Lawmaker says 20% import tax would help oil sector

AUSTIN — U.S. oil producers would get a financial boost from a proposed border adjustment tax that would add 20 percent to the price of imported crude, and a senior Texas congressman says the wider benefits would outweigh the resulting higher gasoline prices.

U.S. Rep. Joe Barton, a senior Republican on the House Energy and Commerce Committee, said that to eliminate the estate tax and lower the maximum corporate and individual income tax rates to 20 percent, the government will need to tax all imports 20 percent.

“In the case of crude oil, if the price is $50 ... you would add to that price $10,” Barton said while answering questions at the Kay Bailey Hutchison Energy Symposium in Austin.

“It would help domestic producers, it would hurt the big importers of oil, the Exxons, the Chevrons, the BPs, the Conoco Phillipses, and all the big oil companies that import oil,” he added. “It would raise gasoline prices at the pump, because you would raise the price domestically of crude oil.”

Despite the burden on commuters, Barton said he supports the border adjustment tax because it comes along with lower income tax rates and would give small oil producers higher profits to pump more Texas oil. Oil exported from Texas, by the way, would not be taxed.

Barton, who has served 32 years in Congress, deserves credit for his honesty about the

winners and losers of a border adjustment tax. He didn’t try to convince anyone that exchange rates would magically adjust and wipe out the 20 percent tax hike on imported goods.

Realistically, though, this doesn’t make the border tax a good idea. And it reveals how and why the tax overhaul under discussion in Congress would cut taxes on the rich and shift the burden to the middle class.

President Donald Trump’s choice for Treasury secretary promised Congress in November “there would be no absolute tax cut for the upper class.” But that’s not the direction Congress is heading.

The plan Barton describes lowers the highest tax rates on the wealthiest American, while collecting revenues from imported goods. Any economist will tell you that the middle and lower classes, many of whom pay no income tax, spend a larger portion of their income on goods than the wealthy, who typically invest or save a much larger portion of their income.

Therefore, any tax on imported goods will hit low- and middle-income Americans more than the wealthy, who will pay less in taxes. The New York Times published a detailed look at the Republican tax plan that proved the wealthy will benefit the most.

Barton wasn’t done sharing the truth about our finances. He also came clean on the nation’s $20 trillion debt, created by running a budget deficit for 17 years.

“We’re still borrowing about half a trillion dollars a year,” Barton said. “It’s the biggest problem facing our nation. My biggest failure and disappointment as a congressman is I haven’t been able to be a part of something to really change the basic pattern of deficits.”

The Republican leadership laughed at him when he suggested getting back to a balanced budget within four years, Barton said. Getting to a balanced budget will take at least eight years because of increased spending on Social Security, Medicare and Medicaid.

Barton and his Republican colleagues refuse to see the solution right in front of them. They have a once-in-a-generation chance to overhaul the tax system and make the budget balance.

Yet they’d rather continue to run up the national debt rather than admit that they have not properly managed the money Americans have been paying into Social Security and Medicare for their entire working lives. Frankly, they gave away too much in past tax breaks, and they are about to do the same again.

Barton said the Republican Congress will present a comprehensive plan in the coming weeks. He said he fully expects howls of protest from every corner of the nation about losing favorite tax provisions. The draft plan will evolve, of course, as the president gets involved.

This is the time, though, for everyone to pay attention. What happens next determines how much you pay for imported goods at Wal-Mart. Cutting taxes could mean Social Security and Medicare won’t be available when you turn 65. And the closer I get to retirement, the more worried I become about these programs.

chris.tomlinson@chron.com twitter.com/cltomlinson