Thank you, Chairman Brady, for holding today’s hearing on increasing U.S. competitiveness and preventing American jobs from moving overseas. This is an important topic and I look forward to a productive conversation.
As we continue with this series of hearings on comprehensive tax reform, I want to reiterate my support for reforming our Tax Code. There’s certainly strong bipartisan support for simplifying our tax system - and making it more fair. We on the Democratic side are willing partners in those efforts.
However, Democrats will only support comprehensive tax reform that will ease financial burdens on the middle class and working families. We will not support tax cuts for those at top of the income scale at the expense of the middle class. Our primary focus and top priority in tax reform needs to be putting the middle class first.
I also believe that a key component of tax reform is ensuring that American businesses remain competitive in the global economy - and that we prevent American jobs from moving overseas. Achieving this includes providing incentives to companies to conduct research and development here in the United States. We also need to improve our nation’s infrastructure so that it’s in line with other developed nations. That includes meaningful investments to repair and enhance our nation’s roads, rail, bridges and harbors. These reforms can be done through the Tax Code and would also jump start economic growth and create thousands of jobs.
Another key component of international competitiveness is investment in a well-trained and skilled workforce. A 2015 report by the Manufacturing Institute estimated that over the next decade, two million manufacturing jobs in this country could go unfilled due to the skills gap. And the New England Council estimated in a 2015 report that thousands of high paying advance manufacturing jobs - some with salaries over $80,000/year - would go unfilled because employers were struggling to find candidates to meet the needs of the open positions. At a time when families across the country are trying to reach and stay in the middle class, our nation cannot afford to have factories and workers sit idle. To remain competitive, we need to invest in workforce development.
Let me shift to another focus of today’s hearing - the border adjustment tax. I think the border adjustment tax proposal is an interesting idea. As my past support of an innovation box demonstrates, I am no stranger to innovative tax ideas, and I’m willing to look outside the box for smart tax policy - and certainly encourage others to do the same. Some argue that a border adjustment tax would create such an incentive for companies to make things in the U.S. that it would drive up demand for American-made goods. I certainly support American manufacturers.
However, there are many unknowns about the border adjustment tax. Given the many significant economic uncertainties and risks associated with a border adjustment tax, the Committee must evaluate its merits thoroughly and methodically. There are many very important questions that must be answered in order to evaluate the proposal. And I applaud the Chairman for holding today’s hearing to do just that. For example:
* What will the impact be on consumers? The retailers tell us the cost of products like food, clothing and medicine will go up for consumers by more than $1,700 - and gas prices will increase by 35 cents a gallon. I’ve also been told that a 20 percent BAT could increase average home heating costs for a New England family by $400 or more per winter. Middle-class families can’t - and shouldn’t - have to sustain those types of increases in consumer prices as a result of tax reform. Is that a risk with the adoption of a border adjustment tax?
* Will the dollar strengthen to offset increases in consumer prices? If so, how long will it take and will it be complete? And how much certainty is there with respect to currency fluctuations? What are other implications of an increased dollar?
* Is the border adjustment tax WTO compliant? Is there a risk of retaliation?
* What would the BAT’s impact be on American jobs? Who will be the winners and losers as a result of the BAT?
Another question I have is the impact on small businesses. Unfortunately, we don’t have a small business witness with us today. But I think understanding the potential impact on small business is key. The owner of Dave’s Soda and Pet City in my district tells me that it is his imported products that provide the margin for him to operate the rest of his business. He says if his costs go up, he can’t reduce rent or utilities, so the only place to cut is payroll. He also is very concerned that if consumers have to pay more for gas and other essentials, he will sell less of the pet accessories that keep his business afloat. I hope we can continue to examine the impact of the BAT on small businesses.
Mr. Chairman, I also hope that you will consider holding a hearing on how to use the revenue from a deemed repatriation tax in tax reform. I support using repatriation dollars to pay for infrastructure or other productive purposes for the middle class.
Again, Mr. Chairman, thank you for your leadership in calling today’s hearing to really dive into this topic of the border adjustment tax and get our questions answered. I look forward to a productive conversation, and I thank the witnesses for joining us today.
Thank you.
