Trade Not Top of Mind for Most Ways and Means Committee Democrats

When members of Congress had the opportunity to publicly tout their priorities for legislation this year at the House Ways and Means Committee, most of the Democrats emphasized social spending and ending the cap on state and local tax deductions on personal income taxes more than traditional infrastructure projects. Only one Republican, Rep. Kevin Brady, R-Texas, spoke at the March 23 hearing, to say that Republicans would boycott the hearing because holding a hearing without any expert witnesses was just a cover for “another multi-trillion, one-sided spending bill.”

Spending on day care and education are part of the administration's infrastructure spending plans, though traditional roads and bridges are expected to go first.

Republicans held their own competing event March 23, largely criticizing Democratic plans to increase corporate income tax rates or hiking other taxes. Brady said, “Democrats' tax policy is tax policy by villain,” targeting entities such as corporations, energy and the wealthy.

Out of more than 20 members who testified at the official committee hearing, from the Northern Mariana Islands to Ohio to Florida, only two brought up trade issues.

Rep. Dean Phillips, D-Minn., spent most of his five minutes on trade. He said he appreciated President Joe Biden's efforts to lower the temperature in trade disputes with the European Union and to re-engage at the World Trade Organization. But he said the administration's -- and Congress' -- inaction on Section 301 tariffs on Chinese imports is hurting businesses. He said he wants the U.S. to be “committed to addressing China’s unreasonable and very discriminatory trade practices in a thoughtful, strategic, and most importantly, an effective manner,” but said that “our constituents, in my estimation, should not be bearing the brunt of our trade war with China.”

He said one small company in his district had an exclusion from 25% tariffs on its imports from China that expired at the end of 2020, and told him that makes it hard to remain competitive. “We cannot continue to drag our feet on policies of such consequence,” Phillips said.

“Additionally, the committee should prioritize reauthorization of the Miscellaneous Tariff Bill and Generalized System of Preferences [benefits] program,” he said. Both expired at the end of 2020. “I wholeheartedly support the committee’s efforts to modernize these programs by creating provisions to strengthen our efforts to combat climate change and fight human rights abuses across the globe. However, these programs are instrumental to the success of many businesses in my district, and any further delay will only charge more hardship.”

The other way trade came up was as a related issue to levying a carbon tax. Rep. Scott Peters, D-Calif., said that it's the most politically feasible carbon strategy, as nearly 90 Democrats co-sponsored a bill to institute a carbon tax in the last Congress, and that Republicans and industry leaders are starting to come on board, too. He said it's essential for American diplomatic leadership on climate, and on trade. “If the U.S. implemented a border adjustment without a national price on carbon, it could be seen as a protectionist tariff in disguise,” he said. “And in all likelihood, the EU will levy carbon taxes on us if we fail to implement our own carbon price, so our country’s competitiveness could decline if the U.S. fails to implement a carbon tax.”

Rep. Ted Deutch, D-Fla., also called for a carbon tax, which he said should start at $15 a ton and increase by $10 a ton each year, with all of the revenue returned to taxpayers as dividend checks.

Over at the Republican hearing, two members asked former Congressional Budget Office director Douglas Holtz-Eakin to weigh in on Democratic desires for a carbon tax. Holtz-Eakin is a conservative who advised Sen. John McCain's presidential campaign.

Holtz-Eakin said a carbon tax is much better than regulatory actions to clean up the power sector or increase mileage targets for automobile fleets. Rep. Jodey Arrington, R-Texas, who represents a fossil-fuel producing district, asked him about it first, in a question that implied Arrington thought Holtz-Eakin would say it would hurt economic growth. Instead, the economist said that if you want to tackle climate change, “you should have just a carbon tax,” rather than regulation, and use the revenue to lower the corporate income tax and payroll taxes to ease the price shock on companies and consumers.

When Rep. Darin LaHood, R-Ill., asked him about such a tax raising the cost of fuel, Holtz-Eakin said it harnesses market forces by sending a price signal. Deutch, too, emphasized how it uses the free market to transition to cleaner fuels. But, the conservative economist said again, it should be offset by a reduction in corporate income taxes, not the hike proposed by Democrats.