Border-adjustment tax proposal at death’s door

Border-adjustment tax proposal at death’s door
© Greg Nash

Speaker Paul RyanPaul Davis RyanAEI names Robert Doar as new president GOP can't excommunicate King and ignore Trump playing to white supremacy and racism House vote fails to quell storm surrounding Steve King MORE’s (R-Wis.) border-adjustment tax proposal is increasingly looking like it’s on death’s door.

The proposal to tax imports and exempt exports has been facing long odds for several months, with retailers, conservative groups and senators warning that it would lead to consumers paying more for items such as clothes and groceries.

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But in recent weeks and days, the concerns have been mounting from the White House and House Republicans.

“The BAT can’t pass without President Trump’s support. And it’s not clear it would pass with his support,” said Rep. Luke Messer (R-Ind.), who as GOP policy chairman is a member of Ryan’s leadership team.

“I think it’s going to be hard to get [the border-adjustment tax] through,” added Rep. Dennis Ross (R-Fla.), a senior deputy whip who is opposed to the tax.

Asked Wednesday if he thinks the border-adjustment tax is completely dead, Freedom Caucus Rep. Mark Sanford (R-S.C.) simply replied:  “I do.”

For the first time, Ryan on Wednesday conceded that a House tax-reform bill might not include any type of border adjustability measure.

“That’s the kind of conversation we’re having [with the White House and the Senate],” Ryan, who has been forcefully defending the tax, said at an event hosted by Axios.

Ryan still offered a vigorous defense of the proposal, which he has long championed.

But his acknowledgement that the tax could be left out of tax reform resonated a day after a House hearing failed to boost momentum and as top Trump administration officials tell lawmakers behind closed doors that they are opposed.

At a public hearing on Wednesday, Treasury Secretary Steven Mnuchin said the administration has “some concerns” about the proposal but is “looking forward to potential changes” that House Ways and Means Committee Chairman Kevin BradyKevin Patrick BradyTexas governor, top lawmakers tell Trump not to use hurricane relief funds to build border wall Trump on declaring national emergency: 'Not going to do it so fast' Dems look to chip away at Trump tax reform law MORE (R-Texas) may be considering.

Behind closed doors, he is offering a tougher message.

During meetings this week with the conservative Republican Study Committee (RSC) and far-right Freedom Caucus, Mnuchin said both he and Trump are opposed to border adjustability, GOP sources said.

In the Freedom Caucus meeting, lawmakers twice pressed Mnuchin on Trump’s position on the border-adjustment tax. At first, Mnuchin said he and Trump are not inclined to back it, saying the it was too unpredictable, a source said.

Asked again, Mnuchin was more forceful, saying he hoped the proposal would be dropped so that Republicans can move forward with tax reform.

During the RSC meeting, Mnuchin made clear his opposition to the border-adjustment tax is to the proposal in its “current form,” said a senior congressional aide.

“I think he was being careful to provide wiggle room if necessary,” the aide said, “but it was pretty clear where they stand on it.”

In a separate closed-door meeting with House Ways and Means Committee Republicans and Democrats, Mnuchin also told lawmakers the president doesn’t back the tax. “He’s not for it,” Mnuchin told Rep. Judy Chu (D-Calif.), who asked about the president’s position on the tax.

There is also opposition to the proposal in the Senate. Majority Leader Mitch McConnellAddison (Mitch) Mitchell McConnellSunday shows preview: Shutdown negotiations continue after White House immigration proposal Senate to take up Trump's border-immigration plan next week Trump pitches new plan to reopen government amid Dem pushback MORE (R-Ky.) just last week predicted that the Ryan proposal “probably wouldn’t pass the Senate.”

In the House, neither the RSC nor the Freedom Caucus has taken an official position on the border-adjustment tax, but it’s clear that Freedom Caucus members are largely opposed.

“There is a strong desire with HFC members to move tax reform in the House over the next 90 legislative days. Getting consensus on the border-adjustment tax in that timeframe does not appear to be realistic,” Freedom Caucus Chairman Mark Meadows (R-N.C.) told The Hill on Wednesday.

“The general thoughts among several of our members is that tax reform must happen and that more time to find consensus on BAT will not be fruitful,” Meadows added.

The border-adjustment proposal is a key part of the “Better Way” tax plan House Republicans released last year. The idea behind the proposal was to raise revenue to pay for lowering tax rates and to curb incentives for companies to move their jobs and headquarters to other countries.

But it has divided House Republicans, even on the Ways and Means Committee.

Several members of the tax-writing panel expressed reservations about the border-adjustment tax during a hearing Tuesday on the proposal. Most notably, Rep. Erik Paulsen (R-Minn.), who had previously expressed support for the proposal, said he “cannot support the border adjustability provisions as introduced last year in the blueprint.”

Paulsen’s home state includes the headquarters of Target, whose CEO testified against the tax during the hearing. He is also among the Democratic Congressional Campaign Committee’s targets for the 2018 midterm elections.

Rep. Jim Renacci (R-Ohio), who also raised questions about the tax proposal during the hearing, told The Hill on Wednesday that his concerns have not been eased.

“I still have the concerns I’ve had before,” said Renacci, who is running for governor.

Ryan and other supporters of the border-adjustment proposal are continuing to defend it, even as they acknowledge it is in trouble.

“A border adjustment basically taxes the trade deficit, gets you revenue to lower your tax rates,” Ryan said Wednesday. “If you’re not going to tax our trade deficit, like every other country does, then you’ll have to get your base broadening from within the country.”

Indeed, the lack of a border tax would create a new problem for Republicans, and it’s unclear exactly how they would make up the roughly $1 trillion in revenue the tax is estimated to raise in a decade.

“There’s lots of different scenarios we’re running,” Mnuchin told the Ways and Means Committee Wednesday during a hearing.

If Republicans completely abandon the border-adjustment tax, they will also need to find another mechanism to try to prevent companies from shifting income overseas.

“The attractive thing about border adjustment is it works,” Rep. Peter Roskam (R-Ill.), chairman of the Ways and Means Committee’s tax-policy subcommittee, told Mnuchin.

GOP lawmakers said they’re torn over the issue and are approaching it cautiously. On one hand, they’re aware Trump is opposed and that it’s unpopular with their conservative base. But members said they also don’t want to come out too harshly against an idea trumpeted by their own Speaker.

Brady said at Tuesday’s hearing that retailers and lawmakers have “legitimate concerns” about the tax proposal and that he wants to work with them to address their fears.

He told Fox Business Wednesday that the border-adjustment tax is not off the table “because everyone has another question: So what’s the better idea?”

“Tax reform is a process. It’s not easy and smooth like Derek Jeter,” he said. “It is scrappy and gritty, and there is a whole lot of work, but at the end of the day, we’re going to deliver with this president.”