BAT Is Dead: Republicans Kill Border Adjustment Tax

The Trump fiscal agenda - which these days really means tax reform - may be dead, but that does not mean it can't reemerge as a zombie every now and then. That's precisely what happened moments ago when Paul Ryan just announced that after months of speculation whether border adjustment tax will or won't be implemented to help offset Trump's proposed tax cuts, it is now officially dead.

  • RYAN IS SAID TO BE TELLING REPUBLICANS BORDER TAX IS DEAD: BBG

As Reuters adds:

  • "BIG SIX" REPUBLICANS IN CONGRESS, TRUMP ADMINISTRATION ANNOUNCE BORDER TAX PROVISION HAS BEEN SET ASIDE IN ORDER TO ADVANCE TAX OVERHAUL

A statement Thursday from the so-called Big Six - Ryan, Brady, White House economic adviser Gary Cohn, Treasury Secretary Steven Mnuchin, Senate Majority Leader Mitch McConnell and Senate Finance Committee Chairman Orrin Hatch - said due to the unknowns associated with the border-adjusted tax, the group “had decided to set this policy aside in order to advance tax reform."

"While we have debated the pro-growth benefits of border adjustability, we appreciate that there are many unknowns associated with it and have decided to set this policy aside in order to advance tax reform,"

"And we are now confident that, without transitioning to a new domestic consumption-based tax system, there is a viable approach for ensuring a level playing field between American and foreign companies and workers, while protecting American jobs and the U.S. tax base," according to the statement.

House Speaker Paul Ryan and Ways and Means Chairman Kevin Brady had been telling Republicans prior to the statement’s release that the controversial border-adjusted tax on imports would no longer be part of tax-legislation negotiations, according to four people familiar with the ongoing discussions.

 

The border-adjusted tax, which would replace the current 35 percent corporate rate with a 20 percent levy on companies’ domestic sales and imported goods, had been a centerpiece of the House GOP tax plan endorsed by Brady and Ryan. It was estimated to generate more than $1 trillion over a decade, which would help pay for tax cuts promised by Republicans.

As we discussed extensively at the start of the year, when people still gave some credibility to Trump's fiscal agenda, the BAT was under furious attack by retailers and other industries that rely on imported goods, who mounted a campaign saying it would raise prices for working Americans on everyday goods. The end of the BAT, while alreadly largely assumed, should be favorable for retail stocks, as the XRT reveals.

The only problem: with or without BAT, retailers are still doomed as long as AMZN is around.

As for BAT being gone, it means that any Trump tax cuts - a generous assumption these days - will be that much smaller as the border adjustment tax was expected to raise roughly $1.2 trillion in government revenue over the next decade, offsetting over half of the corporate tax cut over a ten year period. In other words, so much for corporate tax cuts.

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The full Republican statement is below:

Joint Statement on Tax Reform

Today, House Speaker Paul Ryan (R-WI), Senate Majority Leader Mitch McConnell (R-KY), Treasury Secretary Steven Mnuchin, National Economic Council Director Gary Cohn, Senate Finance Committee Chairman Orrin Hatch (R-UT), and House Ways and Means Committee Chairman Kevin Brady (R-TX) issued the following joint statement on tax reform:

“For the first time in many years, the American people have elected a President and Congress that are fully committed to ensuring that ordinary Americans keep more of their hard-earned money and that our tax policies encourage employers to invest, hire, and grow. And under the leadership of President Trump, the White House and Treasury have met with over 200 members of the House and Senate and hundreds of grassroots and business groups to talk and listen to ideas about tax reform.
 
“We are all united in the belief that the single most important action we can take to grow our economy and help the middle class get ahead is to fix our broken tax code for families, small business, and American job creators competing at home and around the globe. Our shared commitment to fixing America’s broken tax code represents a once-in-a-generation opportunity, and so for three months we have been meeting regularly to develop a shared template for tax reform.
 
“Over many years, the members of the House Ways and Means Committee and the Senate Finance Committee have examined various options for tax reform.  During our meetings, the Chairmen of those committees have brought to the table the views and priorities of their committee members. Building on this work, as well as on the efforts of the Administration and input from other stakeholders, we are confident that a shared vision for tax reform exists, and are prepared for the two committees to take the lead and begin producing legislation for the President to sign.
 
“Above all, the mission of the committees is to protect American jobs and make taxes simpler, fairer, and lower for hard-working American families. We have always been in agreement that tax relief for American families should be at the heart of our plan. We also believe there should be a lower tax rate for small businesses so they can compete with larger ones, and lower rates for all American businesses so they can compete with foreign ones. 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. And we are now confident that, without transitioning to a new domestic consumption-based tax system, there is a viable approach for ensuring a level playing field between American and foreign companies and workers, while protecting American jobs and the U.S. tax base.  While we have debated the pro-growth benefits of border adjustability, we appreciate that there are many unknowns associated with it and have decided to set this policy aside in order to advance tax reform.
 
“Given our shared sense of purpose, the time has arrived for the two tax-writing committees to develop and draft legislation that will result in the first comprehensive tax reform in a generation.  It will be the responsibility of the members of those committees to produce legislation that achieves the goals shared broadly within Congress, the Administration, and by citizens who have been burdened for too long by an outdated tax system. Our expectation is for this legislation to move through the committees this fall, under regular order, followed by consideration on the House and Senate floors. As the committees work toward this end, our hope is that our friends on the other side of the aisle will participate in this effort. The President fully supports these principles and is committed to this approach. American families are counting on us to deliver historic tax reform. And we will.”

Comments

FrozenGoodz (not verified) Thu, 07/27/2017 - 14:23 Permalink

Constant headlines about the things GOP is not making happen, things that are failing, things the President said that are not true or will not happen ... despite the tweeter

froze25 (not verified) BaBaBouy Thu, 07/27/2017 - 14:37 Permalink

Words can't describe the absolute frustration I have with these jerks that will literally spend Billions on BS foreign interventions but God forbid they give a nice break to the Working Middle Class. Anything but help out the regular working Joe that makes too much get "benefits" but too little to really get ahead.

In reply to by BaBaBouy

Simplifiedfrisbee Handful of Dust Thu, 07/27/2017 - 15:47 Permalink

Such a typical generalization from a hedonistic citizen who grew up in a world of debt expansion and stagnant wage growth for the middle class. Justice democrats will not only throw out the garbage created by the current paradigm but generate energy from it also.

All you old world "has-bins" enjoy the remaining decade you have without health insurance and keep worshiping your Ayn Rand corporatocracy Lords.

In reply to by Handful of Dust

Zorba's idea froze25 (not verified) Thu, 07/27/2017 - 15:24 Permalink

The Repugnants will reconsider BAT once they have scraped all the lint out of the middle classes pockets. Rest assured, they really don't give a fuck about any citizen except the "Supreme Citizens" our nation's highest court created out of mortar and cooked books. Thus, our perverted Constitution is simply "of the Corporations, by the Corporations, for the Corporations." Need further confirmation? Wait for CONgress to give us the new and improved HC...I fully expect it to be named The BOHICA Act!

In reply to by froze25 (not verified)

swmnguy Deep In Vocal … (not verified) Thu, 07/27/2017 - 15:42 Permalink

Hey, why not?  Those same people rode their Rascals into the voting booth to elect a fictional character from a scripted TV show.  The character appealed to them because he was rude to people they fantasize about being rude to, and they wanted him to keep the government away from their Medicare and Medicaid and ObamaCare which pays for their diabetes medication, oxycontin and the lease on the Rascal.  Maybe if they get ambitious, lap-band surgery, but as long of the government doesn't interfere with their SNAP benefits and keeps letting them buy Mountain Dew and Doritos, why go to the extreme of eating actual food or losing the weight put on by eating non-food products one's body doesn't know how to process except to store as fat.These are the same people who don't understand that there's no fixing America's economy while spending over $1 Trillion per year on the War Machine, all departments included.  They think we spend more on Welfare, particularly for illegal immigrants who don't get Welfare to begin with, and Foreign Aid, which is actually money-laundering of US taxes to US corporate interests, than we spend on the Military.  They routinely over-estimate the number of immigrants, legal or illegal and especially Muslim, by factors of 10x to 100x.  They don't understand that trannies have always used the public restrooms that correlate to how they act and appear to others.They might as well bury their heads in the sand, give no fucks whatsoever and drive around at Wal-Mart.  What they'd make of their lives if they took an active interest is too horrible to contemplate.

In reply to by Deep In Vocal … (not verified)

MoreFreedom FrozenGoodz (not verified) Thu, 07/27/2017 - 15:08 Permalink

The BAT (Border Adjustment Tax) was a setup by the establishment to tank the economy (given the politicians' personal bank accounts are just fine) to get rid of Trump in 2020.  That it's gone is a good thing.  Anyone who thinks it is good ought to read up on the Smoot-Hawley Tariff Act (both Smoot and Hawley were Republicans).You'll find the results were to cut US GDP in almost half within 3 short years before the act was repealec, but both Smoot and Hawley lost their seats in Congress for good reason.   That's way opposite of 4% growth and essentially cut incomes by nearly half.  Ryan knows his history which is why he was pushing it.The BAT was nothing more than a tax on American consumers and US manufacturers (which happen to use more than half the US's imports as inputs to products they make; thus, taxing those imports makes US manufactured goods less competitive globally). That's not the kind of deal I believe Trump means when he says there are a lot of bad US trade agreements, as least I hope.

In reply to by FrozenGoodz (not verified)

novictim MoreFreedom Thu, 07/27/2017 - 16:16 Permalink

Border Adjustment Tax is not a tariff (see above).  And Tariffs are good, not bad, and if we still had them America would be king of the world, not just sheriff. And China would still need UNICEF. But you are too young to know that the Neoliberal talk talk you are mimicking lead to the dE-industrialization of the USA, the loss of 60,000 US Manufacturing facilities and the rise of China. In other words, you were conned.  And the Smoot-Hawley Tariff claims are debunked and you can search that out for yourself.Stop being a traitor to the USA. 

In reply to by MoreFreedom

insanelysane Gen. Ripper Thu, 07/27/2017 - 14:37 Permalink

By some perverse logic the politicians believe that by doing nothing, somehow the people will like them.  Please keep doing nothing.  It can only get better on its own.  Actually it will because at some point, the people will revolt, either through the ballot box or through violence.  I'm thinking more likely with violence as politicians control the ballot box.

In reply to by Gen. Ripper

swmnguy rayban Thu, 07/27/2017 - 15:47 Permalink

Umm...would that be the corporate interests who exported all the manufacturing capability of the country to 3rd World hellholes, and exploit the loopholes they paid to have written into law to import their foreign-made goods as "Made In USA," or at least not subject to tariffs?It was downright hilarious when Candidate Trump used to talk about how Corporate America was hoodwinked at the negotiating table and tricked into slashing labor costs by 80%, the poor duped deluded darlings.  Even more hilarious when the dipshits whose jobs were exported somehow expected them all to come back, without their having to take an 80% pay cut.  Same kind of magical thinking must have convinced the people on Easter Island to cut down the last of their trees to roll still more giant statues into place.  Since the Gods hadn't responded to their beseechments previously; better do more of it.

In reply to by rayban

novictim swmnguy Thu, 07/27/2017 - 16:53 Permalink

It is tragic.  Nice analogy, too. The NeoLiberal Free Traders like Ryan who actually believe what they peddle are quite a bit like the those Easter islanders. In your analogy, the Trees they cut down are the US factories sent oversees to Asia going on for over 5 decades now.  And the Gods they placate with this sacrifice is the ideology of Neoliberal Free Trade, itself.  These "Gods" are this belief system that refuses to be empirically focused, refuses to see the decade after decade loss of jobs, industry, and prosperity (trees). But one more tree will do it!  One more erection of these stone idles will make Manna fall from heaven! Just keep the tariffs low or nil and, suddenly, this experiment of shifting jobs to other nations will pay off in jobs and wealth beyond out wildest imaginings. How?  Shhhh...don't ask that question.  Just believe.Paul Ryan believes and that is all that really matters.

In reply to by swmnguy

Deep In Vocal … (not verified) Thu, 07/27/2017 - 14:28 Permalink

The psychopaths and pedophiles run the show. It's a neofutile soceity....laws only apply to you. Nobels & peasants. You ain't worth shit, human..... Suicidal thoughts every day but hanging in there....

Batman11 Thu, 07/27/2017 - 14:29 Permalink

Disposable income = wages – (taxes + the cost of living) The cost of living = housing costs + healthcare costs + student loan costs + food + other costs of living.Keep a lid on health care expenses otherwise the tax cuts will be pointless.Neo-liberal idea:Lower taxes to leave people with more disposable incomeNeo-liberal mistake:Letting the cost of living rise to leave people with lower disposable income, even with the tax reductions.What was the point?

Batman11 Batman11 Thu, 07/27/2017 - 14:31 Permalink

The early problems of capitalism involved the landed aristocracy who were looking to maximise their rents, which had to be paid in wages by business. Business interests are directly opposed to those of rentiers, as what they gain has to be paid by business in wages, reducing profit. The repeal of the Corn Laws to usher in the era of Laissez-Faire.The landed aristocracy wanted high corn prices to get more land rent.The businessmen wanted lower corn prices, to lower the cost of living, for lower, internationally competitive wages.The conflict between the landed aristocracy and business rears its head again.Landowners have been undermining capitalism since it began.They understood this in the 18th and 19th centuries but their knowledge disappeared with today’s neoclassical economics.Also missing from Austrian economics. There is wealth creation and wealth extraction.The rentiers gains are paid by business in wages.Business and rentier interests are directly opposed.Always have been, always will be.“Income inequality is not killing capitalism in the United States, but rent-seekers like the banking and the health-care sectors just might” Angus DeatonA 21st century Nobel prize winning economist spots the problem that was hidden in economics but exists in the economy.

In reply to by Batman11

Batman11 Batman11 Thu, 07/27/2017 - 15:08 Permalink

Adam Smith spots the parasites: “The labour and time of the poor is in civilised countries sacrificed to the maintaining of the rich in ease and luxury. The Landlord is maintained in idleness and luxury by the labour of his tenants. The moneyed man is supported by his extractions from the industrious merchant and the needy who are obliged to support him in ease by a return for the use of his money. But every savage has the full fruits of his own labours; there are no landlords, no usurers and no tax gatherers.”The rentier aristocracy are still feeding in the UK.Capitalism looks after them. I have no idea what the Adam Smith Institute in the UK does.They know nothing of Adam Smith.

In reply to by Batman11

Mena Arkansas Thu, 07/27/2017 - 14:33 Permalink

And by "in order to advance tax reform" they mean lowering the tax of the uber-wealthy who own them and increasing the burden on what's left of the middle class to pay for it.

Public Banking Pete Thu, 07/27/2017 - 14:39 Permalink

Globalist Neo-Con Republicans won't allow anything beneficial to America pass.   Why generate External Income when they have unlimited funds from the Internal Revenue Service?   It's no coincidence that the Federal Reserve Act of 1913 was quickly followed by the creation of the IRS in 1914.

ableman28 Thu, 07/27/2017 - 14:41 Permalink

Trump had no program at all.  He had slogans and bombast.  That may have effected the average voter but for professional politicians and the monied classes there is simply no way their interests and their judgement about what is best is impacted at all.Trump is an unruly thorn in the side of Congress who periodically has to deal with statements Trump makes but beyond some marginalized members in the House of Representatives there isn't anybody in Congress who takes this guy and his wants seriously.  They wish he'd just shut up and stop making stupid comments.

gregga777 ableman28 Thu, 07/27/2017 - 14:44 Permalink

It's not like there is any difference between the Repussican Party political parasites and the Demo-Marxist political parasites anyway. They are all just members of the evil Uniparty Party political parasites. They all became political parasites to get rich through taking bribes for doing their Masters' bidding because they have no innate talent besides being pathological liars.

In reply to by ableman28