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Republicans seek to ease into US border tax

13 Jun 2017 22:15 (+01:00 GMT)
Republicans seek to ease into US border tax

Washington, 13 June (Argus) — The Republican leadership in the US House of Representatives is trying to rescue their proposed border tax by phasing it in over five years, but critics say the transition does little to resolve concerns it would increase prices for gasoline and retail goods.

House Ways and Means committee chairman Kevin Brady (R-Texas) today announced he wanted a "very gradual five-year phase-in" of the border adjustment tax, which would tax US corporations on imports and domestic sales but remove taxes on exports. Brady, who is leading tax overhaul efforts in the House, has suggested a phase-in period before but today was the first time he specified a five-year schedule.

The border tax in its initial form had been projected to raise $1 trillion over the next decade, revenue Republicans could use to pay for lower corporate tax rates. Supporters of the border tax argue it will retain jobs in the US and strengthen the dollar, which would offset higher prices of imports. But critics say there is no guarantee this would happen.

Brady said that while he was confident the dollar would adjust quickly and fully, a five-year transition would provide more clarity to businesses nervous about the the border tax's effects.

"Businesses need plenty of time to assess their current supply chain and decide what, if any, can return to the United States. And they want plenty of time to see how the dollar adjusts and at what level," Brady said at an event hosted by the Wall Street Journal. "A very gradual phase-in really resolves the major challenges."

But the five-year schedule did little to appease the border tax's critics, who say the border tax would be disruptive to business and raise costs of consumer goods such as gasoline, food and clothing. US energy company Koch Industries argues that the continued focus on border adjustment is delaying Republican efforts to overhaul tax policy.

"This phase-in does little to ease our concern with a border adjustment tax," Koch Industries government affairs president Philip Ellender said. "A five-year phase-in does not make a bad idea a good one."

The conservative group Heritage Action said the phase-in would "create more problems than it solves" and called on Republican leaders to declare the border adjustment tax dead so they can move on to overhauling tax policy. A retailer group called Americans for Affordable Products said the proposal "only delays political consequences for lawmakers."

President Donald Trump omitted the border adjustment idea from the tax plan he released in April, but House Republicans are continuing to push for the idea in an eventual joint tax plan they are writing with the White House and Senate Republicans. US treasury secretary Steven Mnuchin yesterday said the administration was still seeking to enact a tax overhaul this year.