Editor's Note: This is an excerpt from an institutional research note written by Hedgeye Potomac's Chief Political Strategist JT Taylor and David Hoppe, former Chief of Staff to House Speaker Paul Ryan. To read our institutional research email sales@hedgeye.com.
The Ways and Means Committee held its first hearing on tax reform and the big message is that there are a number of House Republicans who are less than supportive of the border adjustment tax (BAT) – no surprise here after an effective lobbying campaign led by the retail industry.
Senate Republicans have had some serious questions about the BAT for several months and many have declared BAT dead. However, it appears likely that there will be some significant internal discussions about the potential structure of a BAT as well as the need to answer the question of where revenue will come from to reduce the deficit cost of tax reform. Of course, there are people who are willing to vote for a paper deficit, if that will achieve a bigger, growth-oriented tax reform bill.
BAT is a significant, but not the only threshold question facing the tax writing committees. The basic question of revenue neutrality is an a priori question that must be answered before serious development of a tax bill begins. There is also the ongoing discussion of whether tax reform should be a fundamental restructuring of the code like in 1986 or just a common variety tax cut package.
A myriad of other questions will also have to be answered, but these are a couple of the questions that must be addressed to move any tax legislation. Republicans on both side of the Capitol are feeling the pressure, but taking a serious look at the calendar would suggest that House consideration of the tax reconciliation bill wouldn't come until the fall.
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Click here and here to read other significant policy discussions analyzed by Taylor and Hoppe.
