Mar 14, 2017

Lawmaker Tracker: Split Deepens Over Trillion-Dollar Border Adjustment Tax On The Middle Class

Post by Freedom Partners

Pro-growth, comprehensive tax reform is badly needed, but one major sticking point facing mounting opposition in the Senate is the Border Adjustment Tax (BAT), which is included in a tax reform proposal from House leaders.

Under the BAT, there would be a 20% tax on everything imported into the U.S. This means that consumers would end up paying $1.2 trillion in the form of higher costs for clothes, gasoline, electronics, and other everyday goods.

That is why Senators Lisa Murkowski (R-AK) and Jeff Flake (R-AZ) delivered stark warnings to the GOP on the idea of a new middle class tax hike.

“We ought to make sure that the middle class isn’t in the losing column,” Sen. Flake told his Senate colleagues.

“I’m not interested in anything that is going to increase the price of gasoline in Alaska,” Sen. Murkowski told an audience in Houston. “I think [a border tax] is something we need to look at very, very critically.”

Republican leaders insist that shifting the burden of lower rates to consumers is the only way to get pro-growth tax reform done. But this isn’t true. The trillions of dollars in potential spending cuts, tax loopholes, and corporate welfare — like those identified by Americans for Prosperity — should be considered as alternatives before any new tax hike on consumers.

The more that lawmakers learn about a new tax hike on the middle class, the less reason they have to like it.

BI-PARTISAN CHORUS OF LAWMAKERS OPPOSE OR EXPRESS DEEP CONCERN OVER THE BORDER ADJUSTMENT TAX

Senate Republicans

Sen. David Perdue: “This 20-percent tax on all imports is regressive, hammers consumers, and shuts down economic growth … This would hammer consumer confidence and lower overall demand, thus putting a downward pressure on jobs … We end up with more losers than winners … American seniors will see their retirement savings evaporate at the same time their living costs increase.” (Naomi Jagoda, “GOP Senator: Reject Border Tax Proposal,” The Hill, 2/9/17)

PERDUE: “It’s beyond a complication. It’s a bad economic proposition.” (Rachel Bade & Eliana Johnson, “Ryan Struggles To Sell Tax Reform Plan To Fellow Republicans,” POLITICO, 2/16/17)

Sen. Mike Lee: “This ends up becoming a VAT-like substance and I think it would end up having a lot of the negative characteristics of both a VAT and a tariff … I really don’t like it.” (Jonathan Swan, “Border Adjustment Has A Senate Problem,” Axios, 2/2/17)

Sen. Jerry Moran: “I worry that consumers, my Kansas constituents, are the ones who pay the tax … I assume you get into a battle with other countries … and it affects the exporters.” (Richard Rubin, “GOP Plan To Overhaul Tax Code Gets Held Up At The Border,” Wall Street Journal, 2/7/17)

Sen. Mike Rounds, POLITICO PRO: “Asked … if he’s on board with the House proposal, Rounds said: ‘Not at this time, no … Any time we start talking about how we’re going to regulate products going out and products coming in, we better darn well know what the impact on the economy is before we start making major changes.’” (Brian Faler, “South Dakota’s Rounds Joins BAT Skeptics,” POLITICO Pro, 2/9/17)

Sen. Orrin Hatch, ROLL CALL: “Utah Sen. Orrin G. Hatch has launched a new push for a bipartisan Senate alternative to the contentious House Republican tax plan, as President Donald Trump begins to frame administration priorities. ‘I don’t think you can pass a tax bill, unless it’s bipartisan.’” (Alan Ota, “Amid Senate Tensions, Hatch Eyes Bipartisan Tax Deal,” Roll Call, 2/14/17)

HATCH: “I have some real reservations about it … All I can say is I think it’s got a long way to go and it’s going to be a difficult matter to get through both bodies.” (Jacob Pramuk, “Top GOP Senator: It Will Be ‘Difficult’ To Get Key House Tax Proposal Through Congress,” CNBC, 2/28/17)

ROLL CALL: “The seven-term senator said the House GOP plan would not pass the Senate, even if it moves under reconciliation instructions that would allow passage with 51 votes. He pointed to disputes over parts of the House plan, including a proposal for border adjustments to apply business income taxes to imports but not exports.” (Alan Ota, “Amid Senate Tensions, Hatch Eyes Bipartisan Tax Deal,” Roll Call, 2/14/17)

REUTERS: “In a speech to the U.S. Chamber of Commerce, Senate Finance Committee Chairman Orrin Hatch did not reject the border adjustment tax proposed by House Speaker Paul Ryan. But he said there are questions about whether it would unduly burden U.S. consumers and businesses or pass muster under international trade rules.” (David Morgan, “Senate Tax Chief Questions Border Adjustment Tax,” Reuters, 2/1/17)

HATCH: ‘We don’t have definitive answers to any of those questions at this particular point. And without them, I don’t think I can give definitive positions.” (David Morgan, “Senate Tax Chief Questions Border Adjustment Tax,” Reuters, 2/1/17)

POLITICO: “Hatch, in an interview after Ryan’s presentation, said the speaker ‘didn’t cover [the border adjustment proposal] as specifically as I would have liked.’” (Rachel Bade & Eliana Johnson, “Ryan Struggles To Sell Tax Reform Plan To Fellow Republicans,” POLITICO, 2/16/17)

Sen. John Cornyn: “Many unanswered questions about proposed ‘border adjustment’ tax.” (Senator John Cornyn, Twitter, 1/26/17)

CORNYN: “Border adjustability [is] ‘a high-risk gamble … I’m still a question mark.” (Bernie Becker, “Skeptical GOP Senators Quiz Ryan On Border Adjustment,” POLITCO Pro, 2/14/17)

CORNYN: “The hard reality is the border tax is on life support, and given the imperative of 51 senators and 218 House members and one president, I think we need to look for other options.” (Patti Domm, “Border Adjustment Tax Is On ‘Life Support,’ And Tax Reform May Come Later … And With Less Punch,” CNBC, 2/17/17)

CORNYN: “There have been a few issues that have concerned me about the border adjustment tax … The more I’ve looked at it, the more I worry that the assumptions on which it’s based are unproven. I’m worried about the politics of it.” (Ben Lefebvre, “Cornyn, Murkowski Dis Border Tax, Trade Protectionism,” POLITICO Pro, 3/10/17)

Sen. John Boozman, WALL STREET JOURNAL: “At least seven GOP senators have expressed concerns about border adjustment, including Utah’s Mike Lee, Arkansas’s John Boozman, Georgia’s David Perdue and Texas’ John Cornyn.” (Richard Rubin, “GOP Plan To Overhaul Tax Code Gets Held Up At The Border,” Wall Street Journal, 2/7/17)

POLITICO PRO: “Sen. John Boozman (R-Ark.) said that he’s definitely hearing from Wal-Mart about the House plan, and that he still has questions about the currency aspect of the proposal.” (Bernie Becker, “Morning Tax,” POLITICO Pro, 2/2/17)

Sen. Rob Portman: “I do understand the need to be more competitive but I want to be sure that we do so in a way that does not cause dislocation in the economy.” (Bernie Becker, “Morning Tax,” POLITICO Pro, 2/2/17)

Sen. Roy Blunt: “I’m not there yet as a supporter.” (Bernie Becker, “Skeptical GOP Senators Quiz Ryan On Border Adjustment,” POLITICO Pro, 2/14/17)

POLITICO: “[T]he fifth-ranking GOP senator, said the Finance Committee will likely go a ‘different way.’” (Rachel Bade & Eliana Johnson, “Ryan Struggles To Sell Tax Reform Plan To Fellow Republicans,” POLITICO, 2/16/17)

Sen. Tom Cotton: Senate Republicans “most certainly will not keep our powder dry and see working Americans railroaded with a precooked deal that raises their taxes and increase the prices of the stuff they buy every single day.” (Jordain Carney, “GOP Senator: ‘Serious Concerns’ About House Border Tax Plan,” The Hill, 2/15/17)

Sen. John Thune: “I think the border adjustability is the hard thing to sell.” (Rachel Bade & Eliana Johnson, “Ryan Struggles To Sell Tax Reform Plan To Fellow Republicans,” POLITICO, 2/16/17)

Sen. Lindsey Graham, WASHINGTON POST: “Sen. Lindsey Graham (R-S.C.) opined that the House tax plan will not fly. ‘The Congress is stumbling. Republicans in the Congress, we are all tied up in knots. The House is talking about a tax plan that won’t get 10 votes in the Senate … So it is not just the administration that has got problems. Republicans in the House and the Senate have problems, and I hope we will get our act together.’” (Jennifer Rubin, “Where Are The Fiscal Conservatives When You Need Them?” Washington Post, 2/20/17)

Sen. Lisa Murkowski: “In an oil producing state such as Alaska, we can see a real benefit in exporting oil, but we’re also dependent on importing fuel … I’m not interested in anything that is going to increase the price of gasoline in Alaska. I think [a border tax] is something we need to look at very, very critically.” (Ben Lefebvre, “Cornyn, Murkowski Dis Border Tax, Trade Protectionism,” POLITICO Pro, 3/10/17)

Sen. Jeff Flake, WASHINGTON EXAMINER: “Republican Sen. Jeff Flake on Wednesday criticized the House GOP plan to adjust taxes at the border, joining several other Republican senators doubtful of the idea in a new blow to the momentum for tax reform. The provision, the Arizona lawmaker argued in a brief speech on the Senate floor, could raise the prices of consumer goods.” (Joseph Lawler, “Republican Jeff Flake Comes Out Against House GOP Import Tax Plan,” Washington Examiner, 3/8/17)

FLAKE: “[W]e ought to make sure that the middle class isn’t in the losing column (on tax reform).” (Joseph Lawler, “Republican Jeff Flake Comes Out Against House GOP Import Tax Plan,” Washington Examiner, 3/8/17)

Anonymous U.S. Senator: “I heard ‘keep your powder dry’ as, ‘Don’t articulate your cogent arguments against our bad idea … I have not yet talked to a single senator who’s enthusiastic about it. Ryan and [Ways and Means Chairman Kevin] Brady seem to have a near-theological commitment to it.’” (Rachel Bade & Eliana Johnson, “Ryan Struggles To Sell Tax Reform Plan To Fellow Republicans,” POLITICO, 2/16/17)

House

Rep. Pat Meehan: “It puts us at a remarkable competitive disadvantage.” (Richard Rubin, “GOP Plan To Overhaul Tax Code Gets Held Up At The Border,” Wall Street Journal, 2/7/17)

Rep. Jim Jordan: “You’re now adding a new revenue stream to government, and the potential for abuse, I think, down the road is real.” (Naomi Jagoda, “GOP Senator: Reject Border Tax Proposal,” The Hill, 2/9/17)

Rep. Pat Tiberi: Tiberi “says some of his constituents back border adjustment while others are worried. He says Cardinal Health Inc. has voiced concerns about the cost of rubber for latex gloves and Honda Motor Co. has raised objections, too.” (Richard Rubin, “GOP Plan To Overhaul Tax Code Gets Held Up At The Border,” Wall Street Journal, 2/7/17)

Rep. Jim Renacci, POLITICO PRO: “A Republican tax writer is demanding the House Ways and Means Committee convene a hearing on plans to create a ‘border adjustable’ business tax. Rep. Jim Renacci (R-Ohio) said he has several concerns with the proposal and ‘it would be important, if we’re going to move forward on something, to have a hearing and hear the arguments for and against’ … Renacci said he’s concerned the proposal is ‘picking winners and losers,’ that it may violate World Trade Organization agreements and also has questions over ‘who ultimately ends up paying for’ the proposal.” (Brian Faler, “Renacci Demands Hearing On Border-Adjustment Proposal,” POLITICO Pro, 2/15/17)

Rep. Mike Kelly, BLOOMBERG BNA: “If it hurts American consumers, it doesn’t make sense for me,’ Kelly said, adding that Republicans should not just adopt the plan because it ‘sounds good.’’ (Kaustuv Basu, “Ways And Means Republican Unity Behind Import Tax In Doubt,” Bloomberg BNA, 2/15/17)

Rep. Vern Buchanan, BLOOMBERG BNA: “Buchanan, who previously owned several car dealerships, called border adjustability a ‘big issue.’” … “I haven’t decided where I’m on it until we get the whole package put together.” (Kaustuv Basu, “Ways And Means Republican Unity Behind Import Tax In Doubt,” Bloomberg BNA, 2/15/17)

Democrats

Sen. Mark Warner:  The border adjustment tax is a “VAT on steroids … I continue to hope that Chairman Hatch will try to do tax reform in a bipartisan way. It’s also got to be paid for … But this seems so far beyond anything that has been discussed. With this whole notion that it is going to work itself out and the dollar is going to rise in value, it seems a bridge too far.” (Kaustuv Basu & Laura Davison, “Senators Question Import Provisions In House Tax Proposal,” Bloomberg BNA, 2/2/17)

Sen. Chris Coons: “[T]ax reform is very difficult. When you add a new tax, like the border tax that the President is proposing, you could raise new revenue, and you could encourage one sector of industries but you could punish another. So there’s going to be a lot of fighting about exactly which taxes go up, and which go down…. My gut instinct is to be against it…” (“Sen. Coons Says His Gut Instinct Is Against Border Tax,” Bloomberg, 3/2/17)

Rep. Sander Levin: “Layered on top of the rate reduction and a move to a territorial system is an adoption of ‘a destination-basis tax system,’ which would be achieved by providing for border adjustments exempting exports and taxing imports. Indeed, what the Republicans have included here is a key feature of a VAT, except that the blueprint goes through pains to insist such proposal is not a VAT. Instead, they refer to it as a shift to a consumption-based tax system, with no detail of what that consumption-based tax system looks like, and no detail of how that system would impact consumers and businesses.” (Representative Sander Levin, “Levin Statement On Republican ‘Better Way’ Tax Reform Agenda,” Press Release, 6/24/16)