The heads of GE, Boeing, and other large corporations have warned that the US may not have another opportunity to revamp its tax code for 30 years if it misses out on a chance to do so now amid uproar over a proposed import tax.
In a letter to Congress, 16 chief executives from exporters including Caterpillar, Dow Chemical, and Pfizer issued their strongest statements of support yet for the import tax, which retailers, oil refiners, and other importers are fighting to kill.
“If we miss this chance to fundamentally reshape the tax code, it might take another 30 years before we have another chance to try,” the chief executives write in a letter to be sent on Tuesday.
The lobbying war between importers and exporters — whose products would go untaxed if shipped overseas under the plan — has already slowed the writing of legislation and prompted some senators to come out against the House plan.
Tax Debate Heats Up
An uncomfortable question looms over the tax debate in Congress: What’s Plan B?
Border adjustment, a pillar of House Republicans’ tax proposal, is taking a beating. Big retailers are lobbying aggressively against the concept, which would tax imports and exempt exports. Senate Republicans have expressed views ranging from skepticism to hostility. Even some House Ways and Means Republicans are wary.
With Democrats sidelined, just three GOP senators could kill the House tax plan; already, more than that oppose border adjustment.
Border adjustment is essential to overhauling the tax code and encouraging investment in the U.S., and House Republicans are going to keep pushing, Rep. Kevin Brady (R., Texas), the plan’s chief architect, said Thursday.
In Mr. Brady’s plan, border adjustment serves two purposes that can’t be easily replicated, experts say. First, it would raise an estimated $1 trillion over a decade to help pay for cutting the corporate tax rate to 20% from 35%. Second, border adjustment reshapes the U.S. tax base around domestic consumption, making it harder for companies to escape U.S. taxes by putting their manufacturing, intellectual property or headquarters outside the country.
Any plausible Plan B—whether from Mr. Brady or importers lining up against him—must grapple with those two challenges.
Deep tax cuts face tougher Senate procedural hurdles that would likely require them to expire after 10 years.
Sen. David Perdue (R., Ga.), a former retail executive, said lawmakers should scrap border adjustment, focusing on lower tax rates and banking on economic growth to make up revenue shortfalls.
“Trust the free enterprise system. Get this tax structure simplified, competitive with the rest of the world and then watch this economy grow,” he said. “I think they’re underestimating the power that this is going to have.”
Six Reasons to Side With Perdue
- The border adjustment tax (BAT) proposal is against WTO rules
- It will not raise the amount of money expected (tax hikes never do)
- It will cripple trade with Mexico
- It will decrease competition
- It will raise prices for consumers
- It will kill jobs
Contrary to popular myth, taxing importers will not bring jobs back to the US. But import taxes would raise prices, decrease competition, and cripple trade, whether or not other countries retaliate.
Since when do raising prices, decreasing competition, and restricting trade increase jobs?
Trust the Free Enterprise System
Perdue is correct. It’s time to slash the corporate tax rate and trust the free enterprise system. We also need to cut spending and stop warmongering.
Mike “Mish” Shedlock