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The failure of the border adjustment tax proposal is spurring ideas on what Republicans need to do to better sell tax reform legislation that will be crafted in the coming months.
“They need to have a messaging strategy. They need to be ahead of everything, not reacting,” said Douglas Holtz-Eakin, president of the conservative American Action Forum and a prominent backer of the border adjustment tax. The House, Senate, and White House need to collectively explain why they want “this bill” and not just why the present system is broken, he said.
Preparation is the key, Holtz-Eakin said. “They have to recognize that whatever plan they come up with, the moment it hits the desk for a markup and goes public, there’s going to be controversy over something,” he said. “There are losers out there all the time and they have to be ready for that. I mean the famous line of Mike Tyson applies here. Everyone has a plan until they get hit.”
In a joint statement released July 27, the House, Senate, and White House officially gave up on the border adjustment tax, a controversial provision in the House GOP tax reform blueprint that would tax imports at 20 percent. The BAT was opposed by some GOP senators, retail industry groups, and some Republicans on the House Ways and Means Committee. Congressional Republicans and the Trump administration are now working on a unified plan.
Republicans like Holtz-Eakin and others are advocating stronger and clearer messaging on a tax reform plan, as interest groups jockey for position in a post-BAT tax world. Business Roundtable, a lobbying group, is moving forward on a multimillion-dollar campaign on tax reform. And two groups backed by the billionaire Koch brothers’ network—Freedom Partners and Americans for Prosperity—have tax reform events scheduled in Washington for the week of July 31. An event on July 31 features Treasury Secretary Steven Mnuchin.
House Ways and Means Committee Chairman Kevin Brady (R-Texas) said in an interview in his office that the tax reform statement released July 27 was well received “by those outside these walls.”
“As the day wore on, I got to see even more clearly how important it was for us to unite,” he told Bloomberg BNA.
Ways and Means Republicans acknowledged the need to focus and stay in the game.
Rep. Kenny Marchant (R-Texas), a Ways and Means member, said one good idea might be to refocus on lowering tax rates across the board. “That’s what I’m going to talk to my constituents about.”
Marchant said that criticism on a tax plan would be inevitable. “If you are on the Ways and Means Committee, that’s just a way of life, you just listen,” he told Bloomberg BNA.
A push for regular order came from Rep. James B. Renacci (R-Ohio), who has constantly talked about the need for more tax reform hearings in recent months. “Regular order is the cure for everything,” he said. And the tax reform principals need to explain what a rewrite of laws would do in totality, like growing the economy or create jobs, Renacci said.
As tax-writers and the administration move toward selling a tax plan, they should consider plans that are easily digestible to voters, said Jason J. Fichtner, a senior research fellow at the Mercatus Center at George Mason University.
“It’s too late to sell people on something new,” he said. “You need to sell them on something they understand, like rate reductions or expanding the standard deduction.”
That would mean that other wonky ideas, such as Sen. Orrin G. Hatch’s (R-Utah) corporate integration idea—to eliminate the second layer of taxes corporations pay by giving them a dividends-paid deduction—would be off the table, Fichtner said. “It’s something that to economists makes sense, but to the American people makes no sense at all,” he said.
Charles Koch, the chairman and chief executive officer of Koch Industries Inc., is a board member of the Mercatus Center.
The House GOP blueprint suggested a fundamental change in the tax code by moving to a consumption-based tax system, Rep. Devin Nunes (R-Calif.) told Bloomberg BNA.
“The education hasn’t been enough for the American people, and our colleagues in the Senate and the White House, to make that kind of change,” said Nunes, one of the BAT’s biggest supporters on Ways and Means. “But what people are going to find out is that the rates are going to be much higher.”
Those who didn’t like the border-adjusted tax successfully characterized it as a stand-alone item, Holtz-Eakin said. “There’s a thing call a border adjustment tax. It’s a bad tax,” he said.
“That was never what it was. It was a means to an end, and the end is entirely desirable. It’s to grow more rapidly, invest, innovate, and employ in the United States,” he said.
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