The White House has scrambled the congressional debate over a border tax by injecting the controversial issue of how to pay for a wall on the Mexican border into the discussions.
During a speech to congressional Republicans in Philadelphia on Thursday, Trump suggested that tax reform could be a vehicle to achieve his goal of paying for the wall.
”We're working on a tax-reform bill that will reduce our trade deficits, increase American exports and will generate revenue from Mexico that will pay for the wall, if we decide to go that route," he said.
Hours later, White House press secretary Sean Spicer suggested that the wall could be paid for through a 20 percent import tax.
“If you think about what a border tax on imports from countries like Mexico that we have a huge trade deficit does, that’s really going to provide the funding,” he said.
Spicer quickly walked the comments back, suggesting they were just an option.
But they created a furor, plainly worrying some Republican lawmakers, Mexico and a host of U.S. businesses with stakes in the fight.
House Republicans for some time have been talking about a border-adjusted tax that would subject imports to the corporate tax while exempting exports. Their plan would lower the corporate tax rate from 35 percent to 20 percent.
The plan is controversial, since some import-reliant industries could see their tax bills rise as a result of the change. Retailers have said that higher taxes on imports would hurt consumers.
And Trump’s sudden support for the idea was a surprise, since earlier this month he had criticized it as “too complicated.”
Peter Navarro, head of Trump’s National Trade Council, offered his personal support for border adjustability on Friday, but said that he would let other Trump advisers speak for themselves.
“There’s no question we need a border adjustable tax of some kind, one that has to be flexible,” he said on CNBC.
House GOP leaders have argued that border adjustments would make the U.S. tax system more similar to that of other countries and would remove incentives for companies to outsource jobs.
The White House’s remarks spurred those who are uncertain about or oppose the border-adjustment proposal to speak out.
Senate Majority Whip John CornynJohn CornynAll hostages free, safe after hours-long standoff at Texas synagogue: governor McConnell will run for another term as leader despite Trump's attacks Republicans threaten floor takeover if Democrats weaken filibuster MORE (R-Texas) tweeted Thursday that he has “many unanswered questions” about it. And Americans for Prosperity, a group backed by the Koch Brothers, sent a letter to House Ways and Means Committee Chairman Kevin BradyKevin Patrick BradyOn The Trail: Retirements offer window into House Democratic mood Members of Congress not running for reelection in 2022 Trump war with GOP seeps into midterms MORE (R-Texas) on Friday that calls the proposal a “whopping tax hike of more than $1 trillion on American families and small businesses.”
It’s also not entirely clear what the White House has in mind.
Spicer’s comments suggested the White House saw a chance to impose an import tax specifically on Mexico, which would be different from the House GOP plan. It would tax all goods consumed in the United States regardless of where they are produced.
Also, House Republicans have proposed using the revenue raised from the border-adjustment tax to pay for tax cuts, rather than for new spending — though a border wall would only cost a small amount of the money that the border-adjustment proposal is expected to raise.
Speaker Paul RyanPaul Davis RyanOn The Trail: Retirements offer window into House Democratic mood Stopping the next insurrection Former Sen. Bob Dole dies at 98 MORE (R-Wis.) on Friday said that border adjustments could be an “elegant solution” to get more revenue.
With a border-adjustment tax, “you’ll get revenues coming in from every country we have a trade deficit [with], because imports exceed exports,” Ryan said at an event hosted by Politico.
Congress last overhauled the tax code more than 30 years ago. Tax reform is known for being difficult, and the latest remarks from the White House may be indicative of that.
Rep. Peter Roskam (R-Ill.), chairman of the House Ways and Means Committee’s tax-policy subcommittee, told The Hill that he thinks the White House is looking seriously at border adjustments. And he said that he feels like Trump is the type of president who could push through a bold tax-reform plan.