Warren Buffett cast doubt on a controversial centerpiece of House Speaker Paul Ryan’s tax overhaul plan, saying the measure would lead to higher prices for consumers and likely be scaled back because it’s too politically contentious.
The Berkshire Hathaway Inc. chairman told CNBC’s "Squawk Box" that the House Republican border-adjusted concept to tax imports but not exports “would be a big sales tax,” adding that it would hit “items that are not yachts or anything like that; they’re things that the ordinary person buys.”
Ryan and Kevin Brady, the chairman of the tax-writing House Ways and Means Committee, have been struggling to gain support from other Republicans for the border-adjusted tax. The unique proposal would replace the current 35 percent corporate income tax with a 20 percent tax on domestic sales and "border adjust" it by levying it on imports but not exports. President Donald Trump hasn’t yet said where he stands on border adjustments.
Retailers, automakers and oil refiners that rely on imported goods and materials oppose it, while export-heavy manufacturers support it. Proponents argue that economic theory shows that the plan wouldn’t raise consumer prices or favor exporters, while critics say there’s no real-world precedent.
Buffett said that in Berkshire-owned furniture stores, “75 percent of what you see is imported. That means if we pay an import tax on it, our customers are going to pay for it.”
With sharp divisions amid efforts to undertake the biggest tax overhaul in three decades before August, “my guess is they will find doing something really comprehensive will be too difficult and they’ll want to get something done,” Buffett said. “And I think they will end up going for something not as dramatic as they might even like to do because they simply don’t want to spend the time and political capital getting it done.”
Treasury Secretary Steven Mnuchin said during a CNBC interview last week that he’s looking closely at border adjustments and has “some concerns” with the idea. Mnuchin said he was focused on overhauling the tax code before the August recess for Congress.
“I just have a feeling when the Treasury Secretary says fine have this by August, you’re not going to get a really 1986 type overhaul,” or one similar to the reforms in the 1950s and 1960s, Buffett said.
This article was provided by Bloomberg News.
