A plan to introduce a border adjustment tax has been abandoned by Republicans in Congress, a development that will be welcomed by the Irish Government.
A group of senior Republicans announced that they were setting aside a proposal to introduce a tax on imports, a move that would have impacted the State’s exports into the US.
Ireland runs a large trade surplus in goods with the US – exporting more than it imports – an imbalance that the White House has said it wants to rectify. China, Mexico and Germany are some of the other main exporters that run a surplus with the US.
A statement from the group known as the “Big Six” – the most senior Republicans in the legislative and executive branch of the US government – said that they had decided to drop the proposal.
“While we have debated the pro-growth benefits of border adjustability, we appreciate that there are many unknowns associated with it and have decided to set this policy aside in order to advance tax reform,” the group said in a statement.
They added that they intended to bring forward new legislation in the autumn “that will result in the first comprehensive tax reform in a generation”.
“American families are counting on us to deliver historic tax reform. And we will.”
The group of six includes House speaker Paul Ryan and senate majority leader Mitch McConnell, White House economic adviser Gary Cohn, senate finance committee chairman Orrin Hatch and Kevin Brady, chair of the Ways and Means committee. Treasury secretary Steve Mnuchin is also a member.
The border-adjustment tax had been touted by Republicans as a way of raising money to offset other tax cuts, and discouraging companies from manufacturing their goods outside of the US, a central plank of president Donald Trump’s “America First” economic policy.
But the proposal met resistance from some Republicans in Capitol Hill, particularly those in southern states, who were concerned that the tax could raise prices for consumers and hit businesses that rely heavily on imports.
The sidelining of the plan means that Republicans need to now focus on alternative ways to offset revenue losses under Mr Trump’s plans for the “greatest tax cut in history”.
It is understood that the group, which held a series of meetings on Wednesday night, decided to issue an update on tax reform in a bid to show some progress on the issue before the August recess. Apart from a statement in April, there has been little progress on tax reform, though discussions between the White House and Congress have been taking place privately.
Mr Trump’s promise to reform the tax code has also been delayed by the impasse over healthcare reform which has dominated activity in Congress for months. The details of the final healthcare proposal to repeal and replace Obamacare could also have a material impact on tax reform proposals.
For example, the initial Republican proposal would have seen federal spending on Medicaid, the insurance programme for low-income Americans, decline by $772 billion (€660.7bn) over 10 years, a saving that would have been used to offset tax cuts. That reduction in Medicaid spending now looks less likely as Republicans squabble over the details of healthcare reform.