House GOP Pushes Border Adjustment Tax Despite Opposition

House GOP Pushes Border Adjustment Tax Despite Opposition
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House Republicans aren’t backing off a controversial proposal at the center of their tax overhaul plan despite continued opposition from key GOP leaders in the Senate and the Trump administration.

Rep. Kevin Brady, the chairman of the House Ways and Means Committee, held a hearing Tuesday examining border adjustability, a proposed 20 percent tax on imports -- while exempting exports -- that is at the heart of the blueprint he and Speaker Paul Ryan helped craft last year.

“Our goal is not simply to eliminate any tax reason to move American jobs overseas, but to reestablish America as a 21st-century magnet for new jobs and investment,” Brady said in his opening statement.

But even as House Republicans on the tax-writing committee were debating the pros and cons of the proposal Tuesday, Treasury Secretary Steven Mnuchin was throwing cold water on its viability.

“One of the problems with the border adjustment tax is that it doesn’t create a level playing field,” Mnuchin said at the Peter G. Peterson Foundation Fiscal Summit, according to Politico. Last week, Senate Majority Leader Mitch McConnell called border adjustability “controversial” and said it probably couldn’t pass in the upper chamber.

Despite that pushback, House Republicans forged ahead with the proposal, and still consider it a key portion of their tax plan, saying it could raise more than $1 trillion in revenue to help pay for lower corporate and individual tax rates. Tuesday’s hearing was a key opportunity to debate the issue, and try to win over some of the skeptics.

“We recognize this is a significant change from our current tax code. We know there are legitimate concerns” from stakeholders, including some of those testifying at the hearing, Brady acknowledged.

The concerns from opponents include whether the tax would be compliant with the World Trade Organization and whether it would increase the power of the dollar to offset any setbacks for consumers.

In particular, the opposition has come from large retailers – notably Walmart and Target – that import massive amounts of goods, and could face steep taxes under the new plan. Target CEO Brian Cornell testified against the proposal Tuesday.  

“Under the new border adjustment tax, American families – your constituents – would pay more so many multinational corporations can pay even less,” Cornell said.

That opposition could be a potent weapon against border adjustment among Republicans, and it highlights the growing need for Brady and Ryan to sell the plan to the public. Two committee Republicans – Rep. Erik Paulsen, who represents a district that borders Minneapolis, the corporate home of Target, and Rep. Jim Renacci of Ohio -- expressed serious reservations about the proposal Tuesday.

“I cannot support the border adjustability provisions as introduced last year in the blueprint,” Paulsen said during the hearing. “I really want to urge this committee to listen, to be educated and then to address these concerns that we heard as we move forward with reform.”

Renacci said he had been “skeptical” of the plan, though he was trying to be open-minded. Among his concerns is the sentiment expressed by Mnuchin that it could create winners and losers.

“I’m hearing very real concerns from Main Street Ohio,” said Renacci, who is running for governor of the Buckeye State.

But Brady and other Republicans had some cover from retailers in the room. William Simon, the former president and CEO of Walmart, argued that if the border adjustment tax were written in a way that took account of the concerns from retailers and was carefully implemented over time, it could be successful.

With proper implementation and a proper transition, “it will be very, very good for the country,” Simon said.

Brady, in a brief interview after the hearing, remained optimistic about the proposal, saying that the hearing helped with “raising this issue up” and that his Senate colleagues could still be brought on board. 

“I haven’t met a senator yet who defends the status quo of giving tax breaks to foreign products over American products and chasing jobs overseas, so let’s just stay at the table together,” Brady said.

James Arkin is a congressional reporter for RealClearPolitics. He can be reached at jarkin@realclearpolitics.com. Follow him on Twitter @JamesArkin.

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