Feb 17, 2017

Paul Ryan's border tax is in trouble

J. Scott Applewhite / AP

As Donald Trump will happily tell you, nobody sells a product better than Donald Trump. House Republican leaders are waiting for the President to turn his famous salesmanship skills to the border adjustment tax — a linchpin of Paul Ryan's tax plan that promises to raise more than $1 trillion by raising taxes on imports while exempting exports.

The problem: If President Trump doesn't get behind border adjustability — and we mean use the full force of the bully pulpit to pressure Senate Republicans and wavering House conservatives — this thing is dead on arrival.

We know Steve Bannon likes the idea. He's told associates that border adjustment is an "American nationalist" concept. But the President has equivocated, and seems more animated by punitive tariffs, which would never fly with GOP leadership.

I asked Trump's press team whether the conventional wisdom on the Hill is true, that Trump's top economic adviser Gary Cohn doesn't like border adjustability. The spokeswoman declined to comment on Cohn's views. Her response: "We're looking at all options – including border adjustability – remain on the table."

Key indicators of trouble:

  • We've seen no signs yet that the President is willing to spend a penny of political capital on border adjustability.
  • The majority of the House Freedom Caucus is against the plan. Without their support, Ryan and co can't get border adjustability through the House. These Freedom Caucus members will only wobble if Trump goes after them.
  • As we've laid out before, border adjustment has a Senate problem. The GOP Senators from states home to big box retailers — think Walmart in Arkansas, Home Depot in Georgia and Lowe's in North Carolina — have compelling reasons to oppose border adjustability.

What's next: Even the most fervent House conservatives tell me they can't fault Ways and Means chair Kevin Brady, who has been working to sell border adjustability to his colleagues. But House leaders are also realistic, and they need cash to pay for massive tax cuts. Don't be surprised if you hear that House leaders are dusting off the Camp tax plan. It was the GOP's last attempt at tax reform and contains plenty of other revenue options, including a controversial financial products section.

But you can't avoid making enemies when raising $1 trillion. If it's not the retailers or oil and gas, it might be the banks. Watch the reactions of Cohn and the other Goldman Sachs alums in Trump's orbit if House leaders start looking at the dreaded "Bank Tax."

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