GOP Faces Tax Plan Dilemma as Senate Snubs Border Adjustment

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By Aaron E. Lorenzo and Laura Davison

House Republicans may need to rethink their border adjustment plan to tax imports and exempt exports after two leading senators said they doubt the proposal could pass their chamber.

“I don’t see that happening, not the way the House has configured it,” Senate Finance Committee Chairman Orrin G. Hatch (R-Utah) said Feb. 17. “I can’t say there won’t be something done in that area.”

The lack of Senate Republican support indicates the House plan will need to undergo significant changes in order to become law this year. President Donald Trump, who is expected to release his own tax outline in the coming weeks, has said border adjustability is too complicated. Retailers, oil refiners and other import-reliant businesses are lobbying heavily against it.

“The House template has encountered quite a bit of skepticism on the border-adjustment issue, so I don’t think it’s going to be a viable part of the tax reform,” Senate Majority Whip John Cornyn (R-Texas) said.

Majority Leader Mitch McConnell (R-Ky.) also acknowledged unease over how to lower tax rates. Sens. Tom Cotton (R-Ark.) and David Perdue (R-Ga.) have previously gone public with concerns about the House GOP border adjustment plan, as has Cornyn, and Hatch reiterated the “real concerns” he has with it.

“We don’t know exactly what it’s going to look like at the end,” McConnell said.

Talk to Me

House Ways and Means Chairman Kevin Brady (R-Texas) said he wants to address the concerns senators have about the plan, but also said he won’t support a plan that doesn’t include provisions to tax foreign products the same as American-made goods.

Republicans in the House and Senate are under pressure from business groups to push through a plan that lowers corporate rates this year, which is seen as a once-in-a-generation opportunity to overhaul the tax code.

If Congress doesn’t get legislation to Trump’s desk in 2017, there will likely be an uptick in companies seeking foreign acquirers to move outside the U.S. tax net, Louise Weingrod, Johnson & Johnson Inc.’s vice president of global taxation, said.

“I think it’s obvious that companies will not be able to sustain hope for another 30 years to get another window like the one that we have this year,” she said Feb. 17 at a Tax Council Policy Institute event in Washington. “Because we have so much reason to hope, the stakes are very high if we fail. There is not an option not to get to the finish line on this.”

The Audacity of Ryan’s Hope

The business world has formed both support and opposition coalitions. Johnson & Johnson is part of a group that applauds the plan, along with General Electric Co. and Boeing Co. The conservative Americans for Prosperity group also launched a campaign Feb. 16 aimed at persuading House and Senate Republicans to oppose border adjustments.

House Speaker Paul D. Ryan (R-Wis.), who is one of the main border adjustability cheerleaders in the House, is confident about Congress’ ability to act this year. “More and more” U.S. companies are going to leave the country if the tax laws aren’t changed, he said.

“We’re going to get tax reform done,” Ryan told reporters Feb. 16. “And there’s going to be a whole bunch of drama you’re going to enjoy covering between now and then.”

To contact the reporters on this story: Aaron E. Lorenzo in Washington at aaron@bna.com and Laura Davison in Washington at lDavison@bna.com

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

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