All Eyes on White House’s Border Adjustment Tax Decision

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By Kaustuv Basu

The fate of a controversial import tax in the House tax overhaul plan now rests with the White House after pointed criticism from several Republican senators in the past week.

House Speaker Paul D. Ryan (R-Wis.), Ways and Means Chairman Kevin Brady (R-Texas) and other supporters, who have been backed into a corner about the 20 percent import tax, now have their hopes set on President Donald Trump.

“I am assuming that Donald Trump adopts this plan,” Rep. Peter Roskam (R-Ill.) told Bloomberg BNA. “If Donald Trump adopts this plan, then I think the dynamic fundamentally shifts.”

Trump has been ambivalent about his support for the border adjustability proposal, although more clarity is expected when the White House announces its tax plan in the coming weeks. “Even if the president endorses it, it may only mean that they can get it out of committee and maybe through the House, not through the Senate,” a tax lobbyist told Bloomberg BNA.

White House press secretary Sean Spicer told reporters Feb. 21 that a tax plan was expected in the “next couple of weeks.” Observers are also expecting more clues at the Conservative Political Action Conference in Maryland this week, where Trump, Brady and a number of officials from the president’s administration are expected to speak. In addition, Trump will address a joint session of Congress Feb. 28, and there has been some speculation that he might unveil elements of his tax plan during that speech.

Trump’s tax outline, when it is released, could be the idea that the Senate runs with, said Gary Clyde Hufbauer, a Reginald Jones senior fellow at the Peterson Institute for International Economics.

“A big priority is to have it in effect in 2018. Without this, I don’t see them getting near the target 3 to 3.5 percent growth,” Hufbauer said. “If they want to reach it in time for it to have some effect for the 2018 election, they need to get things humming six months before the election. Boy, that’s critical. The timing cannot be overstated. The Republicans won’t be the majority party anymore unless they move briskly.”

Senate Stop

The Ryan-Brady tax reform plan has run into significant opposition in the Senate, where a number of top Republicans have continued to openly question the merits of the import tax.

Sen. Lindsey Graham (R-S.C.) said Feb. 19 on CBS’s “Face the Nation” that the House tax plan “won’t get 10 votes in the Senate.”

And Sen. Tom Cotton (R-Ark.), a rising Republican star and a potential presidential candidate, told Bloomberg BNA that he doesn’t think the Senate “should sit back passively and let the House send us some half-baked idea as a take it or leave it proposition.”

Hearts and Minds

The debate over the border tax also pits U.S. companies against each other as they stake out positions for or against the issue. The American Made Coalition, a group of companies supporting the border adjustment tax, sent a letter to congressional leaders Feb. 21.

“This reform is consistent with the tax policies of nearly every other country in the world, and it would effectively end the ‘Made in America’ tax that creates an unfair advantage for foreign-based companies at the expense of U.S. jobs and economic growth,” the coalition said. The letter was signed by 16 chief executive officers, including those from General Electric Co., Dow Chemical Co. and Boeing Co.

The letter called the border tax a “critical element” of the House plan, which would lower business tax rates, allow immediate expensing of capital spending and establish a territorial tax system.

The same day, a group called the Americans for Affordable Products, made up of more than 150 businesses and trade groups including Wal-Mart Stores Inc. and Best Buy Co., said that many of the companies in the American Made Coalition pay an effective tax rate that is significantly lower than the statutory rate.

These companies “are asking consumers to pay more so that they can pay even less,” an e-mail from Americans for Affordable Products said.

With assistance from Laura Davison and Cheryl Bolen in Washington.

To contact the reporter on this story: Kaustuv Basu in Washington at kbasu@bna.com

To contact the editor responsible for this story: Meg Shreve at mshreve@bna.com

Copyright © 2017 The Bureau of National Affairs, Inc. All Rights Reserved.

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