President Trump has promised to rebuild America’s infrastructure from roads and bridges to ports and rail lines in an effort to expand the economy and bring jobs back to America. His initial proposal of $1 trillion would include grants and other financing measures. At the other end of Pennsylvania Avenue, Congress is divided on how to pay for such a bold program. The primary funding option is to impose a cross-border tax on imports into the United States. It is estimated that this tax on imports could raise about $1 trillion over ten years, enough to pay for the President’s plan. The tax would apply to imports of anything – finished or unfinished goods. And, NAFTA countries would not be exempt. In fact, the cross-border tax is partly aimed at Mexico and Canada.
Congressional Republicans included the cross-border tax scheme in their “A Better Way” proposal last year during the campaign. Their aim was primarily to raise revenue for infrastructure rather than punish countries or bring jobs back to America. The idea is that the reduction in corporate rates would more than cover the additional costs to manufacturing. Couple this with repatriation of offshore revenue, and businesses would be made whole and reap the benefits later on. However, even simple plans have complications especially when manufacturing has developed long supply chains that stretch over many countries and have parts that move about for various steps in the manufacturing process. For example, a car part may travel back and forth between the U.S., Canada, and Mexico several times before being installed in an automobile assembled in the U.S. The tax would only apply to the actual manufacturing or finishing that occurred outside the U.S. and not on the entire part.
Following the election, this tax provision started to gain much more attention and various groups began to organize and push back against it especially the retailers who largely import most of their products. Other manufacturers also began expressing concerns to Congress and the new Administration. Also, the U.S. Senate differs from its counterpart in the House – the Ways & Means Committee – on this tax provision. As a result, the Congressional tax writing committees have slowed as they look for other revenue sources to fund a large infrastructure plan. If sufficient new revenue sources cannot be found in other places, the Congress will be faced with the options of trying to impose the cross-border tax or blow-up the budget to fund the infrastructure plan without revenue meaning borrowing.
The Trump Administration immediately halted any regulations promulgated in the last several months of the Obama Administration ordering all agencies to stop their work on other rules until the new administration can review their work. Congress has also used the Congressional Review Act to reverse regulations as well. Every administration has utilized these provisions when taking over control of the White House from the opposing party. One particular example of regulatory reform was the executive order referring the Waters of the United States (WOTUS) back to the EPA for further review. WOTUS has been stayed by the courts immediately after its release last year. Congress failed to get a bill passed to halt its implementation knowing President Obama would have vetoed it anyway. Other rules that are stuck in the court system will likely proceed without presidential action such the Definition of Solid Waste. The administration seems more focused on financial regulatory reforms to fix problems associated with the Dodd-Frank banking law. As the Administration takes shape over the next few months, it can be expected that the Office of Management and Budget will take a large role in reviewing the costs of regulations very seriously making it more difficult for agencies to promulgate rules.