UPS CEO, House Ways and Means chairman discuss tax ‘reform’ in Louisville

U.S. House Ways and Means chairman Kevin Brady and UPS CEO David Abney discussed the need for tax reform Tuesday in a hangar at the UPS WorldPort in Louisville | Photo by Joe Sonka

Congressman Kevin Brady, the chairman of the House Ways and Means Committee, pitched his tax plan to an audience gathered at the UPS WorldPort in Louisville on Tuesday, receiving an assist on that effort from UPS Chairman and CEO David Abney.

This marked the second consecutive day in which a high-profile Republican official traveled to Louisville to make the case for a restructuring of the federal tax code, as Treasury Secretary Steven Mnuchin pitched lower tax rates and a simplified tax code at a Greater Louisville Inc. event on Monday.

Republicans in Congress and the administration of President Donald Trump are expected to begin a push for major legislation next month, following the failure of the administration’s preferred bill to “repeal and replace” the Affordable Care Act this summer.

Billed as a discussion on “the importance of tax reform” with an audience of UPS employees and local business owners inside a large UPS hangar, Abney opened by citing a recent joint op-ed he wrote with the CEO of competitor FedEx on what would boost economic growth in America. In addition to significant spending on the country’s crumbling transportation infrastructure and boosting “free and fair trade,” Abney called for comprehensive tax code changes that would lower the tax rate on all sizes of businesses and, he said, lure companies that have kept their earnings and investments offshore to bring those back to the states.

UPS CEO David Abney | Courtesy of UPS

Abney introduced Rep. Brady as an “important part” of making such changes possible, with Brady saying that events such as this would “kick off a national conversation” about taxes.

Instead of having a tax code built to extract money, Brady said it should be “built for growth, literally designed to grow jobs and paychecks.” To lure companies back to investing in manufacturing and research in America, Brady called for “the lowest tax rates in modern history on our local businesses.”

He also called for reducing the number of personal income tax brackets to just three — from the current seven — and lowering the rate at each level, while doubling standard deductions and cutting the tax rate in half for money earned from savings and investments.

In addition to simplifying the tax code to the point that 90 percent of families could file their return on a postcard, he called for a simpler system of tax collection, proposing “to bust up the IRS as it is today, and redesign it into a 21st century agency focused on one singular mission: customer service.”

During a question-and-answer session from the audience, Brady said he wanted the new tax cuts to be permanent, as businesses will make significant investments only if there is certainty about the rates they have to pay, and “they won’t do that if we’re just doing temporary cuts that are litigated every election.”

However, for permanent tax cuts to pass Congress, Brady said they have to “balance the budget over time,” which requires eliminating special loopholes for certain industries and increasing revenue through significant economic growth.

Referring to those special provisions or tax loopholes for certain industries, Abney said UPS “would be more than happy to give up any of those special provisions in order to have that lower rate … It is so important to us that we get this lower rate, that we’d be willing to walk away from those other things.”

As for where the money would come from to dramatically increase infrastructure improvements throughout the country, Brady said that some in Congress have called for tax revenue returning from offshore to be directed toward this cause, but he noted that he favors such revenue going toward lowering the tax rates for businesses.

Abney noted that every five minutes that each of his company’s 100,000 drivers lose each day due to road congestion “costs UPS $105 million a year.”

Speaking with reporters after the event, Abney said tax code changes as described by Brady would allow UPS to invest more and expand jobs, though adding it was too soon to estimate an exact number.

Congressman Kevin Brady

Coming on the heels of the defeat of “repeal and replace” legislation — despite a strong Republican majority in Congress — Brady said that despite tax “reform” being “incredibly hard to do politically,” he was optimistic such legislation would pass before the end of this year.

“Unlike health care, there are very few who defend the status quo,” said Brady, “very few Americans who believe these high tax rates and complex and costly tax codes are right for America. So we start from a different position.”

Brady said he hoped to find common ground with “centrist Democrats” who would work with Republicans on their tax package, but most congressional Democrats have panned these proposals as a giant tax giveaway to the wealthiest Americans that would add trillions to the deficit.

In a statement to IL about Tuesday’s event, Congressman John Yarmuth of Louisville said he is prepared for bipartisan work to enact responsible changes as the top Democrat on the House Budget Committee, though adding that “unfortunately, the House Republican budget, which was approved in our Committee several weeks ago on a party line vote, provides tax cuts for the wealthy at the expense of everyone else. Those are not my priorities and are not the priorities of the American people.”

Despite the president’s falling approval rating and the recent criticism he’s received by members of his own party in Congress, Brady said Trump will be a great ally in helping to push a tax bill to passage and onto his desk for his signature by the end of the year.

“He’s committed to this single tax reform plan and committed to following it through for the rest of the year,” said Brady. “From my perspective, he has a comfort and a sense on tax reform that I think is going to help get this across the line.”

Free trade agreement, border tax and internet taxes

While Trump campaigned for president as a fierce critic of multilateral free trade agreement like NAFTA and the Trans-Pacific Partnership (TPP), Abney stated last year that he was strongly in favor of TPP, as it would break down uncompetitive barriers placed on American businesses in other countries. Asked if he hoped that now-President Trump would have a change of heart on such issues, Abney said NAFTA is in need of being modernized, but he hoped the administration in its current negotiations does not totally dismantle that agreement.

“It would be very difficult to see where a dismantling of NAFTA would help our customers or help us,” said Abney. “So we encourage the administration as they are beginning these talks to find a way … obviously we want to address the U.S. trade deficit, but at the same time we want to take advantage of the entire North American market, where we think it can create jobs and opportunities for all three countries.”

On his previous support for TPP, Abney said, “We’re big fans of trade in general, and we thought the TPP multilateral agreement was going to be good for our customers, good for our company.” However, he said he would also be open to bilateral agreements — as Trump has indicated a preference for negotiating with individual countries — so long as American businesses “have a level playing field with other parts of the world,” which is “not always the case today.”

“We’re working closely with the administration to make sure we have trade agreements that will address that,” said Abney. “If they are bilateral, we’ll deal with that. If there’s a time at some point down the road where TPP or other multilateral agreements could be passed, we’d be in favor of that, too … The issue is trade agreements and being able to give U.S. businesses the chance to compete.”

As for a border adjustment tax with Mexico — which Trump proposed as a way to discourage cheap Mexican imports and to raise revenue to build a wall on the border — Brady said he supported such an effort, but it will not be part of any comprehensive tax package due to concerns brought up by business leaders, who fear a trade war and rising prices for local consumers.

“I believe border adjustment — which is what our competitors use against America — was the best way to level the playing field for American workers and companies, both here and around the world,” said Brady. “Nonetheless we had a good healthy debate on that issue. It proved to have too many unknowns for our business community to get comfortable with it. So we made the decision to set border adjustment aside so we could focus on unifying our businesses and our families around this program of tax reform.”

Brady also was asked about a possible “internet tax” on e-commerce companies like Amazon, which Trump has hinted at pushing for in a series of tweets aimed at coverage he didn’t like from the Washington Post, also owned by Amazon’s Jeff Bezos. Brady said the Marketplace Fairness Act, which has passed the Senate and would allow states to require such companies to collect sales taxes, is not in his committee “and not in the tax reform purview, either.”

Debt ceiling

Asked if he wants a “clean” increase in the federal debt ceiling before next month’s deadline — as Mnuchin prefers, free of partisan policy riders that might jeopardize its passage — Brady said Congress is having discussion with the White House on that matter, but stressed that America will not default on its debt.

“One, we are going to fulfill our debt commitments on time and in full,” said Brady. “That’s what America does. We are having discussions with the White House and our Senate colleagues about any reforms that are appropriate and might be part of that discussion, so that we can again continue to stress efficiency and savings and continue to move toward a balanced budget.”

Abney passes on responding to criticism of Trump’s Charlottesville comments

Asked about the backlash from major business leaders and even prominent Republicans to Trump’s comments on Charlottesville last Tuesday, in which the president appeared to draw a moral equivalence between the white supremacists and neo-Nazis who marched and those who showed up to oppose them, Abney said UPS strongly values diversity, but declined to weigh in on Trump.

“What we believe is there is no place in this world for hatred, for violence, for bigotry, and we make that very clear,” said Abney. “And we want to see the U.S. unite and come together. And it just breaks our heart to see issues such as Charlottesville. As far as commenting on the president, I think there’s been enough comments on that. But for us, it’s really about diversity and inclusion and giving everyone a chance to succeed.”