Tax Reform News
Tax Reform
Comprehensive tax reform remains a top priority for the congressional GOP majority, the Trump Administration, and the business community, but it will be a complicated, time-consuming process. It’s perhaps the ultimate marathon, not a sprint. Or, if tax reform were the Tour de France, we would be nowhere near the Alps, more at the beginning stages of slowly building important momentum. On April 27, President Trump introduced an outline of his tax proposal – a largely unpaid-for, across-the-board tax cut – with many details yet to be fleshed out. Still, we have not seen presidential leadership on fundamentally reforming the tax code since President Reagan, so it was welcomed.
Meanwhile, at the other end of Pennsylvania Avenue, the House Ways and Means Committee held its first hearing on May 18. Following through from their “Blueprint” released last June, House Leadership prefers revenue-neutral reform that would not be subject to a 10-year sunset. The U.S. Chamber agrees, as our chief tax counsel, Caroline Harris, explains in her latest Bloomberg interview citing permanence (along with pro-growth reforms) as a key metric.
With the Senate Finance Committee thus far adopting a “wait and see” approach, the next mile-marker passed on May 23 at a House hearing on one of the thorniest revenue issues that has emerged – a Border Adjustment Tax (BAT). Under the BAT, exported goods are exempt from taxation; imported goods sold domestically are subject to the tax. Not surprisingly, industries that import goods within their supply chain are organizing in opposition to the BAT, while those that chiefly export are lining up in support. The BAT is integral to the House Blueprint, because it raises more than a trillion dollars in revenue, which is required to finance other key provisions, such as full expensing, and income tax rate reductions (20% for corporations, and 25% for pass-through businesses). Neither the White House nor the Senate Finance Committee has taken a clear position on the BAT, although individual senators have expressed reservations.
While we are still in the early stages on the race to reform, the business community will continue to cheerlead the various tax teams on their admittedly uphill battle. With a lot of hard work and a little luck, perhaps we can toast to tax reform before the end of 2017.
