House Speaker Paul Ryan on Thursday defended the controversial border adjustment tax, which he called “good manufacturing policy,” during his weekly press conference with the media.
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“[The border adjustment tax is] putting American-made products at a huge advantage. There’s a built-in bias in our tax code to outsource and re-import into this country. That’s not good for American jobs, that’s not good for American manufacturing, that’s not good for American economic growth,” Ryan said.
The comments come one day after retail executives, including AutoZone (NYSE:AZO) president and CEO Bill Rhodes, JCPenney (NYSE:JCP) CEO Marvin Ellison and Target (NYSE:TGT) CEO Brian Cornell, huddled with President Trump at the White House to voice their concerns over the divisive tax. The industry leaders later met with Rep. Kevin Brady (R-TX) of the House Ways and Means Committee and Senator Orrin Hatch (R-UT) of the Senate Finance Committee.
“We had a positive and productive conversation with President Trump… [Where] we stressed the importance of taking a thoughtful approach to tax reform for both individuals and corporations,” AutoZone CEO Bill Rhodes said in a statement on Wednesday.
After the meeting, Rep. Brady said he is “confident” the border adjustment tax, which would eliminate the ability for companies to deduct the cost of imports – but exempt exports from being taxed, will be included in the GOP’s tax reform plan. While supporters say the tax is designed to prevent the outsourcing of American jobs, opponents argue this type of tariff will result in a financial burden that retail companies will be forced to pass on to the consumer.
“This 20 percent tax on all imports is regressive, hammers consumers, and shuts down economic growth,” Senator Perdue (R-GA) wrote in a letter to his colleagues last week.
In a speech on the Senate floor Wednesday, Senator Tom Cotton (R-AR) echoed concerns that it would seriously cripple the average American.
“It’s estimated that this one change alone would produce something like $100 billion a year in additional tax revenue. That’s a lot of money, and someone has to pay it. And I’ll tell you exactly who’s going to pay: working Americans who’ve been struggling for decades. A tax on imports is a tax on things working folk buy every single day,” Cotton told his colleagues.
This type of consumer pain would spillover to stunt an already slowly-moving economy, Brian Wesbury, First Trust chief economist, told FOX Business.
“U.S. companies have arranged their affairs based on the current tax code - trillions of dollars of decisions. Shifting to a [border adjustment tax] creates a chaotic cascade of winners and losers. This chaos is bad for the economy,” he said.
It is unclear whether President Trump will ultimately support the tax, he has called it “too complicated.” Meanwhile, a few U.S. multinationals who stand to gain from the tax exemption on exports, including Boeing (NYSE:BA) and General Electric (NYSE:GE), have come out in favor of it. Even some retail industry insiders have spoken out for it, maintaining that it is an essential part of the GOP’s overhaul agenda.
“[The CEOs in opposition to the tax] are making their decisions based on the tax code as it is set up today, and what’s being proposed is a complete reform of the tax code where the incentives to export jobs and export businesses that have existed for years would be turned around so that the incentives to build capability and jobs in the U.S. would exist,” Bill Simon, former Walmart U.S. president and CEO, said during an interview with FOX Business’ Stuart Varney Wednesday.
Grover Norquist, Americans for Tax Reform president, said the border tax supports the administration's pro-growth agenda.
"The part of the tax reform package that creates a border adjustable cash-flow business tax is part of overall pro-growth and job creating tax reform," he told FOX Business.
In December a staff memo leaked from the Democrats in the Senate Finance Committee revealed they find the proposal “confusing, untested” and “possibly illegal under WTO rules.”
On Thursday, Ryan said that division on Capitol Hill over the policy will not impede the tax reform process.
"We are doing tax reform. Tax reform is going to happen. Do you know why tax reform is going to happen? Because it has to happen," Ryan said.