Heck on the bor­der

Tax ‘ad­just­ment’ is needed to keep com­pa­nies here, but how to do it isn’t clear

The Washington Times Daily - - EDITORIAL -

There’s change com­ing on the bor­der. Repub­li­cans on the House Ways and Means Com­mit­tee are work­ing to make Speaker Paul Ryan’s tax re­form scheme palat­able enough to sell to a cranky cham­ber. It’s a high wall to climb over.

Repub­li­can lead­ers say the “bor­der ad­just­ment tax” is nec­es­sary to keep U.S. com­pa­nies from re­lo­cat­ing their head­quar­ters over­seas to qual­ify for a tax break in an­other coun­try. But more than $1 tril­lion in tax rev­enues are needed to en­able the pro­posed over­all lower tax rates. The rankand-file Repub­li­cans aren’t so ea­ger to em­brace the scheme.

The way the pro­posed bor­der tax is cur­rently be­ing struc­tured is that it would ap­ply only to goods pro­duced abroad and sold in the United States. Ex­ports would be ex­empt. The tax could be steep, as high as 20 per­cent. The tax, like all taxes, will be paid by con­sumers. Sen. Tom Cot­ton of Ar­kan­sas, a Repub­li­can, says that “what all of this would re­ally amount to is a 20 per­cent tax on im­ports.” Lots of in­ex­pen­sive goods mid­dle-class fam­i­lies count on are made some­where else.

Rep. Kevin Brady of Texas, chair­man of the Ways and Means Com­mit­tee, says he’s try­ing to come up with a for­mula that will sat­isfy Repub­li­cans in the House. But the Se­nate is a dif­fer­ent place, and there may not be a sin­gle Repub­li­can on board. State gov­ern­ments will likely rebel, too. A new re­port by the Koch-backed Free­dom Part­ners and Amer­i­cans for Pros­per­ity warn that the tax would be a par­tic­u­lar fi­nan­cial hard­ship in 10 spe­cific states, seven of which voted for Pres­i­dent Don­ald Trump. Ge­or­gia, Ken­tucky, Louisiana, Michi­gan, South Carolina, Ten­nessee and Texas, all Trump strongholds, rely heav­ily on im­ports. Cal­i­for­nia, New Jersey and Illi­nois would feel in­tense pain, too.

Mr. Trump, who un­der­stands why U.S. com­pa­nies must be per­suaded not to aban­don Amer­ica to avoid Amer­ica’s high cor­po­rate tax rate, among the high­est in the world, has not yet taken a firm stand on the bor­der tax. But he seems to pre­fer re­form of some kind to keep com­pa­nies here. Some of his White House eco­nomic ad­vis­ers fa­vor the bor­der tax, oth­ers don’t. The fight­ing over this will be fierce.

Speaker Paul Ryan, fac­ing a wave of anger and angst over the fail­ure to re­peal Oba­macare, must find a way to build Repub­li­can sup­port while pre­vent­ing bolt and buck among con­ser­va­tives of the Free­dom Cau­cus, lest tax re­form share a lonely grave with re­peal and re­place.

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