When it was Senator
Ben Cardin's (D MD) turn to question the witness at last week's confirmation hearing for the nominee to become the next USTR, he led off with high praise for the candidate,
Robert Lighthizer, and questions about specific issues. The importance of making compliance with anti-corruption agreements a key U.S. negotiating objective was one of those. Another was his concern that the U.S. do what it can to ensure that the European Union does not sponsor boycott, divestment, or sanctions initiatives against the state of Israel.
After gaining commitments from Mr. Lighthizer on those topics, Senator Cardin turned to border taxes. Three types of border adjustable taxes were clearly in his mind: 1) the value added tax systems used by members of the European Union and many other countries; 2) the border adjustable tax that has been proposed by the leadership of the House and is included in the Ways and Means Committee's blueprint for tax reform; and 3) a proposal offered by Senator Cardin himself at the end of last year -- the "
Progressive Consumption Tax (S3529) -- a bill he will presumably reintroduce in this new, 115th Congress.
Here is our transcription of the full exchange between Senator Cardin and Robert Lighthizer on taxes:
SENATOR CARDIN:
There is now currently an effort to try to change our tax code so that we can get a border adjustment, which would be fairer to American manufacturers.
And we've always included in our trade promotional authority an effort by the USTR to get border adjustment comparable to what our trading partners have on products that enter [our] market [and] on our products entering their market. The difficulty of course is that we have not harmonized with the international community in the use of a consumption tax. I've introduced a progressive consumption tax that is patterned after what is accepted internationally as a border adjusted tax.
It's difficult to see us winning too many cases in the WTO with something that is an income tax that we call a consumption tax. So, I just urge you in your position to give a realistic assessment to those of us in Congress as to what is likely to be border adjusted, so that, at long last, we can try to set up a level playing field for American manufacturers and producers in the international marketplace as it relates to tax burdens.
MR. LIGHTHIZER
Thank you, Senator. I have spent a lot of time on this issue over the years. I was involved in DISC and FISC and all these things at various times. I don't know what the right answer is, but it is a problem in my judgment, this disequilibrium between direct and indirect taxes. I don't view it as having any real economic or legal basis. I think it's sort of serendipitous and unfortunate from the point of view of the United States. So I would look forward to working with you.