The demise of the American Health Care Act, the so-called repeal and replacement of Obamacare last week, ups the ante for tax reform. With House Minority Leader Nancy Pelosi and Senate Minority Leader Chuck Schumer becoming increasingly emboldened in their opposition to the conservative agenda, President Trump and congressional Republicans need a win on tax reform. To get one, they simply can't afford to allow the controversial Border Adjustment Tax to get in the way of lowering rates and eliminating loopholes.
The BAT is strongly supported by Speaker of the House Paul Ryan and Ways and Means Committee Chairman Kevin Brady to generate $1.2 trillion of tax revenue to help offset the costs of reducing the corporate tax rate from 35 to 20 percent. The tax has quickly become politically toxic on Capitol Hill because of its negative impact on small businesses and the fact that it would significantly drive up prices for middle-class families while allowing large, multi-national companies to operate virtually tax free.
Several senators have already come out in opposition to the BAT, meaning that it is likely dead on arrival should the House leadership insist on its inclusion in tax reform. As the experience with Obamacare reveals, a legislative strategy of ramming unpopular and controversial provisions through the House of Representatives with the hopes of coming out with a successful end product after resolving differences with the Senate is wrought with peril.
The BAT is not going to become the law of the land, and for good reason.
Imposing a 20 percent tax on imports would have a chilling effect on job creation and the budgets of working families. This ill-conceived tax hike would drive up the cost of doing business for small retailers and manufacturing companies who rely on imports. The cost of big ticket items like cars, electronics and appliances would all rise.
But more politically dangerous for the Republican Party is the BAT's costly impact on everyday necessities such as gas, food, clothing, shoes and medicines. According to the National Retail Federation, the BAT will result in the average American family paying $1,700 more per year in higher prices. Ryan would imperil his majority in the House by forcing vulnerable members in swing districts to cast a vote for this job-destroying tax hike that would punish the households that have struggled as their wages have stagnated over the past decade.
Given the stakes involved for the Republican agenda, the Trump administration would be wise to make a strong declaration of its opposition to the BAT now. Trump and Congressional Republicans have a once in a generation opportunity to fix our broken tax code and pump new life into the American economy.
To achieve the job creation and wage growth promises that were the foundation of Trump's successful campaign, Republicans must provide businesses and families with long-overdue tax relief, while ridding the tax code of the special interest favors and loopholes that keep rates artificially high. It would be political malpractice to allow the controversial BAT to derail tax reform and the most fruitful opportunity to drain the D.C. swamp.
To be successful, there are only four things the Trump administration needs to do. They need to fully repeal Obamacare, build the wall, cut spending and cut taxes. The BAT gets in the way of this goal. The BAT unnecessarily complicates what should be a simple process to cut tax rates and simplify the tax code so average Americans benefit from it.
The window for legislative successes during a president's first term can be narrow. History shows that the president's party, on average, loses significant House seats in midterm elections. To avoid a wave election and get the conservative agenda back on track, Republicans need to be disciplined in advancing pro-growth tax reform and getting legislation signed into law this year.
There is no place for the controversial BAT in this process.
Republican leaders should shelve it and put their focus on passing a conservative tax reform bill that will put more money in the pockets of working families and make American businesses more competitive.
Let there be no mistake: The BAT is a poison pill that will squander the opportunity to fix the tax code and quite likely could sweep out the Republican majority in the House. This is entirely avoidable if Republicans stick to their conservative principles and cut taxes across the board for families and businesses, large and small, while avoiding overly complicated tax schemes like the BAT.
Judson Phillips (@judsonphillips) is the founder of Tea Party Nation.
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