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Republicans look to address border tax price concerns

24 Jan 2017 21:24 GMT
Republicans look to address border tax price concerns

Washington, 24 January (Argus) — House Republicans are considering revising their proposed border adjustment tax plan to address fears that it could drive up gasoline prices.

US House Ways and Means committee chairman Kevin Brady (R-Texas) today said there were "valid concerns" about the effect the tax could have on energy prices. He said he was confident that economic and currency shifts driven by the policy would mitigate those effects. Even so, Brady said he was looking at altering the tax's design.

"We know we are throwing bold changes at the business community," Brady said today at an event hosted by the US Chamber of Commerce.

The border adjustment tax is a key component of a House Republican plan to slash corporate tax rates to 20pc from 35pc under current policy. The proposed border tax would block corporations from taking a tax deduction on imported feedstocks and products, effectively making them more expensive, while exempting income from exports from US corporate taxes altogether.

US refiners have pushed back against the proposal over concerns it could drive up consumer fuel prices and disrupt their operations. US oil and natural gas group the American Petroleum Institute has raised preliminary concerns with the proposal but is still studying it before formally taking a position.

Brady warned there would be "severe consequences for America" if special interest groups succeed in blocking the proposed border adjustment tax. US corporate tax rates would have to be set at a significantly higher than the Republican goal of 15-20pc without the border adjustment tax and the revenue it would provide, he said.

House Republicans proposed the border adjustment tax last summer through a "blueprint" that offered broad details of a tax overhaul plan. Brady said his staff were "hard at work" turning the blueprint into legislation and have invited business executives to "engage constructively on the design and transition" for the border adjustment tax.

President Donald Trump has so far said he favors a targeted tax on imported products from companies that close US factories and move jobs overseas. Yesterday he said there would be a "very major border tax" on companies that move jobs overseas, but has offered mixed views on the border adjustment tax proposed by House Republicans. Trump seemed to suggest there would be no such tax for companies that stay in the US.

"If you stay here, there is no tax," Trump told manufacturing executives yesterday. "People are saying Trump is going to tax, I am not going to tax, there is no tax, none whatsoever. And I just want to tell you, all you have to do is stay, do not leave, do not fire your people in the US."