Monday, June 12, 2017

The Last Days of the BAT???

Wither the Border Adjustment Tax?  Wither indeed.

As noted in this space several times, and fairly obvious to everyone following this issue closely except for two people, the Border Adjustment Tax proposal is nearing its just demise.  There is nowhere to turn, and only a concession by Ryan and Brady stands between us and rationality.

On June 9th, Rep. Jim Jordan published an Op-Ed in The Washington Examiner entitled "America-first tax reform begins with dismissing a border adjustment tax".  This article is being seen as the official position of the Freedom Caucus, an independent group of 30 or more Republican members of Congress (the exact list is not known).  You may recall that the Freedom Caucus did a lot of damage to Paul Ryan's efforts to repeal Obamacare.  They tend to vote as a bloc.  This means there are officially more than 30 "no" votes out there, plus others who have stated a negative position.  On Ways and Means alone, Reps. Paulsen, Tiberi, Renacci and Kelly have all publicly stated opposition or very strong concerns.  The path to law in the House is dead.

And in the Senate, no realistic tax reform fantasy can include "turning" the BAT opposition of Senators Cotton, Graham and Perdue into "yeses".  So it's not getting through the Senate.

As predicted many times in this space, the power vacuum of Trump/Ryan is encouraging more Republicans to chart their own course.  The prediction was a gradual breakdown of the Republican pack with defectors leading to more defectors. The approach of Midterms has only hastened this process.

Are the House Republicans so dense that they can't see that the BAT stands between them and tax reform?  Happily, I can say with confidence that they aren't that dense.  In fact, they are starting to speak about it, out loud even.  The WSJ reports that pressure is finally being applied UP by House Republicans against Ryan and Brady to ditch their pet idea and move toward something more realistic and likely to be the basis of a new tax law.  My conversations with folks on the Hill confirms that conversations are being had, and the obvious being stated aloud for the right ears to hear.  There are even signs that these pleas are being heard.  You never heard me say that before.

Sadly, the real problem is that Ryan won't accept a plan unless it's revenue-neutral.  This is quite unfortunate, and may result in his political downfall if he doesn't give up the ghost.  "Revenue-neutral" is when a tax cut isn't a tax cut, but only burden shifting among taxpayers.  The correct approach is deficit-neutral, namely reducing tax revenues being matched by reduced governmental expenditures.  Oddly, in a town where advocating the devastation of health care for millions seems to be just fine (explain that to me, please), no one in Washington will speak of attacking other larger entitlements, even if done in a fair and forward-looking manner.  Those plans exist and will not endanger Seniors.

If Ryan won't consider deficit-neutral, there is little hope for tax reform.  It is hard to believe that Congress will be irresponsibly cut taxes without cutting expenses, leading to spirally deficits we may not survive. We are already looking too much like Greece and can't afford to make the comparison even more direct.

This is coming to a head, finally, and we should see news, important news, soon.  Keep your eyes peeled.  Help may be on the way.

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