US senators raise border tax concerns: Update

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Leading Republican members of the US Senate are concerned about the potential increase in domestic gasoline prices as a result of a border adjustment tax proposal advanced by their House colleagues.

The concerns from Senate majority whip John Cornyn (R-Texas) and US Senate Energy and Natural Resources Committee chairman Lisa Murkowski (R-Alaska) come as the lead tax writer in the US House of Representatives all but ruled out exempting oil and other imported commodities from the proposed tax, which has drawn staunch opposition from some refiners and US energy company Koch Industries.

House Ways and Means committee chairman Kevin Brady (R-Texas) during a televised interview rejected the idea of exempting oil and other imports from the tax. "Not if I have my way, because once that starts, it never ends. It will be a constant special-interest lobby stream into our offices. That is what we are trying to get rid of in this tax reform."

The tax plan put forward by House Republicans would lower corporate tax rates to 20pc, down from 35pc, and partially make up for the lost revenue by changing the tax treatment of imports. The border adjustment tax would prevent corporations from taking a tax deduction on imported products, including crude and products, and eliminate taxes on exports.

"I worry about the politics of it, where you look at cutting corporate taxes but raising the taxes on consumers, through higher prices of gasoline coming from refineries, consumer goods, automobiles," Cornyn said today at the CeraWeek conference in Houston.

"I am not really interested in anything that increases the price of gasoline," Murkowski said at the conference.

House Republicans expect the border adjustment tax would generate about $100bn/yr in revenue, which they want to use to help pay for the loss of revenue that would come from cutting the corporate tax rate. Cornyn said he worried about the assumptions behind the tax and called it a "huge gamble." Murkowski said the Senate needed to look at the assumptions "very critically."

The fate of the border adjustment tax may hinge on whether it wins enthusiastic support from President Donald Trump, who has offered conflicted opinions on the proposal but dislikes its branding. "He does not [like the name], and he will tell you that pretty clearly," Brady said today. Brady predicting Trump would "leave it to us" to design the border adjustment tax.

Both Cornyn and Murkowski said they supported the principle of a corporate tax overhaul. But Cornyn said that pushing forward with the tax reform has to yield priority to the immediate task of confirming administration officials, rolling back federal regulations and taking on former president Barack Obama's landmark healthcare legislation.

The White House and House Republicans have pushed to enact tax changes by August, but top senators expect it to take longer. Cornyn said "sometime in 2017" was more likely. Senate majority leader Mitch McConnell (R-Kentucky) earlier this week suggested the August deadline was not realistic.