House Ways and Means Chairman Kevin Brady mounted a renewed defense Tuesday for including a border adjustment tax in the Republicans’ proposed tax overhaul, but he is facing increasing defections from members of his party who say the tax is complicated and will end up socking consumers.
Seeking to inject new life into the proposal, Mr. Brady acknowledged “fair concerns” about it and said there is merit to the idea of phasing in the tax to give the economy time to adjust.
“I’m confident that we can bring forward the designs [and] the transition — very deliberate, very generous, including incorporating some of those issues in a way that we not just address it in the short term,” Mr. Brady, Texas Republican, said at an event hosted by the Peter G. Peterson Foundation.
A 20 percent border tax has become a centerpiece of the House Republicans’ tax overhaul, with Speaker Paul D. Ryan and other leaders saying it will level the playing field with other countries that impose similar taxes and protect American manufacturers.
Opponents counter that it will raise prices on goods sold inside the U.S.
“Under the new border adjustment tax, American families — your constituents — would pay more so many multinational corporations can pay even less,” Target CEO Brian Cornell testified to Mr. Brady’s committee on Tuesday.
Retail giants such as Target and Wal-Mart are among other high-profile business groups that have vocally opposed the tax.
But former Wal-Mart CEO William S. Simon testified that the plan might not be bad if it’s implemented properly. He said lawmakers should think about a longer implementation using the expected value of the dollar or other method to trigger the next phase-in steps.
Mr. Brady later said that approach has merit.
House Republicans are counting on revenue generated by the tax to help fund a massive reduction in income tax rates. Without the money, they would have to either deepen the deficit or go for a less-ambitious tax code rewrite.
But the White House hasn’t embraced the idea, and Treasury Secretary Steven T. Mnuchin said at the Peterson Foundation event that the tax could pass significant costs to consumers.
Senate Majority Leader Mitch McConnell, Kentucky Republican, has said the plan probably wouldn’t pass the upper chamber, and other Republican senators have expressed concerns.
Beyond those hurdles, some of Mr. Brady’s fellow Ways and Means Republicans expressed skepticism on Tuesday, acknowledging the concerns about how the measure would affect retailers and consumers.
Rep. Erik Paulsen, Minnesota Republican, said he can’t support the provision as laid out in the House blueprint, and Rep. James B. Renacci, Ohio Republican, said he is skeptical about including the item as a central element of the Republican tax plan.
“I know we have to pay for these tax cuts, but I don’t want [it] to be on the back of everyday hardworking American taxpayers,” said Rep. Mike Kelly, Pennsylvania Republican, who has expressed reservations about the tax.
Outside advocacy groups — even those who support the Republicans’ broader efforts at tax reform — have also mobilized against the border adjustment provision.
Rep. Peter J. Roskam, Illinois Republican and chairman of a tax policy subcommittee, accused opponents of a disinformation campaign.
• David Sherfinski can be reached at dsherfinski@washingtontimes.com.
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