Don’t let tax on imports derail the reform effort
It has been nearly 31 years since President Ronald Reagan and the U.S. Congress reformed our nation’s tax code, and during those years Congress enacted numerous changes — more than 5,900 since 2001 — that made our tax laws more convoluted and globally uncompetitive. No surprise, then, that opposition to simplifying the code comes from within Congress itself.
Fair and comprehensive tax reform is long overdue, and a growing coalition of elected officials, business leaders and ordinary taxpayers are rallying support for bold action.
President Donald Trump and Republicans in Congress have outlined plans that would cut taxes and eliminate special-interest loopholes, all while expanding the economy and increasing opportunities for all Americans, especially those hardest hit by the failed economic policies of the Obama years.
Voters are on board, too. According to a recent survey, 73 percent think our tax system should be overhauled this year.
Washington now has a once-in-a-generation opportunity to do just that. Unfortunately, U.S. Rep. Kevin Brady, R-The Woodlands, stands in the way of uniting the pro-tax reform coalition and building consensus around a comprehensive plan.
As chairman of the U.S. House of Representatives’ tax-writing Ways and Means Committee, Brady and his colleagues have drafted a reform agenda that contains many positive proposals that would boost our economy and tame the tax code.
But Brady is relentlessly insisting that tax reform legislation include what he calls a “border adjustment tax.”
The Brady Tax is a new 20 percent tax on everything businesses import into the United States, including raw materials, component parts and final products. It is estimated this tax would raise $1.2 trillion over 10 years. And while supporters like to call it an “import tax,” we all know the costs would be passed on to consumers, who will pay more for energy, food, clothes, cars, computers and more.
Supporters of the Brady Tax claim it would put American industry on a more competitive footing. But an analysis by Freedom Partners and Americans for Prosperity found that the measure would hurt the very industries it is designed to help. The manufacturing industry alone could face $67 billion in new taxes on imports. That means higher prices and fewer jobs.
Brady’s home state would be among the hardest-hit. Texas imports amounted to more than $302 billion in 2014, or nearly 19 percent of state GDP. Because imports play an outsize role in the overall economy, Texas would be one of the 10 states most sensitive to a tax hike on imports.
Brady’s own constituents are among those protesting.
Emmett Kelly, who owns a gun store in Conroe, went to Washington recently to tell members of Congress that the tax could ruin his business. About 80 percent of his inventory is imported. “Everybody that I’ve talked to has shuddered when they heard what this border adjustment tax is going to cost,” Kelly told Reuters.
Randi Sonenshein, senior vice president of strategy and finance for Houston-based Stage Stores, told the Houston Chronicle that “the plan will have a disproportionately negative impact on retailers. It’s a tough thing to contemplate.” Most of her company’s 800 locations are in smaller cities, where the customers would be particularly hurt by the higher prices resulting from the consumer tax.
The Brady Tax is bad policy, it has no chance of passing the U.S. Senate, and it’s dividing the pro-tax reform coalition at the precise time unity is desperately needed most.
Comprehensive tax reform is critical to leveling the tax playing field, and expanding prosperity and opportunity. And this can be done without saddling consumers with new burdens like the Brady Tax.
The White House has put forward its own proposal to lower rates for individuals, families, and businesses while excluding new taxes on consumers. That’s the right approach.
Brady should follow Trump’s lead and abandon his divisive tax — a trillion dollar tax on consumers masquerading as a tax on imports.
He instead should use his leadership position to unite lawmakers and the American people around an achievable tax reform plan that will make the code simple, equitable and efficient, and does not add new burdens on the taxpayer.