Ways and Means Chairman Proposes Five-Year Phase-In for Border Adjustment
House Ways and Means Committee Chairman Kevin Brady, R-Texas, this week pitched a five-year phase-in of his border adjustment plan as part of any tax reform, drawing another wave of opposition voiced by retailers and others. The transition would usher in taxation on imports at the same rate it lifts taxes on exports, Brady said at the Wall Street Journal CFO Network annual meeting on June 13 (here). He said the approach reflects business feedback his committee received on dollar rate adjustments and the length of time required for proper supply chain assessments, among other things. “For the first time since I’ve been in Congress in twenty-one years, we have whole industries telling us that under this tax reform approach, they can now bring significant parts of their supply chain back to the United States,” Brady said.
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Speaking on behalf of Americans for Affordable Products, which was formed in opposition to border adjustability plans (see 1702020048), Bill Bryant, chairman of agricultural export consulting firm Bryant Christie, offered a terse response (here) to Brady’s news. "A bad idea is a bad idea,” he said. “Phasing in a bad idea doesn't make it better." Retail Industry Leaders Association Senior Executive Vice President for Public Affairs Brian Dodge said despite any phase-in, consumers would still eventually pay more for items like food, gas, prescriptions, electronics and clothes under any border adjustment framework. “Phasing in a job-killing plan like the Border Adjustment Tax does nothing to fix its many flaws,” National Retail Federation Senior Vice President for Government Relations David French said in a statement (here). “If Chairman Brady is truly listening to his colleagues in the House and the Senate, he will drop the proposal altogether and move on with a new tax reform plan that can win majority support in Congress and gain the President’s signature.”
Noting that it hasn't endorsed a border-adjustable cash flow tax, Coalition for a Prosperous America CEO Michael Stumo said that border adjustment "would have to be phased in," but added that it is "essential" the U.S. move to "more border adjustability," as almost all foreign countries do it. "We must drastically improve our trade competitiveness to reduce our job killing trade deficits and this will help," he said. "But just as most other countries phased in their value added taxes and goods and services taxes, the magnitude of such a tax system change would require us to do so as well." Treasury Secretary Steven Mnuchin has reportedly expressed opposition to border adjustment in talks with House Democrats (see 1706070043). The White House and Treasury didn’t comment.