Republicans are searching for a revenue-raising alternative to the border adjustment tax (BAT) after the Trump administration and top congressional tax writers announced the polarizing provision is officially off the table Thursday.
The BAT — which would place a levy on imports while exempting exports– was strongly supported by House Speaker Paul Ryan and Ways and Means Chairman Kevin Brady, who argued it was the best way to combat base erosions and even the playing field. Border adjustment played a key role in offsetting the steep cuts proposed in the House GOP’s “A Better Way” blueprint on tax reform.
While top GOP lawmakers endorsed the provision, critics within the Republican conference argued it was a consumer tax that would ultimately lead to a substantial increase in prices on a number of goods.
GOP House, Senate and White House leaders released a joint statement asserting they are united in their goal to bring down rates and spur economic growth.
“We are now confident that, without transitioning to a new domestic consumption-based tax system, there is a viable approach for ensuring a level playing field between American and foreign companies and workers, while protecting American jobs and the U.S. tax base,” the joint statement reads. “While we have debated the pro-growth benefits of border adjustability, we appreciate that there are many unknowns associated with it and have decided to set this policy aside in order to advance tax reform.”
With GOP lawmakers hoping to use the reconciliation process — a tool allowing a budgetary related-measure to pass with just a simple majority in the upper chamber — the death of the BAT could prove to be problematic, as the measure can’t increase the deficit after a 10-year window under parliamentary rules. The provision would have generated a whopping $1.2 trillion in revenue over the course of a decade, according to Tax Foundation, providing the necessary means to offset their plans to slash both corporate and individual rates.
Brady and Ryan said, while they are still supportive of the BAT, shelving the idea was necessary to move forward with negotiations to craft a plan to pass permanent tax reform this year.
“You know I’m convinced border adjustability is the best solution for keeping jobs in America and bringing them back from overseas, and helping lower taxes for local businesses,” Brady told reporters Thursday. “We had a healthy debate on that provision, but in order for us to unify it was important to set it aside for now.”
According to the Texas Republican, he is working with members of the Senate Finance Committee and administration officials to ensure they can find a way to bring rates down as low as possible.
“I’m confident that we’re getting close to a solution that addresses that problem of U.S. companies and profits moving overseas,” Brady continued. “We still have work to do, but I like the path we’re going.”
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