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Politics Conservatives push to drop border tax from tax reform

02:50  11 june  2017
02:50  11 june  2017 Source:   thehill.com

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Conservatives are ramping up the pressure on House GOP leaders to abandon the border -adjustment tax proposal and move on with tax reform . The proposal to tax imports and exempt exports was a key plank of the tax blueprint Speaker Paul Ryan Paul Davis Ryan Capitol ‘overflowing’ with reporters in

Even before Ryan issued his call, groups had been pushing back against attacks and explaining Lawmakers “need to hear from the validators,” said Americans for Tax Reform President Grover and other tax negotiators agreed to drop the border -adjustment proposal, conservative groups have had

Freedom Caucus Chairman: 'Time is of the essence' on tax reform© Provided by The Hill Freedom Caucus Chairman: 'Time is of the essence' on tax reform

Conservatives are ramping up the pressure on House GOP leaders to abandon the border-adjustment tax proposal and move on with tax reform.

The proposal to tax imports and exempt exports was a key plank of the tax blueprint Speaker Paul Ryan (R-Wis.) released last year but has been on life support for some time after dividing lawmakers and business interests.

With Republicans still looking for a major legislative achievement in the first year of President Trump's administration, some lawmakers and right-leaning groups want Congress to give up on the border-adjustment tax (BAT) in an effort to cut taxes as quickly as possible.

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Conservative groups and activists are stepping up their push for tax reform , arguing to key GOP lawmakers and administration officials that passage of legislation is key for the midterm elections. "There is broad consensus on the need for tax reform

Getty Images. House Speaker Paul Ryan and other officials have dropped the border adjustment tax from a reform push . A controversial plan to tax imports and exempt exports has been dropped from a push to overhaul the U.S. tax code

The Heritage Foundation, which backed a BAT in a 2015 report, released a paper Thursday urging Congress to pursue a tax reform plan that doesn't include the proposal.

The conservative think tank, which is widely respected by congressional Republicans, argued that the proposal is a "significant economic gamble." It also noted the political difficulty of implementing a border-adjustment tax.

"Regardless of one's ultimate view of the economics of border adjustments, it is clear that the current proposal is impeding an otherwise unified effort for tax reform," the group wrote.

One day later after Heritage released its report, House Freedom Caucus Chairman Mark Meadows (R-N.C.) said at an event at Heritage that it's time to look beyond the border tax proposal.

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Kyle Pomerleau, director of federal projects at the conservative -leaning Tax Foundation, said that border adjustment is “actually one of the less-complicated ways to enact tax reform ,” since it is just eliminating a deduction for imports and adding a tax exclusion for exports.

"There is not consensus for the border-adjustment tax," Meadows said. "The sooner we acknowledge that and get on with a plan that actually works and actually can build consensus, the better off we will be."

The members of the conservative Freedom Caucus are split over the border tax, and the group hasn't formally come out against the proposal. But many caucus members don't view it as something that can get enacted.

"I don't see how you pull it off politically," said Rep. Warren Davidson (R-Ohio), who said that he could live with a BAT.

Groups affiliated with GOP billionaire donors Charles and David Koch have also been stepping up the pressure to pass tax reform.

One Koch-backed group, Americans for Prosperity (AFP), recently launched a six-figure ad campaign aimed at getting lawmakers to rally behind the group's tax reform principles. One of those principles is that tax reform not include new burdens on taxpayers, which is where AFP's opposition to the BAT comes in.

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At least two other conservative organizations – the Koch-backed Freedom Partners and the right-wing Club for Growth – confirmed to the Washington Examiner that they plan to be involved in the tax reform push over the coming weeks.

Conservatives that had pushed for the inclusion of mandatory spending cuts in the House budget are now focusing on swiftly passing tax reform . According to Brat, they were willing to drop the spending cuts if leadership would publicly set a Thanksgiving deadline for passing the tax plan.

AFP President Tim Phillips said that Republicans are in agreement on a host of other tax-related issues. He also said House Ways and Means Committee Chairman Kevin Brady (R-Texas) is "isolated" in his continued commitment to the proposal, since the White House and many Republican lawmakers want to move on.

"The most significant holdup at the moment is Chairman Brady's insistence on a border-adjustment tax," he said.

The challenge with abandoning the border-adjustment proposal is that lawmakers will need to find another way to raise revenue to pay for tax cuts and an alternative method to prevent companies from shifting their profits, jobs and headquarters overseas.

Brady told reporters Thursday that cutting tax rates alone won't stop companies from leaving the U.S.

"We need to redesign our system to be competitive, and so the border-adjustment proposal not only solves that but actually starts to begin bringing the supply chains home," he said.

Brady added that he's open to ideas from BAT critics on "how we stop jobs from leaving and more importantly bring them back."

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The border tax idea, essentially a consumption tax that exempts profits from exports, was a major part of the plan that House Republican leaders had been pushing for a year. Other than dropping the border tax idea, the 594-word statement added little that was new.

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Finding an acceptable alternative to the border-adjustment proposal could be tricky, given that any alternative would likely have its own opponents.

"I think the ultimate perspective is, if you're waiting for some kind of revenue-raising provision that no one will get mad at to just come in on a white horse to save your tax proposal, you're not going to find it," said Alan Cole, an economist at the Tax Foundation, which has supported the BAT.

Some conservatives have suggested that tax reform does not need to be revenue neutral, and that tax cuts could be paid for through spending cuts.

But Cole said that when Republicans are trying to cut hundreds of billions in spending, it's hard for them to reach an agreement.

"The politics of cutting spending are pretty hard too," he said.

The Freedom Caucus took an official position Tuesday urging Congress to cancel the August recess to work on tax reform and other issues of importance. Several other prominent conservatives also support that position and argue that if Republicans don't pass a tax bill, it could hurt them in the 2018 midterm elections.

"We have to start showing the American people some tangible proof that Republicans can govern," said Jason Pye, director of public policy and legislative affairs at FreedomWorks.

Pye said it's "short-sighted" for lawmakers to be focused on the BAT and said that lawmakers can oppose the proposal and still have constructive conversations with House leadership and the Ways and Means Committee on tax reform more broadly.

"We have to move past that," he said.

Trump campaign adviser Larry Kudlow said in an op-ed in the New York Sun Friday that Meadows "is absolutely right that the August recess should be cancelled."

Kudlow opposes the BAT and said he's been pitching the White House on a tax plan of "three easy pieces" of a 15-percent corporate tax rate, full expensing of businesses' capital investments and a one-time rate of 10 percent on earnings that American corporations repatriate to the U.S.

He's encouraging policymakers to include a corporate rate cut in legislation to repeal ObamaCare, and to tackle tax cuts for individuals at a later point.

"If the GOP can't deliver, they're not going to get it done in the fall and they're not going to get it done next year. This is the moment," Kudlow said in an interview with The Hill.

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