Ways and Means Committee Hears Testimony on Border Adjustment Tax

On Tuesday, May 23rd, the House Ways and Means Committee, led by Chairman Kevin Brady, held its second hearing on tax reform, entitled “Increasing U.S. Competitiveness and Preventing American Jobs from Moving Overseas.”  The hearing concentrated on the practicality and effects of the proposed border adjustment tax on the economy.  Chairman Brady was critical of the ‘Made in America’ tax on domestic products and tax breaks for foreign goods.  Chairman Brady’s prepared Opening Statement is available here.  Ranking minority member Richard Neal, while supporting bipartisanship and the need for a simpler Tax Code, questioned the risks and uncertainty surrounding a border adjustment tax and its impact on the middle class.  Rep. Neal’s prepared Opening Statement is available here.

The witnesses offering testimony before the Committee included:

Juan Luciano, President and Chief Executive Officer, Archer Daniels Midland Company
Mr. Luciano, advocating for the U.S. agricultural industry, fully supported the implementation of a border adjustment tax.  He argued that elimination of tax disparities on exports from the U.S. compared to those from other OECD countries would redress the current disadvantage U.S. exporters suffer.  Read his full remarks here.

Brian Cornell, Board Chairman and Chief Executive Officer, Target Corporation
Mr. Cornell , while noting the need for tax reform, opposed the border adjustment tax, stating that it would result in up to a twenty percent (20%) increase on everyday essentials sold at Target and a tax rate, for Target, that would balloon up to seventy-five percent (75%).  Read his full remarks here.

William Simon, Former President and Chief Executive Officer, Walmart U.S.
Mr. Simon, representing his individual views as a private citizen, endorsed the border adjustment tax, adding the caveat that the tax must be properly implemented with a long transition period. Read his full remarks here.

Lawrence B. Lindsey, President and Chief Executive Officer, The Lindsey Group
Mr. Lindsey also supported the introduction of a border adjustment tax.  While he acknowledged that a border adjustment tax would be accompanied by transition costs, he felt the long-term gains, through an increase in real wages and a reduction in income inequality, would outweigh short term costs.  Read his full remarks here.

Kimberly Clausing, Thormund A. Miller and Walter Mintz Professor of Economics, Reed College
Ms. Clausing opposed the border adjustment tax, arguing, in part, that it would not be World Trade Organization compliant which would result in the raising of disputes before the Organization, as well as retaliatory tariffs from trading partners.  Read her full remarks here.

The full hearing may be viewed at: Hearing on Increasing U.S. Competitiveness and Preventing American Jobs from Moving Overseas.

For additional information, the Joint Committee on Taxation’s “Destination –Based Taxation and Border Adjustments” report (JCX-20-17), released on May 22nd in anticipation of the hearing, may be found here.