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Washington — The Trump administration Wednesday proposed an overhaul of the US tax code without the controversial border-adjustment provision that could have upended US energy and commodity trade flows and distorted the Brent/WTI spread.

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The plan would slash business taxes to 15%, from the current 35% corporate tax rate, extend those cuts to small and medium "pass-through" companies, and allow companies one chance to repatriate trillions of dollars in overseas earnings, Treasury Secretary Steven Mnuchin said during a White House briefing.

Companies across the energy sector are expected to embrace the cuts.

Related: Find more content about Trump's administration in our news and analysis feature.

While US refiners were breathing easier about not facing steep new import costs from the House of Representatives' plan, Tesoro lobbyist Stephen Brown said it may be too soon to declare the border adjustment dead.

Brown said the White House has "figured out that the Senate is poised to administer last rites over the BAT," but House leaders are still defending it.

"I think it's still alive," Brown said. "It's not as viable as it once was. And today is more of an opening gambit than anything else. It's not politically realistic in terms of blowing a hole in the deficit, but it paints a signpost for the direction the [White House] wants to go."




WAITING FOR RELIEF


Bill Douglass, chairman of the Small Retailers Coalition and owner of Texas-based Douglass Distributing, said he would welcome any cuts to business taxes. His company, which handles more than 130 million gallons of fuel a year, pays an effective tax rate of 43.5%, including surcharges from the Affordable Care Act, Douglass said.

"We have all waited a long time for relief, so any proposals about reduction are welcome," he said.

Edison Electric Institute, which represents investor-owned electric utilities, said the White House proposal was positive for its members, but it would continue to fight the House plan's elimination of deductions for net interest expenses and state and local taxes.

"Our industry is the nation's most capital-intensive industry, and EEI's members invest more than $100 billion each year to build smarter energy infrastructure and to transition to an even-cleaner generation fleet," the group said. "The loss of interest detectability will increase the cost of capital, which is reflected in electric rates paid by our customers." The White House plan omits a border-adjustment provision that is central to the House's tax blueprint, despite campaigns against it by importers from across the US economy.

Mnuchin said earlier Wednesday during an event hosted by The Hill that Treasury officials are talking weekly with House and Senate leaders to come to agreement on one tax plan that they hope to move through Congress by the end of the year.

"There's many aspects of it we like; there's certain things that we're concerned about," Mnuchin said of the GOP's border-adjustment proposal. "What we've discussed with them is we don't think it works in its current form and we're going to continue to have discussions with them about revisions that they will consider."


HOW TO PAY FOR TAX CUTS?


The House plan calls for cutting corporate taxes to 20% from 35% and paying for those cuts with a border adjustment that would tax imports but not exports. Analysts estimate the border provision would raise consumer prices, upend energy and commodity trade flows, and inflate WTI crude prices by as much as 25% relative to Brent.

Related Commodity Pulse video: Tax reform plan could upend US oil trade flows

The measure is estimated to generate up to $1 trillion over 10 years -- a key element that would make the package revenue neutral and allow legislators to advance the bill through the faster budget reconciliation process.

A major sticking point of the White House plan will be funding the massive tax reductions without blowing up the federal deficit.

Mnuchin gave few specifics about how the administration wants to pay for the cuts, except to say that it would lead to 3% or higher gross domestic product growth.

"This will pay for itself with growth and with reduction of different deductions and closing loopholes," he said.

Mnuchin said the White House is counting on "a lot of desire" from all sides in Congress to pass a tax package that boosts the economy, makes US businesses more competitive and creates jobs.

"We will be working very closely with the House and the Senate to turn this into a bill that can be passed and the president can sign," he said. "And there's lots and lots of details that will go into how that will pay for itself."

--Meghan Gordon, meghan.gordon@spglobal.com

--Edited by Valarie Jackson, valarie.jackson@spglobal.com