Republican Sen. Jeff Flake on Wednesday criticized the House GOP plan to adjust taxes at the border, joining several other Republican senators doubtful of the idea in a new blow to the momentum for tax reform.
The provision, the Arizona lawmaker argued in a brief speech on the Senate floor, could raise the prices of consumer goods.
While there will always be winners and losers in tax reform, he concluded, “we ought to make sure that the middle class isn’t in the losing column.”
Several Republican senators have expressed doubts about the border adjustment plan backed by House Speaker Paul Ryan.
At least two, David Perdue of Georgia and Tom Cotton of Arkansas, have previously voiced opposition. Those two were invited to the White House on Tuesday to meet with President Trump, who has yet to decide on the provision.
With 52 Republicans in the Senate, there is little room for defections from any tax reform legislation.
At issue is the House Republican idea of taxing imports as part of a broader corporate rate-cutting reform that would tax goods based on where they are sold. In 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 revenue 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.
Ryan and outside economists have argued that the dollar would appreciate in response to the border adjustment’s implementation, leaving importers’ purchasing power unchanged.
But Flake said Wednesday that argument amounts to “gambling” in currency markets.
The reform idea also could raise questions about whether the U.S. was violating the terms of trade agreements, prompting retaliation from other countries, he added.
