No Industry Carve-Outs in Border Adjustment Plan: Brady

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By Colleen Murphy

House Ways and Means Chairman Kevin Brady (R-Texas) is working hard to avoid exempting any industries from the border adjustment proposal he hopes will be a piece of tax reform.

“I always worry about that with exemptions, that that will be the new ‘Lifetime Lobbyist Employment Act’ going forward, so I’d strongly prefer not to go that route,” he told reporters June 8.

The border adjustment tax provision of the House tax plan would levy a 20 percent tax on imports and exempt exports—an idea that has been roundly criticized in the Senate and by some industry groups. Still, the provision would be a key tool to pay for the rate cuts Republicans hope to make.

Some Exceptions

Rep. Tom Reed (R-N.Y.), a member of the Ways and Means Committee, said he is open to excusing commodity markets from the controversial border adjustment tax provision, and is open to input.

“You know, we don’t grow coffee, we don’t grow bananas, so obviously that type of consideration is possibly out there,” he said June 8 during a Bloomberg BNA event.

Reed said tax reform could drag into 2018 because of the nature of the budget process. Republicans plan to tie tax reform to a fiscal year 2018 budget resolution in order to move it through the chamber under the reconciliation process, which would shield it from a Senate filibuster.

Reed’s office didn’t return a request for additional comment.

Rep. Vern Buchanan (R-Fla.), also a committee member, said while the provision is “still just in a discussion phase,” creating exemptions is a possibility.

“Yeah, people bring it up, certain industries, and I think there are people that are open-minded to that, but it’s going to be like pieces of the puzzle all coming together at the end,” he said.

The committee is currently working on modifications and transition rules to ease industries into the revamped tax system. “Designs and transitions” currently in the works will achieve the same goal as an exemption, Brady said.

“What I can assure you, though, is there is a remarkably generous and gradual transition period, among other design elements,” Brady said.

Move On

Border adjustment isn’t needed to move the U.S. toward a consumption-based system and implementing it “would carry substantial economic risk,” because it’s impossible to predict how it would impact currency markets, the Heritage Foundation said June 8.

“The BAT is an overly complex solution to a simple problem; the U.S. corporate income tax rate is simply too high,” it said.

The Heritage Foundation also criticized the idea that tax reform must not add to the deficit, something many Republicans have been arguing. Revenue-neutrality “forces Congress to make a false choice,” the group said.

Brady told Bloomberg BNA in a statement that he disagrees with the Heritage Foundation’s new policy position, pointing to a 2016 tax reform primer from the organization that supported a territorial, border-adjusted system. He said he will continue to look to Heritage for ideas that would prevent American companies from moving jobs and operations overseas.

To contact the reporter on this story: Colleen Murphy in Washington at cmurphy@bna.com

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

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