Center for Freedom and Prosperity
For Immediate Release
Tuesday, June 6, 2017
CF&P Submission Urges Congress to Enact Tax Reform
Without a DBCFT/BAT
(Washington, D.C., Tuesday, June 6, 2017) In a statement to the House Ways and Means Committee, CF&P President Andrew F. Quinlan today urged members of Congress to not include the destination-based cash flow tax (DBCFT), or border adjustment tax (BAT), in any attempt to enact pro-growth tax reform. The testimony, submitted in response to a Congressional hearing looking at how to increase U.S. competitiveness, argues that the BAT has become an obstacle to tax reform.
There’s widespread agreement regarding the need for comprehensive tax reform. High U.S. corporate tax rates leave U.S.-based multinationals at a competitive disadvantage, while excessive complexity burdens taxpayers and the economy with unneeded costs. It is long past time to make correcting these problems a top legislative priority.
Unfortunately, the path to tax reform is being hindered by the prospect of adopting a destination-based cash-flow tax (DBCFT). The proposed switch to a “border adjustable” system has divided both businesses and the free-market advocacy community, constituencies whose full support is needed to help shepherd tax reform through the legislative process.
The strong opposition to the DBCFT is due to its significant political and economic risks. These include the similarity between the tax and European-style VATs that have fueled the growth of governments on the continent, the ambiguity of WTO rules regarding the tax structure, and the likelihood that currency appreciation will not fully offset the shifting of the corporate tax burden onto consumers, among other concerns.
In addition to detailing the widespread concerns regarding implementation of a BAT, the comments dispel certain popular myths, such as references to a so-called “Made in America Tax,” regarding the tax treatment of domestic and foreign produced goods. The real obstacle to U.S. competitiveness, Quinlan argues, is high U.S. corporate tax rates, not any imbalance in the treatment of imports and exports. The comment concludes by offering closure of certain tax loopholes as better alternatives to the BAT, and urges consideration of spending reductions as well.
CF&P Director of Policy and Communications, Brian Garst, added, “Republicans have painted themselves into a corner by preemptively surrendering on principle and refusing to pair tax reform with needed spending cuts, or having the courage to close misguided, distortionary tax loopholes out of deference to certain special interests. It is utterly dishonest to then suggest that accepting this dangerous new tax is the only way to finance tax reform. It’s time for the few remaining holdouts to accept political reality: the border adjustment tax is dead. There are ample ways to move forward without it. Pick one and let’s get on with implementing pro-growth tax reform.”