Tax Bill: Regular Order and No Border Tax

White House, GOP congressional leaders agree on process to write a tax bill and move it through the House and Senate under regular order – without the Trump administration’s proposed border adjustment tax.

White House, GOP congressional leaders agree on process to write a tax bill and move it through the House and Senate under regular order – without the Trump administration’s proposed border adjustment tax.

In contrast to GOP efforts to repeal and replace Obamacare, Republican congressional leaders plan to move tax legislation in regular order, which means starting with a bill and working it through committees. They also plan to put aside the Trump administration’s proposed border tax.

The news came in the form of a joint statement from the White House, House Speaker Paul Ryan and Senate Majority Leader Mitch McConnell. This is viewed as an olive branch to Democrats to play a role in shaping, at least at the margins, of tax legislation.

The basic goal of the legislation remains the same – to promote economic growth and American jobs. Core ideas will be to lower tax rates and simply the tax code. “The goal is a plan that reduces tax rates as much as possible, allows unprecedented capital expensing, places a priority on permanence and creates a system that encourages American companies to bring back jobs and profits trapped overseas,” the statement read.

The flash points, as always, will be who benefits most from lower tax rates and how expected federal revenue losses will be offset. The statement didn’t offer any specifics, but junking the border tax idea, which would have taxed imports and exempted exports, removes one of the main ways the Trump administration proposed to offset revenue losses. That will make it harder to squeeze a tax cut into a budget.

In its statement, GOP leaders talked about “tax relief for American families” and helping small US businesses compete with larger business and larger business compete with foreign businesses.

Dropping the border adjustment tax, known as BAT, comes amid questions about its actual impact and the long-term consequences of shifting to a national consumption tax. Supporters claim it would bolster US manufacturing. Critics contend it could curtail US exports, raise prices for American consumers and possibly even spark a trade war.

There had been some thought that congressional Republicans would try to use the budget reconciliation process to move a tax measure. The health care legislative mess undoubtedly discouraged that thought. Republicans also believe there is willingness among some Senate Democrats to play ball on tax provisions. And they hope to have a more unified voice from business interests, if not others, in support of a tax code update. Inclusion of a border tax would have splintered the business community and probably doomed the legislation to vocal opposition from consumer groups.

No time table or specific provisions were included in the statement, but working through both House and Senate tax-writing committees will take time for public hearings, mark-up sessions and floor debates, not to mention an eventual conference committee to iron out differences. It is unlikely that serious work on tax legislation will start before lawmakers return from their August recess.