Congress’s chief tax-law writer threw his support Tuesday behind the House GOP’s plans for a border adjustment tax, igniting a ferocious debate that’s already dividing conservatives and pitting them against President Trump.
The president has said he wants to see punitive tariffs aimed at companies that move operations outside the U.S., an action he says will convince firms to build and sell here instead.
But Ways and Means Chairman Kevin Brady said he’ll work instead on a border adjustment policy, which he said will even out taxes between imports, exports and purely domestic goods and services, making U.S. companies more competitive without having to turn to a tariff.
“Eliminating the ’Made in America’ tax is a simple but powerful action we can take that will dramatically simplify our international tax system and level the playing field for American businesses and workers,” the Texas Republican said in a speech Tuesday at the U.S. Chamber of Commerce.
House Speaker Paul D. Ryan has been pushing the border adjustment for weeks, clashing with the new president, who has said the system is too complicated. Mr. Trump’s been pushing to instead impose “major” tariffs to boost the price of foreign goods, which he believes would make American manufacturers more competitive.
Mr. Trump can impose tariffs on his own, without needing to get permission from Congress.
But Mr. Ryan, a former chairman of the Ways and Means Committee, said Capitol Hill controls tax policy and will tackle the border issue as part of a massive corporate tax overhaul that all sides have been promising for years.
“We want tax reform that works for American businesses,” Mr. Ryan said.
He said their tax plans are expected to be revenue-neutral, which means the government will take in the same amount of money from taxes after the overhaul — though the composition of where the taxes come from will be different. The corporate tax rate is expected to be significantly lower, though companies would also lose a number of carve-outs.
The border adjustment tax would act like a sales tax on goods sold in the U.S., no matter where they were produced, equalizing the pain for both domestic and foreign producers.
The plan got a boost from Grover Norquist, head of Americans for Tax Reform and the arbiter of a powerful taxpayer pledge, who told CNBC he could accept the border adjustment tax as long as it was part of a big overhaul.
He said there will be “winners and losers” under the tax, but said the overall tax blueprint the GOP is pursuing “is great.”
On the other side is the Club for Growth, a free markets advocacy group, which said the losers under a border tax will be average Americans.
Former Rep. David McIntosh, the club’s president, said the House GOP was wrong to chase after the goal of revenue-neutral tax policy.
“Instead of trading one tax for another, the GOP needs to focus on cutting rates, and cutting spending and the size of government to match,” he said.
• Stephen Dinan can be reached at sdinan@washingtontimes.com.
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