Senate Finance Committee Chair Orrin Hatch, R-Utah, has raised concerns about the “border adjustability” proposal in the House tax reform blueprint and said the Senate will produce an independent tax bill.
The House Ways and Means Committee is currently drafting a comprehensive tax reform bill based on the tax reform blueprint released last year. The blueprint proposes to repeal targeted tax benefits in exchange for rate cuts while shifting toward a cash flow tax that mimics many aspects of a consumption tax.
Hatch said the Senate would not take up and simply pass the House tax reform bill. His committee will conduct its own process and develop its own bill. The Senate is much more narrowly divided than the House, and Senate Republicans have less margin for error. Even if they use the reconciliation process, Republicans can lose only two Republican Senate votes and still pass a bill without Democratic support.
Hatch specifically expressed concern with the border adjustability proposal at the heart of the House tax reform blueprint. Under this provision, gross receipts from exports would be excluded from income, while the cost of any imports would not be deducted. The administration appears to be slowly warming up to the idea, but it remains very controversial.
Hatch raised several concerns, such as whether the tax would be borne by consumers, workers, shareholders or foreigners; whether the tax is consistent with international trade obligations; and whether adjustments would be possible to avoid increasing taxes too much on any specific industries.
House Republicans are aiming to achieve House passage on their tax reform bill by August. Hatch did not offer a Senate timetable, but they are clearly farther behind in the process. Even if the House and the Senate each can pass its own bill, both will still need to navigate the difficult process of resolving the differences between the two versions. The tax reform process, if it succeeds, is likely to take nearly all of 2017 and could spill well into 2018.
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