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Thursday, March 28, 2024

BAT Is Dead: Republicans Kill Border Adjustment Tax

Courtesy of ZeroHedge. View original post here.

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.

* * *

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:

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