While several Republican leaders had spent more than a year championing the border-adjusted tax, and Boeing had lobbied strongly for such a tax, retailers’ groups had strenuously opposed the measure.
Republican leaders said Thursday that the proposed border-adjusted tax won’t be part of negotiations on how to overhaul the U.S. tax code — delivering a victory to retailers’ groups that had strenuously opposed the measure.
A statement Thursday from the so-called Big Six — which includes House Speaker Paul Ryan, Ways and Means Chairman Kevin Brady, White House economic adviser Gary Cohn, Treasury Secretary Steven Mnuchin, Senate Majority Leader Mitch McConnell and Senate Finance Committee Chairman Orrin Hatch — said due to the unknowns associated with the border-adjusted tax, the group “had decided to set this policy aside in order to advance tax reform.”
“And we are now confident that, without transitioning to a new domestic consumption-based tax system, there is a viable approach for ensuring a level playing field between American and foreign companies and workers, while protecting American jobs and the U.S. tax base,” the statement said.
Ryan and Brady had spent more than a year championing the border-adjusted tax.
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Boeing CEO Dennis Muilenburg and the 330-company Aerospace Industries Association that he leads had lobbied strongly for such a tax earlier this year.
While the decision announced Thursday will clarify some issues related to Republican leaders’ attempts to enact the first comprehensive tax overhaul in more than 30 years, it leaves a key challenge: How to balance desired tax-rate cuts with new sources of revenue. The border-adjusted tax would have raised more than $1 trillion over a decade, according to estimates. The joint statement contained little clues about that path forward.
Brady told reporters Thursday it was a “significant” day for tax reform, but added that tax writers “still have lots of work to do.” Asked about any other concrete decisions the group had made in recent months, Brady demurred, citing unspecified “progress” toward a unified tax solution.
The statement Thursday set a goal for formulating a plan that “places a priority on permanence” — a signal that the group still wants a tax bill that balances new revenue against its tax-rate cuts.
But without the revenue from border-adjusted tax, it will be more difficult for Republicans to make the kind of historic tax cuts for businesses and individuals that President Donald Trump has promised — and to keep them permanent.
Under the congressional budget rules that GOP leaders plan to use to pass the legislation with a simple majority in the Senate, any tax changes that would add to the long-term deficit would have to be only temporary.
The border-adjustment concept had been under attack by retailers and other industries that rely on imported goods, with a powerful campaign saying the tax would raise prices for working Americans on everyday goods.
A group funded by Koch Industries unveiled a plan in February to derail the proposal.
“We’re greatly encouraged to see leaders put this harmful provision behind them and start to unify around a positive vision for tax reform,” Tim Phillips, president of Americans for Prosperity, one of the groups backed by billionaire industrialists Charles and David Koch, said in a statement.
The border-adjusted tax had also been criticized by conservative Republicans, including House Freedom Caucus Chairman Mark Meadows, who had called for assurances it would be eliminated before proceeding with a 2018 budget resolution — an essential first step to getting a tax overhaul passed without Democratic support.
Eliminating the border-tax proposal is “a prudent decision that will help move forward tax reform that works for all Americans,” said House Freedom Caucus spokeswoman Alyssa Farah.