House Freedom Caucus Chair Mark Meadows, R-N.C., said that his caucus is divided on the border-adjustable tax proposal and that lawmakers would be better off pursuing a tax reform plan that "actually works and actually can build consensus."
Speaking at a June 9 forum in Washington hosted by the Heritage Foundation, Meadows said the Freedom Caucus has not taken a formal position against the border-adjustable tax included in House Republicans’ “A Better Way” tax reform blueprint. “We have some who believe it’s a great idea, some who believe that it is not a great idea," he added.
Rep. Jim Jordan, R-Ohio, is one caucus member who believes the border-adjustable tax is not a great idea. “Two principles should guide tax policy: one, let families keep more of their money; two, design a code that’s actually conducive to producing economic growth,” he said. The border-adjustable tax and “this concept of revenue neutrality” are not among those principles, he added.
Freedom Caucus member Dave Brat, R-Va., said that if the border-adjustable tax is left out of tax reform, lawmakers will have to come up with a trillion dollars in revenue "on that side so you don’t break the deficit wide open.” He added, however, that “a lot of us have some flexibility with respect to the deficit when it comes to taxes because . . . this is a once-in-a-century opportunity to get this economy humming again for a decade and we’re pro-growth people.”
Meadows said that there were other parts of the tax reform blueprint that the Freedom Caucus supports, albeit with some caveats. The caucus supports a 20 percent corporate tax rate, but only as long as it also applies to small businesses, he said, adding that if it's only a corporate cut "for just the big guys, it leaves a whole lot of Main Street off.” The caucus also wants tax reform to address repatriation, he said, adding, “My advice would be to do a repatriation over the next 20 months, where you allow that repatriation of foreign earnings to come back at an 8 percent rate.”
According to Meadows, the Freedom Caucus also favors “doing something on the expensing side and still allowing the interest expense to be deducted,” and doubling the standard deduction.
Meadows said the House could come to agreement on a tax reform plan “in some shape, form or fashion" over the next several weeks and "start having real debate on legislative text in the months to follow.” He added that if there is no real tax reform plan to begin debating before the August recess, the Freedom Caucus has taken a formal position to stay through August to work on tax reform.
Rep. Warren Davidson, R-Ohio., said he thinks that the deadline for completing tax reform legislation in the House needs to be the end of the third quarter, not the end of the year, “because it’s going to have a lag and the other things in the economy are going to have an impact that” must be countered with strong fiscal growth.
Jordan said the tax reform timeline could be affected by the division among House Republicans on passing a budget. “If you don’t get a budget agreement, you can’t get reconciliation. If you don’t have reconciliation, you can’t get tax reform," he said, adding that the Freedom Caucus is considering accepting a higher budget number if welfare reform is included in tax reform.
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