutting taxes, Republicans will have to find new revenue to replace money lost with lower rates. Brady, who represents the Houston area and whose Ways and Means Committee is leading the tax effort, said they have two ways to offset the missing revenue.

The plan would create economic growth that would offset some of the lost revenue, Brady said. This idea undergirded the economic policy of President Ronald Reagan, who promised that lower taxes would stimulate economic activity, leading to higher wages and more income tax revenue. After cutting taxes in 1981, the deficit ballooned, and Reagan signed a significant tax increase in 1982.

The House Republican plan also would eliminate some of the myriad ways taxpayers can reduce their taxes.

"We have to jettison many of the special provisions for some, such as special exemptions, loopholes and deductions, so we can lower the rates for everyone," Brady said.

Which ones?

Republicans are no doubt reluctant to name which special breaks would be eliminated because many of the deals are both popular and backed by powerful lobbies. The mortgage interest deduction, for instance, is a highly valuable tax preference for homeowners, and thus, homebuilders and Realtors, which is why lawmakers are unwilling to touch it.

The effort earlier this year to raise revenue with the proposed tax on imported goods left Paulsen in a political thicket. After initially supporting the proposal, he changed course after the strong pushback from Best Buy and Target. They argued it would have forced them to raises prices sharply.

"We can't have uncertainty of what it's going to be like for consumers," said Paulsen, who credited House leadership for killing the idea. He said he wanted to be partners with companies like Best Buy and Target on the tax issue, rather than adversaries.

Perhaps the greatest uncertainty as Republicans try to write a tax bill, however, is Trump, whose comments about a white supremacist rally in Virginia have roiled Washington, keeping the national conversation on Nazis rather than on taxes or other policy goals of Republicans in Congress.

Paulsen said after the last election that he did not vote for Trump. While he didn't mention Trump by name on Thursday, he rejected the comments of his party's standard-bearer.