Import provision imperils tax plan
How to finance lower corporate rate divides GOP
WASHINGTON — A key part of House Republicans’ plan to overhaul the way corporations pay taxes is on life support, leaving lawmakers scrambling to save one of President Donald Trump’s biggest priorities and increasing the chances the GOP will simply pass a tax cut instead of overhauling the tax code.
A proposed tax on imports is central to the GOP plan to lower the overall corporate tax rate. It would generate about $1 trillion over the next decade to finance the lower rates without adding to the deficit. It would also provide strong incentives for U.S.based companies to keep their operations in the United States and perhaps persuade companies to move overseas operations to the U.S.
But the tax faces strong opposition from retailers, automakers and the oil industry, and a growing number of congressional Republicans have come out against it. They worry that it will increase the cost of imports, raising consumer prices.
Majority Leader Mitch McConnell, R-Ky., says there probably aren’t enough votes to pass the import tax in the Senate — not a single Republican senator has endorsed it. And a powerful group of House conservatives says it’s time to dump the idea.
“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,” said Rep. Mark Meadows, R-N.C., chairman of the conservative Freedom Caucus.
Even one of the biggest backers of the new tax says he is open to other ideas.
Rep. Kevin Brady, RTexas, has pushed the tax as chairman of the powerful House Ways and Means Committee. He still says it’s the best way to promote economic growth and domestic jobs, but he has softened his stance on alternatives.
“I’m still confident that we’re going to stay at the table until we solve that problem, which is how do we stop U.S. jobs from continuing to leave the United States,” Brady said. “We’re going to remain open to the best ideas on how we do that.”
On Tuesday, Brady proposed gradually phasing in the tax over five years to give corporations time to adjust.
It wasn’t received well by opponents.
“Forcing consumers to pay more so that some profitable companies can operate tax-free is no better of an idea in five years than it is today,” said Brian Dodge of the Retail Industry Leaders Association.
Under current law, corporations pay a top tax rate of 35 percent on their profits. But the tax code is filled with so many exemptions, deductions and credits that most corporations pay a much lower rate.
Under the new import tax, which is called a border adjustment tax, American companies that produce and sell their products in the U.S. would pay a new 20 percent tax on the profits from these sales. However, if a company exports a product, the profits from that sale would not be taxed by the U.S.
Foreign companies that import goods to the U.S. would also have to pay the tax, and they would not be able to deduct the cost of the imported good as a business expense.
Republicans have been meeting behind closed doors for weeks to come up with alternatives. Democrats have been excluded from the talks.