With businesses split on U.S. border tax, wider reform looks shaky

Tue Feb 28, 2017 6:19am EST
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By David Morgan

WASHINGTON (Reuters) - Major U.S. corporations are going to war in Washington over a Republican 'border adjustment' tax proposal meant to boost exports over imports, with lawmakers in Congress coming under pressure from some of the nation's biggest employers.

The political split that is opening, most pronounced in the narrowly divided Senate, could doom the proposal. If it dies, prospects for a thorough tax code reform, a top 2017 goal for President Donald Trump's Republicans, would be diminished.

Trump, who has vowed to produce a "phenomenal" tax reform package, without recently offering many specifics, has not taken a clear stand on border adjustment. He spoke favorably about it in a Reuters interview on Thursday.

The main thrust of border adjustment is to exempt companies from having to pay federal income tax on export revenues, while ending the deductibility of import costs from taxable income.

Border adjustment is a core part of a broad tax reform "blueprint" being pushed by House of Representatives Republicans, including House Speaker Paul Ryan and tax panel chairman Kevin Brady. The blueprint has not been put into formal legislation, but border adjustment is already a sticking point.

At least eight Republicans in the Senate have expressed concern about it. Several are from Republican-leaning states where Wal-Mart Stores Inc (WMT.N: Quote) is a major employer.

Wal-Mart is a member of Americans for Affordable Products, a business coalition working against border adjustment. Other members include Best Buy (BBY.N: Quote), Costco (COST.O: Quote), Gap Inc (GPS.N: Quote), Macy's Inc (M.N: Quote), Nike Inc (NKE.N: Quote) and Target (TGT.N: Quote).

If the Republican-dominated House approves the blueprint and moves it to the 100-seat Senate, Republicans could lose only a handful of votes and still be able to pass the blueprint.   Continued...

Vehicles can be seen going through customs entering the U.S. from Sarnia, Canada from the Bluewater bridge in a view from a U.S. Customs and Border Protection  Blackhawk helicopter in Port Huron, Michigan August 6, 2008.  REUTERS/Rebecca Cook/File Photo