Hearing highlights GOP divide over border tax

Hearing highlights GOP divide over border tax
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A House Ways and Means Committee hearing on Tuesday showed Republicans are divided over their leadership’s border-adjustment tax proposal.

Even on the tax-writing panel, rank-and-file Republicans expressed worries that the proposal championed by 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 (R-Wis.) could hurt their constituents.

If supporters hoped the hearing would provide some momentum, they were disappointed. 

Some Republicans on the Ways and Means Committee appeared to be supportive of the border-adjustment proposal — especially the most senior GOP lawmakers. 

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“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,” said 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).

But several other GOP lawmakers on the panel expressed concerns or outright opposition to the border tax plan. 

Rep. Erik Paulsen (R-Minn.), whose home state includes the headquarters of Target, came out against the border tax plan during the hearing. Paulsen is being targeted by the Democratic Congressional Campaign Committee (DCCC) in the 2018 midterm elections. 

“I cannot support the border adjustability provisions as introduced last year in the blueprint,” Paulsen said.

Echoing the argument of retailers, Rep. Mike Kelly (R-Pa.) said his concern “is the final price on the shelf for those folks that pick up the tab on every single thing this wonderful government does in their name.” 

Meanwhile, Rep. Jim Renacci (R-Ohio) said he’s been “skeptical of the border adjustment as a central element of the blueprint, but I am trying not to be.”

Renacci, who is running for governor of Ohio, said he’s concerned that the proposal picks winners and losers in the economy. He also questioned who will face a tax burden under the proposal and whether the plan is compliant with the United States’ obligations under international treaties.

The border-adjustment tax proposal was a key part of the tax-reform blueprint that House Republicans released last year as part of Ryan’s Better Way agenda. Under the proposal, U.S. taxes would be imposed on imports, while exports would be exempt.

House GOP leaders have touted the proposal as a way to encourage domestic manufacturing and remove incentives for companies to shift jobs overseas.

But the idea has divided the business community, with large exporters backing it and retailers, who are heavy importers, denouncing it a tax increase on consumers. 

Republicans in the Senate and the White House have also raised concerns about the idea.

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.) said last week that the proposal probably couldn’t pass his chamber, while Treasury Secretary Steven Mnuchin said Tuesday at an event hosted by the Peter G. Peterson Foundation that a border-adjustment tax "doesn't create a level playing field."

The emerging divide over the border tax is a big problem for Republicans, who need to remain united if tax reform is going to pass Congress.

Unlike the last major overhaul of the tax code, in 1986, Republicans are not expecting to pass tax reform on a bipartisan basis, which means they cannot afford mass defections.  

Democrats during the hearing Tuesday generally expressed concerns or raised questions about the border-adjustment tax.

Ways and Means Committee ranking member Richard Neal (D-Mass.) called the proposal “interesting” but said “there are many unknowns.”

He said there are several questions that need to be answered about the provision, including how it would affect consumers, if the dollar would strengthen to offset price increases, if the proposal is compliant with World Trade Organization rules and how it would affect U.S. jobs. 

Brady and other supporters of the border-adjustment tax acknowledged the concerns of retailers and lawmakers and said they are working on transition rules.

“I think a smooth transition is key,” said Rep. Peter Roskam (R-Ill.), the chairman of the Ways and Means Committee’s tax-policy subcommittee and another DCCC target in 2018. 

Niv Elis contributed.