House Republicans’ top tax-writer warned Tuesday of “severe consequences” that would follow if Congress fails to pass the GOP plan to border-adjust taxes, issuing a strong defense of the controversial proposal amid pushback from business groups and ambivalent statements from President Trump.
“Make no mistake, there are severe consequences for America if special interests succeed in blocking this provision,” Rep. Kevin Brady, R-Texas, said in a speech at the U.S. Chamber of Commerce in Washington. Those consequences are not keeping U.S. companies competitive with companies in other countries.
Brady, the chairman of the Ways and Means Committee, is the legislator tasked with writing the GOP tax reform, which includes the border adjustment plan. The proposal would make it so that companies are taxed only on sales within the U.S. and not on international sales, a destination-based tax meant to curb offshoring of jobs and corporate “inversions.”
But because it would mean that businesses could no longer deduct the costs of imported goods from their taxable income, it has received opposition from companies with high import costs, including retailers, oil refiners, and others. Koch Industries, whose owners are major funders of conservative groups, have weighed in strongly against the border adjustment.
Brady argued that tax writers won’t be able to cut the corporate tax rate as deeply as planned. Outside estimates suggest that the border adjustment feature could raise around $1 trillion over 10 years, allowing Congress to cut rates further without losing revenues.
Brady also countered the criticism voiced by Trump, who described the tax idea as overly complicated in a January interview. Brady said Tuesday that it is “stunningly simple,” and would only tax goods and services if they’re consumed in the U.S.
Trump has prioritized keeping jobs in the U.S., and called for a border tax on companies that move operations out of the country. Speaking Tuesday, Brady said that the tax reform, including the border adjustment, would align with Trump’s goals of keeping jobs in the U.S.
House Speaker Paul Ryan also defended the scheme Tuesday, saying at a press conference that “all we’re doing is putting ourselves at a more level competitive playing field so that American businesses and American jobs can compete.”
At his appearance at the Chamber, Brady heard the concerns of a gas station owner who was worried that the cost of imported oil would rise under the GOP plan, leaving him no choice but to raise gas prices and lose customers. Brady assured the businessman that the dollar would appreciate in response to the new tax system, increasing his purchasing power for imports. He also promised transition rules to ease the burden.
