Border adjustment proposal eliminated from Republican tax reform plan
TAX ALERT |
In a recently released joint statement on tax reform, Republicans have confirmed that the contentious border adjustment tax (BAT) will no longer be included in their tax reform framework.
Originally proposed in the House Republican Tax Reform Blueprint released last June, the BAT has been the topic of much debate as discussions on tax reform have progressed. Operating as a destination-based tax, the BAT would generally exempt exports while subjecting imports to tax and was the cornerstone of the Ways and Means Republican tax reform plan – projected to raise approximately $1T in revenue. The recently issued joint statement, however, made it clear that tax reform would move forward without the BAT.
The statement, made by 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), provided, among other things, a high level outline of the goals of tax reform moving forward. Included in these goals were rate reductions, “unprecedented capital expensing,” priority on permanence, and the return of American jobs and profits back from overseas.
Most notably, however, was the determination that all of the goals set forth in the statement could be accomplished without the need for a transition to a destination-based tax (such as that provided for by a BAT). Accordingly, in order to advance tax reform, border adjustability would be set aside.
While the joint statement was, as anticipated, high level and far from comprehensive, it did make one point very clear. Moving forward, the border adjustment tax would no longer be a factor in the shape of tax reform to come.