District 6 U.S. House Representative

San Antonio Express: Major retailers, corporations squaring off over “border adjustment tax”

Illinois Rep. Peter J. Roskam - Mon, 02/13/2017 - 3:10pm

By Bill Lambrecht, Washington Bureau

WASHINGTON — A radical plan for a 20 percent border tax on imported goods to the U.S. is drawing opposition from a new alliance of major American retailers, complicating a drive by House Republicans to engineer the biggest tax overhaul in decades.

A week after being caught in the confusion of President Donald Trump’s feud with Mexico, the far-reaching proposal that also slashes corporate income taxes drew fire from the likes of Walmart, Target and Macy’s, along with questions from GOP senators.

“What is this going to do in every community in Texas if Walmart has to raise prices?” asked David French, chief lobbyist for the National Retail Federation. “It’s more money consumers don’t have to spend on other things.”

The 20 percent border tax bandied about by the White House as a means to pay for the Southwest border wall would apply to imports from every nation, the centerpiece of a plan Republicans argue would end the “made in America” tax that plagues exporters. The term loosely applies to value-added taxes applied to imported goods in other countries.

Battle lines began drawing in earnest last week for a high-decibel lobbying battle that pits companies relying heavily on imports against exporters feeling wronged in global trade.

U.S. Rep. Kevin Brady, R-The Woodlands, the House Ways and Means Committee chairman and a main architect of the plan, declared that he had secured backing from a potent business alliance that includes Boeing, General Electric, Dow Chemical, Eli Lilly and Pfizer.

On Friday, Brady responded to audience questions after a speech in Washington by saying he expects to accommodate many of the concerns he is hearing.

“For those who are in a bit of a hysteria, not so much,” he added.

“Everybody needs to understand this: We are not going to continue a tax code that favors foreign products over U.S. products or that keeps in place incentives for companies and research and manufacturing to leave the U.S,” he said.

Brady and GOP allies have worked for five years on their far-reaching proposal, which they unveiled in June, a time when analysts gave Trump a 20 percent chance of getting elected.

Now, with Trump unexpectedly in the White House, they hope to seize the opportunity, which Brady said Friday “may not come again.”

Their proposal, being drafted into legislation, has a most appealing feature for corporations: a huge income tax cut, from 35 percent down to 20 percent.

To make up the billions in lost revenue, the plan proposes a so-called border adjustment tax — the 20 percent levy on imported goods — a taxing method in widespread use around the world.

In an interview, Brady said House Republicans intend to do what China, Mexico and other nations do in global trade.

“More than 100 of our competitors adjust their border taxes. They take their VAT (value added tax) off coming to the United States, and they put that tax on ‘made in America’ products coming into their country,” he said. “Today, through our own tax code, we favor foreign products over American products.”

The plan also has the goal of stemming the practice of companies establishing foreign headquarters and keeping money offshore.

In addition to retailers’ opposition, Brady’s plan is drawing fire from the American Fuel and Petrochemical Refiners Association. Other critics include David and Charles Koch, whose conglomerate based in Wichita, Kansas, relies heavily on exporting.

Supporters argue that the disadvantage for importers would disappear when currency exchange rates adjust to an increased demand for U.S. exports and the reduced demand for foreign products. A significant increase in the value of the dollar would enable importers to buy their goods more cheaply, they say.

Some economists agree, but the issue remains a hot topic of conversation.

“Some of my colleagues here think exchange rates will adjust to offset any impact on trade,” said Rob Scott, an analyst with the left-leaning Economic Policy Institute.

Echoed Alan Cole, an analyst with the independent Tax Foundation in Washington: “It will end up being a wash.”

French, of the National Retail Federation, said the retailers he represents aren’t inclined to accept that thinking.

“If the exchange rates equal out, then there’s no impact on importers. But our expectation is that in the real world, it doesn’t even out as economists would like us to believe,” he said.

French presaged what people might well see in 30-second ads when lobbying grows intense: retailers warning of a 30-cent or more increase for a gallon of gas; a 15 percent increase for clothing; and coffee prices suddenly 15 percent higher.

Trump is sending mixed messages. Brady’s goals of tackling trade inequity and wrangling companies into keeping operations in the U.S. square with candidate Trump’s hard-line messages aimed at China and Mexico. Brady said his plan and Trump’s were 80 percent in agreement.

But just before taking office, Trump made would-be reformers nervous by labeling the border adjustment tax “too complicated.” The U.S., he added in a Wall Street Journal interview, could get “adjusted into a bad deal.”

Then, by saying the border tax could be a means to extract money from Mexico, Trump appeared to signal support. But he could have done harm to the plan by linking it to the emotion-charged issue of the border wall.

“It is easy with these discussions to confuse tax policy with trade policy; they’re becoming interwoven,” Brady said in his interview. “They seem to be on the same side of the ledger. They’re not.”

Trump also invited ridicule by economists, among them Donald Marron of the Urban Institute think tank.

“If you get into the rhetorical game of saying this will lead to Mexico paying for the wall, then you back yourself into questions like, what is China paying for? What is Germany paying for? And what are Japan and Vietnam paying for?” Marron said.

“And assuming that the wall eventually gets built, what is Mexico paying for then?” Marron asked.

U.S. Peter Roskam, R-Ill., will be alongside Brady in the fight as chairman of the Ways and Means subcommittee handling taxes.

“It’s going to be very helpful when President Trump engages specifically on this,” he said. “My prediction is that when he and his team look at all the options in the larger picture, they’ll say, ‘We’re on board. Let’s go.’”

Skeptics will come around, he argued.

“We basically have a tax code that is dissolving beneath us and sending jobs overseas. We can either sit here and watch it or do something about it. We’re saying let’s stop the hemorrhaging; let’s flip the game board on the whole thing,” he said.

See the article from the San Antonio Express here.

The post San Antonio Express: Major retailers, corporations squaring off over “border adjustment tax” appeared first on Roskam for Congress.

Bloomberg: Rep. Roskam Urges Fast Tax Overhaul As Border Debate Continues

Illinois Rep. Peter J. Roskam - Tue, 02/07/2017 - 3:11pm

By Kaustuv Basu and Aaron E. Lorenzo

There is a “collapsing window of opportunity” for overhauling U.S. tax laws that might not come again soon, Rep. Peter Roskam (R-Ill.) told a Heritage Foundation forum.

Roskam’s remarks Feb. 6 echoed those of House Ways and Means Committee Chairman Kevin Brady (R-Texas) in recent weeks, in which he has warned that fighting a key revenue-raising provision in the tax plan would limit how low they could reduce tax rates.

Brady has called the current effort to reshape taxes a once-in-a-generation opportunity.

The comments from Brady and his allies on the committee suggest they are sending a message to corporate America to fully understand the implications if this year’s tax reform push falls by the wayside.

National retailers have questioned a key “border adjustability” provision in the House GOP blueprint, which would led to a 20 percent tax on imports while another coalition of companies support the approach.

Non-congressional supporters of the border adjustment idea spoke separately on an academic paper that showed that it could result in a larger tax base than the current income tax system or a cash-flow tax.
Tax Base

American Action Forum President Douglas Holtz-Eakin told a Tax Foundation forum Feb. 6 that “the amount of revenue on the table in moving to border adjustment is enormous, and for that reason it’s going to attract a lot of attention.”

The research, based on corporate tax data from 2004-13 excluding financial firms, showed a tax base of $14 trillion under border-adjusted cash-flow taxes, compared to about $9.3 trillion from income taxes and about $9.4 trillion from cash-flow taxes before adjustments.

The study results generated such questions as what to do with companies that would be put in a permanent loss position under a border adjustment system, said its author, Elena Patel, financial economist in the Treasury Department’s Office of Tax Analysis. She estimated that 10 percent of firms would be moved into a loss position by shifting out of an income tax system.

“This is one of the pressure points that policymakers in particular are very worried about when you move to a totally new cash-flow tax system,” Patel said, noting that they might want to rethink current policy that allows losses to be carried backwards and forwards.
Pushing Back

Brady, who has been making regular appearances at think tanks and on television to promote the tax plan, is scheduled to appear at a Bloomberg BNA event Feb. 7 to continue his outreach and maintain momentum in the face of opposition from companies such as Walmart Inc. and Koch Industries Inc.

Roskam, chairman of the Ways and Means Tax Policy Subcommittee, suggested that a major tax bill could become law within a year.

“You’ve got a speaker of the House in Paul Ryan who is going to create as much legislative space as possible,” Roskam said.

See the article from Bloomberg here.

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The Hill: Ill. rep named new chairman for House tax-policy subcommittee

Illinois Rep. Peter J. Roskam - Mon, 02/06/2017 - 3:15pm

By Naomi Jagoda

Rep. Peter Roskam (R-Ill.) will be the new chairman of the House Ways and Means Committee’s tax-policy subcommittee, taking the reins of the panel as congressional Republicans aim to pass tax-reform legislation this year.

Roskam will succeed former Rep. Charles Boustany (R-La.), who unsuccessfully ran for a Senate seat. He previously served as chairman of the Ways and Means Committee’s oversight panel.

Roskam and the other chairmen of the Ways and Means subcommittees were announced Friday by committee chairman Kevin Brady (R-Texas). Brady also revealed the subcommittee assignments for each of the panel’s Republican members.

“Each of our subcommittees will play an integral role as we advance President-elect Trump’s and the American people’s top priorities,” Brady said in a statement. “Our new subcommittee assignments reflect the broad range of experience our Members bring to Ways and Means. Whether they previously worked as a CPA, nurse, or small business owner, each Member has a unique perspective on how to deliver real solutions to the American people.”

Rep. Vern Buchanan (R-Fla.) will succeed Roskam as chairman of the Ways and Means oversight subcommittee. Buchanan had previously served as chairman of the human resources subcommittee, which will now be led by Rep. Adrian Smith (R-Neb.).

Reps. Pat Tiberi (R-Ohio), Sam Johnson (R-Texas) and Dave Reichert (R-Wash.) will remain the chairmen of the Ways and Means Committee’s health, Social Security and trade panels, respectively. Johnson announced Friday that he will retire from Congress at the end of 2018.

See the article from The Hill here.

The post The Hill: Ill. rep named new chairman for House tax-policy subcommittee appeared first on Roskam for Congress.

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