GOP chairman suggests phasing in border tax over five years

GOP chairman suggests phasing in border tax over five years
© Greg Nash

House Ways and Means Committee Chairman Kevin BradyKevin Patrick BradyRepublicans' rendezvous with reality — their plan is to cut Social Security The Social Security 2100 Act is critical for millennials and small business owners House panel releases documents of presidential tax return request before Trump MORE (R-Texas) on Tuesday said that the GOP border-adjustment proposal could be phased in over five years, as concerns about the tax plan have mounted from lawmakers and business groups.

“My current thinking on border adjustment — after listening to our businesses large and small and our members — is a very gradual five-year transition,” Brady said at The Wall Street Journal-CFO Network annual meeting.

The border-adjustment proposal was a key part of the tax plan House Republicans released last year. Under the proposal, imports would be subject to U.S. taxes and exports would be exempt.

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Brady has argued that the proposal, which is championed by House Speaker Paul RyanPaul Davis RyanUSCIS chief Cuccinelli blames Paul Ryan for immigration inaction Soaring deficits could put Trump in a corner if there's a recession Paul Ryan moving family to Washington MORE (R-Wisc.) is the best way to prevent companies from moving their jobs and headquarters overseas.

But retailers, Trump administration officials, conservative groups and many GOP lawmakers have worried that it would amount to a tax increase for consumers.

Brady said that a five-year transition reflects feedback from businesses.

“Businesses need plenty of time to assess their current supply chain and decide what — if any — can return to the United States,” he said. “And they want plenty of time to see how the dollar adjusts and at what level.“

Retailers said Tuesday they still don’t like the border-adjustment provision even if it is phased in over five years.

“Chairman Brady’s proposed five-year transition does nothing to change the harmful impact on consumers, it only delays the political consequences for lawmakers,” said Joshua Baca, spokesperson for a coalition of retailers and trade groups called Americans for Affordable Products. “It is past time for Chairman Brady to read the writing on the wall and sideline the border adjustment tax so that our tax code can be reformed; otherwise, his actions serve no other purpose than to severely undercut a once-in-a-lifetime opportunity.”

“Forcing consumers to pay more so that some profitable companies can operate tax-free is no better of an idea in five years than it is today,” said Brian Dodge, senior executive vice president for public affairs at the Retail Industry Leaders Association. “The result will be the same — higher prices on food, gas, prescriptions, electronics, clothes and thousands of items American families need every day."

Koch Industries, which has also come out against the border-tax proposal, argued that Congress needs to move forward on tax reform without any type of border-adjustment tax (BAT).

"This phase-in does little to ease our concern with a border adjustment tax, as it doesn’t change the harm a BAT will have on American consumers who will be forced to pay more for everyday essentials like clothes, gas and groceries," said Philip Ellender, president of government and public affairs at Koch Industries. "A five-year phase in does not make a bad idea a good one."

A group of businesses that supports the border-adjustment proposal, called the American Made Coalition, said it appreciates Brady's efforts and was critical of the response by border tax opponents.

"It is unfortunate that some groups remain committed to sinking tax reform at every turn rather than work on ways to fix a broken system that hurts American workers," coalition spokesman John Gentzel said. "We applaud Chairman Brady for his steadfast commitment to comprehensive tax reform, and will continue to work with Congress and the administration on bold solutions to transform the U.S. tax code so American workers and businesses can compete on a level playing field."

The conservative-leaning Tax Foundation said that phasing in the border-adjustment tax would reduce the amount of revenue the proposal would raise. The group estimated that the original border adjustment proposal would raise about $1.2 trillion over a decade and that a phased in proposal would raise about $1 trillion. 

- updated at 4:47 p.m.