With all the talk of fake news and alternative facts, it mostly has been a pleasure to observe the debate over the House Republican proposal to border adjust corporate taxes. Sure, there has been plenty of political posturing but for the most part, it has been exactly what tax policy debates ought to be: Serious and substantive.
Think about how this has played out. First, University of California at Berkeley economist Alan Auerbach and others presented the idea. It was picked up last spring by House Speaker Paul Ryan (R-WI) and Ways & Means Committee Chair Kevin Brady (R-TX), who included it in a blueprint endorsed by many House Republicans. While the idea attracted little attention at first, it now has landed squarely in the public debate. In recent weeks, other tax experts have raised important concerns and technical issues. Supporters have responded by either defending the idea or suggesting ways to refine it.
Experts have debated these issues in conferences, research papers, and panel discussions. The idea of a cash flow tax has been around for years, for instance a tax reform advisory panel created by President George W. Bush proposed one back in 2005. But we all became more informed about its pros and cons after Ryan included it in his plan.
One key economic issue is whether a border adjusted tax would result in higher prices for US consumers or whether it would be offset (at least partially) by a rise in the value of the dollar against other currencies. Another issue that has generated much discussion in the legal and economics communities: Would the tax be acceptable under World Trade Organization rules and, if not, how it could be changed so it could pass muster?
These are hard questions that deserve serious debate. And, for the most part, they are getting it.
Of course, not all the discussion has been at such a refined level. Retailers and some energy companies have launched an aggressive marketing campaign aimed at getting GOP lawmakers to reject border adjustment. They insist that a typical household would pay $1,700 a year more for everyday necessities—a claim that’s probably unsupportable. Another business group, this one representing tech firms and other big exporters, says the plan would create many new domestic jobs (though they have so far avoided predicting how many).
This is typical marketing hyperbole from lobbyists, and easy to discount as self-serving. But that’s part of the game too. Lawmakers will listen to (often-conflicting) views of their constituents. Some may pay attention to the academic debate. Many will consider the alternatives before deciding how to vote.
But so far, at least, the debate has been serious and productive. No stale arguments over the same tired ideas. Relatively little hyperbole, at least by Washington standards. In the end, Ryan’s border adjusted tax may not make it through the congressional meat grinder. But it will have at least an indirect influence on what finally does pass. And an ongoing robust and largely fact-based debate will be good for all of us.
