By Kaustuv Basu and Aaron E. Lorenzo
There is a “collapsing window of opportunity” for overhauling U.S. tax laws that might not come again soon, Rep. Peter Roskam (R-Ill.) told a Heritage Foundation forum.
Roskam’s remarks Feb. 6 echoed those of House Ways and Means Committee Chairman Kevin Brady (R-Texas) in recent weeks, in which he has warned that fighting a key revenue-raising provision in the tax plan would limit how low they could reduce tax rates.
Brady has called the current effort to reshape taxes a once-in-a-generation opportunity.
The comments from Brady and his allies on the committee suggest they are sending a message to corporate America to fully understand the implications if this year’s tax reform push falls by the wayside.
National retailers have questioned a key “border adjustability” provision in the House GOP blueprint, which would led to a 20 percent tax on imports while another coalition of companies support the approach.
Non-congressional supporters of the border adjustment idea spoke separately on an academic paper that showed that it could result in a larger tax base than the current income tax system or a cash-flow tax.
American Action Forum President Douglas Holtz-Eakin told a Tax Foundation forum Feb. 6 that “the amount of revenue on the table in moving to border adjustment is enormous, and for that reason it’s going to attract a lot of attention.”
The research, based on corporate tax data from 2004-13 excluding financial firms, showed a tax base of $14 trillion under border-adjusted cash-flow taxes, compared to about $9.3 trillion from income taxes and about $9.4 trillion from cash-flow taxes before adjustments.
The study results generated such questions as what to do with companies that would be put in a permanent loss position under a border adjustment system, said its author, Elena Patel, financial economist in the Treasury Department’s Office of Tax Analysis. She estimated that 10 percent of firms would be moved into a loss position by shifting out of an income tax system.
“This is one of the pressure points that policymakers in particular are very worried about when you move to a totally new cash-flow tax system,” Patel said, noting that they might want to rethink current policy that allows losses to be carried backwards and forwards.
Brady, who has been making regular appearances at think tanks and on television to promote the tax plan, is scheduled to appear at a Bloomberg BNA event Feb. 7 to continue his outreach and maintain momentum in the face of opposition from companies such as Walmart Inc. and Koch Industries Inc.
Roskam, chairman of the Ways and Means Tax Policy Subcommittee, suggested that a major tax bill could become law within a year.
“You’ve got a speaker of the House in Paul Ryan who is going to create as much legislative space as possible,” Roskam said.