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Brady Plugs Republican Tax Reform, Obamacare Repeal

by Glen Shapiro, Tax-News.com, New York

26 January 2017


On January 24, House of Representatives Ways and Means Committee Chairman Kevin Brady (R - Texas) delivered a speech at the US Chamber of Commerce, during which he discussed the Committee's 2017 agenda for tax reform and repeal of the Affordable Care Act (ACA).

With regard to the latter, he noted that the budget legislation passed by the House of Representatives on January 13, "officially sets the repeal process in motion. In the coming weeks, several Committees in the House and Senate – including Ways and Means – will craft a bill to repeal Obamacare."

"While existing ACA plans will stay in place until the transition is fully complete and the free market restored, Congress will act this year to enact these reforms," he said. "In our Committee, we will be responsible for dismantling the poorly designed subsidies [premium tax credits] as well as repealing the damaging taxes and mandates."

He also confirmed that his Committee is "moving forward aggressively on pro-growth tax reform this year. … Right now, our Members and staff are hard at work turning the ideas of [the Republican party's Better Way] Blueprint into tax reform legislation that delivers the 21st century tax code our nation needs."

"When it comes to growth," Brady added, "we go all in with the lowest tax rates on American job creators in modern history. Businesses large and small will all see their tax burden reduced dramatically."

In addition, "we take bold action to unleash investment in America," he continued. "Businesses of all sizes will be able to immediately write off the full cost of new capital investments. This creates a tax-free return on purchases of new software, buildings, equipment, machinery, and technology that businesses need to produce and compete at a higher level."

Brady made a robust defense of the border adjustable tax – or, what he calls, the proposal to "end the 'Made in America' tax on US exports" – in the face of severe criticism from US importers.

A border adjustable tax would adopt a system similar to that under a value added tax (VAT), where imported goods are subject to import VAT and tax rebates are provided on exported goods. To eliminate this perceived disadvantage for American companies, tax would therefore be imposed on goods imported into the United States, and US taxes on exports would be eliminated.

"Today 'Made in America' products and services are at a tax disadvantage here in America and around the globe," he stated. "That's because foreign competitors like China, Europe, Mexico, and Canada all adjust their taxes at their borders – adding taxes to American-made products and taking taxes off their own. Because America doesn't border adjust, we lose both here and abroad."

"By border adjusting our taxes like our foreign competitors do," he stressed, "we level the playing field. For the first time in US history, foreign imports and American-made products and services will be taxed at exactly the same rate here in America. No more tax advantages for foreign products or services."

"More importantly," Brady concluded, "border adjusting our taxes helps eliminate all tax incentives for US companies to move their manufacturing, technology, headquarters, and jobs overseas. Coupled with the new lower tax rates on local businesses, this establishes America as a 21st century magnet for new jobs, technology breakthroughs, and headquarters."

"We match [our foreign competitors], not with a hidden VAT, but with a simpler, smarter cash-flow tax based on where a product is consumed, rather than today's business-income tax based on where products are produced or profits booked."

However, as an example of the criticism that a border adjustable tax is facing, the National Retail Federation's (NRF's) Senior Vice President for Government Relations, David French, recently warned that "economic theorists are playing with fire and it's the consumer who ultimately will lose. … The best way to grow our economy is for Congress to lower tax rates for all businesses, not pick winners and losers."

Analysis by NRF and many of its member companies has indicated that the proposed tax would "drive up costs, erode profits, and exceed any benefits from a lower corporate tax rate. It would require price increases of up to 15 percent to retain profitability, effectively creating a new tax paid by consumers."

At NRF's BIG Show, Federal Reserve Bank of New York President and CEO William Dudley also said that that a border adjustable tax "will probably lead to a lot of changes in the value of the dollar [and] the prices of imported goods in the United States. I'm not sure that that would all happen very smoothly and I also think there could be lots of unintended consequences" for US consumers.

TAGS: tax | business | tax incentives | law | corporation tax | tax credits | health care | manufacturing | legislation | tax rates | United States | tax reform | services

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