Georgia Sen. David Perdue has emerged as the top Republican critic of the House GOP plan to adjust business taxes at the border, threatening the divisive proposal’s legislative prospects.
Unlike other members of the upper chamber, Perdue has harshly criticized the tax idea in the press and actively tried to sway his colleagues against it.
Speaking Thursday in an interview with Yahoo Finance, the freshman senator called the border-adjustment feature of the House GOP plan “a regressive tax. It hammers low-income and middle-income people. It doesn’t foster growth.” He also sent his colleagues a letter aiming to rally them against the provision.
Perdue, the former CEO of Dollar General, is on the same page as retailers and other businesses that depend on imports who have warned that the GOP plan would raise costs for them.
House Republicans have proposed taxing imports as part of a broader corporate rate-cutting reform that would tax goods based on where they are sold. Under the plan, companies would no longer be allowed to deduct the cost of imported goods and services, but would no longer pay any taxes on revenues from exports. In today’s system, U.S. companies are taxed on all profits, whether they are earned in the U.S. or abroad. Republicans say the change would encourage more manufacturing within the U.S., and discourage companies from moving production overseas.
A major motivation for including the border adjustment feature in the plan is that it would raise roughly $1 trillion over 10 years, according to the Tax Foundation, allowing Republicans to cut tax rates further without adding to deficits.
Perdue, however, rejected the tax as a pay-for for tax rate cuts on Thursday, calling it a “tax grab.”
“I’m less concerned about the scoring” of the eventual tax bill, he said.
Perdue’s view suggests that the legislative path for the border adjustment is extremely narrow. Orrin Hatch of Utah, the chairman of the Senate Finance Committee, has indicated that tax reform is likely to be pursued on a partisan basis, meaning that he can only lose at most two Republicans.
Other Republicans, such as majority whip John Cornyn of Texas, have also expressed skepticism of the tax, although not as forthrightly as Perdue has.
Perdue also issued another criticism of the border-adjusted tax, namely that it could expand the size of government. Conservatives have long argued among themselves whether value-added taxes increase government revenues because of their efficiency. While the House Republican plan is not a value-added tax, it shares several features with value-added taxes, including the border adjustment.
