Senators Seek Border Tax Options After Faulting House Plan

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By Laura Davison and Kaustuv Basu

Senate Republicans are considering alternatives to the House border adjustment tax plan after criticizing House Speaker Paul D. Ryan’s (R-Wis.) proposal to overhaul the tax code.

“We’re working on that as we speak,” Senate Finance Committee Chairman Orrin G. Hatch (R-Utah) told Bloomberg BNA March 2. “We’re working on it and we’re making some headway.”

The tentative talks about replacement for one of the key provisions in the House GOP tax plan comes after weeks of concerned comments by Republican senators who think the plan to tax imports but not exports wouldn’t pass the Senate. Critics of border adjustability say it could raise prices for consumers or run afoul of World Trade Organization rules.

Hatch has said he doesn’t see the plan “happening, not the way the House has configured it.” Senate Majority Whip John Cornyn (R-Texas) called it a “tremendous gamble” and Sen. Lindsey Graham (R-S.C.) said the proposal wouldn’t get 10 votes.

Hatch said it was too early to talk specifics on possible border tax replacements. Sen. Charles E. Grassley (R-Iowa) said there weren’t detailed alternatives yet.

“Under our constitution we can’t do anything until the House passes something and we don’t even know if they have something together over there,” Grassley said.

Senate Side

While several senators are wary of the idea, they don’t have a comprehensive tax plan of their own to promote. Hatch’s staff was working on a corporate integration plan that would eliminate tax on the dividends companies pay by allowing a deduction for those distributions.

Hatch’s proposal was sidelined after the 2016 elections and Republicans looked for comprehensive tax overhaul, but the Senate Finance chairman has said he would like to revive the plan if given an opportunity.

House Ways and Means Committee Chairman Kevin Brady (R-Texas) has cautioned that he won’t move forward with a tax code that doesn’t subject imports to the same taxes that U.S. products face overseas. He also needs the revenue from the border adjustments—estimated to raise more than $1 trillion in a decade—to pay for the 20 percent corporate rate and reductions in individual taxes.

Americans for Prosperity, backed by conservative brothers Charles and David Koch, published a list of alternative ways to raise revenue to pay for tax cuts, including eliminating the research tax credit and capping the mortgage interest deduction at $500,000.

Economists who helped develop the plan say border adjustments are necessary beyond revenue-raising abilities, because they help prevent the shifting of U.S. jobs, facilities and income overseas. Manufacturers and net exporters, including General Electric Co. and Boeing Co., support the idea, while import-reliant retailers and oil refiners have voiced opposition.

Observers are expecting President Donald Trump’s tax plan, which presidential aides say should be released in the coming weeks, to guide the path forward. Trump has been lukewarm on the border adjustability idea, sometimes criticizing it and sometimes seemingly endorsing the idea of imposing taxes on imports.

Hatch said he expected the Trump administration to put out language and help Congress “all the way through.”

To contact the reporters on this story: Laura Davison in Washington at lDavison@bna.com and Kaustuv Basu in Washington at kbasu@bna.com

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

For More Information

The Americans for Prosperity list is at http://src.bna.com/mFW.

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