GOP Wants to Pay for Tax Cuts with a Tax Increase

Last week House Speaker Paul Ryan assured the country that tax reform is still coming despite uncertainty surrounding the repeal and replace of Obamacare. Speaker Ryan’s speech focused on the House GOP’s broad vision for tax reform to lower rates, close loopholes, get rid of special interest deductions, and “simplify things to the point that you can do your taxes on a form the size of a postcard.”

The House GOP’s Blueprint indeed sets up a good framework for necessary reform, but the devil is in the details. The proposal includes a controversial border-adjustment tax (BAT) that exempts exports while levying in a new, potential 20 percent import tax.

Proponents say the BAT puts the U.S. on a level playing field for business, but looking past the smokescreen of the rhetoric, it’s primary use is to raise taxes on imports to pay for the rest of the GOP’s proposed tax cuts.

The potential economic impacts of the BAT, say a rise in consumer prices, remain wildly unclear. Heritage Foundation expert Adam Michel notes “a border adjustment in the context of the House blueprint presents unnecessary economic risks to the U.S. economy,” and could open up the door to a European style tax “countries use to fund their large and burdensome governments.”

Despite months of criticism from the business community, House Leadership still hasn’t declared the BAT dead. Ways and Means Chairman even proposed “phasing in” tax, but bad policy phased in is still bad policy.

So what’s keeping this-this wildly unpopular idea on life support? Washington’s obsession with revenue-neutral, rather than deficit-neutral, tax reform.

Congress must follow through on the promise to reform the tax-code, but do so in a manner that doesn’t replace a tax cut with an increase somewhere else. Provide for tax-reform that truly grows the economy by cutting federal spending. That’s pro-growth tax reform.

Reforming the food stamp program is a great place to start. New research suggests 90% of Americans “agree able-bodied adults receiving means-tested welfare assistance should be required to work or prepare for work.” Rep. Garret Graves’ Supplemental Nutrition Assistance Program Reform Act of 2017 (H.R. 2996) does just that. His bill would require work for food stamps and save billions of taxpayer dollars – money that can be used to pay for tax cuts.

 

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