Border Adjustment Bashing to Continue for Foreseeable Future

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By Laura Davison (Bloomberg BNA)

Opponents of border adjustability won’t stop criticizing the provision until all possibility of its inclusion in tax reform is gone, according to lawmakers who dislike the idea.

“I think there is still talk and those that are opposed are going to continue to work to oppose it,” Sen. John Boozman (R-Ark.) told Bloomberg BNA. “It certainly doesn’t have the momentum that it had when it was first being talked about.”

House Speaker Paul D. Ryan (R-Wis.) and Ways and Means Chairman Kevin Brady (R-Texas) are the strongest proponents of the provision, which would tax imports and exempt exports. But their continued support could hold up a vote on the House budget, which contains the reconciliation instructions that Republicans are relying on to pass tax reform with a simple majority.

Rep. Mark Meadows (R-N.C.), who chairs the conservative House Freedom Caucus, said he wants assurance that border adjustment won’t be part of tax reform before he agrees to support the budget. He said late July 24 that House leaders and the Freedom Caucus had made no further progress on negotiating a vote on the budget.

Brady said congressional leaders and White House officials have been discussing alternatives to the controversial border tax “for some time.”

“We’re working through all those issues,” Brady said in an interview, referring to the border-adjusted tax on imports proposed by House GOP leaders. “We’ve been on alternatives for some time, just trying to solve that problem, both politically and policy-wise.”

Freedom Partners

Freedom Partners, a group backed by the billionaire Koch brothers, meanwhile continues to assail the border adjustment tax.

This week, the group is highlighting comments made by Rep. Ron DeSantis (R-Fla.), who said on Fox News that the BAT is a divisive idea. “I’ve been arguing, let’s put aside the border adjustment tax. I don’t think it can pass the House, I don’t think it’s good policy, it definitely can’t pass the Senate, and I think it hurts our ability to do tax reform,” he said.

Freedom Partners wants Brady and other Republicans to unify around a tax reform plan that is simple and more efficient and that wouldn’t place “new burdens on taxpayers.”

Base Erosion Alternative

Coming up with an alternative could prove to be a difficult feat, as policymakers will have to find approximately $1 trillion in revenue to replace what border adjustability is projected to raise. Additionally, an alternative would also have to include base erosion measures to keep companies from shifting income overseas.

The retail, oil refining, and auto industries have all been critical of border adjustment, saying it could raise prices on consumers because those sectors rely on goods made overseas.

Representatives from General Motors Co., Hyundai Motor Co., and Tesla Inc. met with the House Automotive Caucus July 25 to discuss border adjustment, along with other tax and trade policy issues.

“They said, ‘please, take a look, are you sure this is the way we want to go?’” Rep. Mike Kelly (R-Pa.) said. “They have some real concerns.”

With assistance from Anna Edgerton (Bloomberg) and Kaustuv Basu (Bloomberg BNA), in Washington.

To contact the reporter on this story: Laura Davison in Washington at lDavison@bna.com

To contact the editor responsible for this story: Meg Shreve at mshreve@bna.com (Bloomberg BNA); Kevin Whitelaw at kwhitelaw@bloomberg.net (Bloomberg)

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