Treasury Secretary Steve Mnuchin is suggesting that the border adjustment might not be dead yet.
The controversial tax provision, proposed by House Republicans to offset lost revenue from corporate rate cuts, didn’t have much support from the Senate. President Trump didn’t like it either. And retailers hated the idea, because it taxes imported goods while exempting exports from taxes.
But so far it has been the only major proposal to counterbalance the trillions of dollars in lost revenue that will result from tax cuts. And now the administration seems to be warming up to the idea of reworking it in some way.
At an event Wednesday morning at the Newseum in Washington, DC, Mnuchin said the White House is open to revising the plan.
“We just don’t think it works in the current form,” he said, without giving details about how they would fix it.
The New York Times reported Tuesday that the border tax would not be part of the president’s tax plan, which the White House is expected to unveil on Wednesday. And that’s probably true, but Mnuchin is implying that the administration is willing to strike some sort of deal later on. He described the forthcoming White House plan as “the biggest tax cut and largest tax reform in the history of the United States.”
Mnuchin, the key architect of Trump’s tax reform agenda, has been meeting for hours each week with House Speaker Paul Ryan and Kevin Brady, the Texas Republican who chairs the House Ways and Means Committee, which is responsible for writing tax law.
Based on Mnuchin’s comments, this is probably what happened: Ryan and Brady told Mnuchin there is no way they will write a bill that includes massive tax cuts — as Trump’s plan proposes — without offsetting the cost in some way. So far, Trump has not explained how the government will recoup the trillions of dollars it will lose after lowering the tax rate for corporations and businesses to 15 percent. The idea that economic growth will magically pay for the tax cuts probably didn’t fly with Ryan and Brady (though Mnuchin said Wednesday that he thinks doubling economic growth to 3 percent is super doable with all the tax cuts).
To strike a deal with House Republicans, Mnuchin and Trump likely agreed to rework the border adjustment tax at some point. What’s clear is that the plan they will reveal Wednesday will be quite broad, and will not tackle difficult decisions, like how to pay for tax reform.