electronic Global Trade Credit Platform/eGTCP's Blog: Import tax officially abandoned in Big 6 tax reform talks

White House and congressional leaders officially acknowledged on Thursday that a controversial tax on imports would be dropped from tax reform, but otherwise provided no new details on a broader plan they expect to start moving through Congress in the fall.

The import tax, called border adjustability, was pushed by House Speaker Paul Ryan as a way to fund tax cuts, but it prompted a fierce backlash from retailers, other import-dependent industries and conservative activists. With that tax off the table, Congress, the White House and advocacy groups hope to present a more united front on tax reform, though other disagreements will surely flare as lawmakers work on a replacement.

In a statement that was otherwise largely symbolic, the "Big Six" tax reform negotiators vowed to reduce tax rates, simplify the tax code and improve U.S. economic growth by changing tax laws.

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The declaration — from Ryan, House Ways and Means Chairman Kevin Brady, Treasury Secretary Steven Mnuchin, Senate Majority Leader Mitch McConnell, Senate Finance Chairman Orrin Hatch, and National Economic Council Director Gary Cohn — on border adjustability confirmed what was widely anticipated for months.

"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," the statement said.

"We are now confident that, without transitioning to a new domestic consumption-based tax system, there is a viable approach for ensuring a level of playing field between American and foreign companies and workers, while protecting American jobs and the U.S. tax base," it said.

Brady, who also supported border adjustability, told reporters that "in order for us to unify it was important to set it aside, for now. Perhaps there will be study in future years on it."

“We’ve been actively exploring with the Senate and the White House a viable alternative," he added. "[We] still have work to do but I like the path we’re going.”

Foes of the border tax, or BAT, celebrated its demise.

“With BAT out, Washington has an opportunity for the first time in more than a generation to pass a tax reform plan that boosts American businesses and family budgets,” said a statement from the president of the Retail Industry Leaders Association, Sandy Kennedy.

Democrats scorned the entire process.

"We all agree that the tax code isn’t working for middle-class families but the past has shown that for tax reform to be successful, it must be undertaken in a truly bipartisan manner," Rep. Richard Neal, the top Ways and Means Democrat, said in media release. "If Republicans continue this partisan process, they are doomed to repeat the same mistakes they have made trying to upend our health care system."

Even though details like tax rates have yet to be worked out, interest groups, including conservative grassroots organizations, are expected to try to build public support for tax reform over Congress's August recess, and GOP lawmakers have been given marching orders to talk up the effort.

Brady has invited House and Senate tax writers to meet at the Reagan Ranch in Santa Barbara, Calif., on Aug. 16 for a public event on tax reform.

Expectations had grown in recent days that the Big Six would provide more details of their talks that members could use as talking points over the break. But the statement amounted to a list of principles.

“The goal is a plan that reduces tax rates as much as possible, allows unprecedented capital expensing [for businesses], places a priority on permanence, and creates a system that encourages American companies to bring back jobs and profits trapped overseas,” it said.

The negotiators added that "the time has arrived" for the tax-writing committees to produce draft legislation. "Our expectation is for this legislation to move through the committees this fall, under regular order, followed by consideration on the House and Senate floors."

Representatives from various groups who were briefed on the top-line statement saw it in a positive light, given that it demonstrated compromise towards getting tax reform legislation enacted by the end of this year. Ryan and Brady hadn’t stopped backing the border adjustment tax until Thursday.

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