US Republican lawmakers and Trump administration officials have rejected a push to overhaul the outdated US international tax system with a destination-based cash flow tax.
“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,” lawmakers and tax officials said in a joint statement yesterday.
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) signed the statement.
Republicans have been advocating a border adjustment tax as a component of their tax reform plans, claiming it would make US business more competitive internationally and would raise revenue needed to offset a corporate tax rate cut and other reductions. The international tax plan faced significant opposition from retail and other lobby groups, though, and seemed to fall out of favor in the past few weeks.
Other paths can achieve the same policy objectives, said the group, known as the “Big Six,” in their letter.
“[W]e 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 US tax base,” they said.
The lawmakers and officials said their priority was to protect American jobs and make taxes simpler, fairer, and lower for working families.
They also said that small businesses should be taxed at lower rates so they can compete with larger businesses and that all American businesses should pay lower taxes so they can compete with foreign businesses,
“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,” they said.