House Ways and Means Committee Chairman Kevin Brady on Tuesday defended a proposal that would tax imports while exempting exports, a core part of the House GOP’s tax-overhaul plan that has been criticized by President Donald Trump.
Speaking at the U.S. Chamber of Commerce, the Texas Republican said maintaining a “border adjustable” system in a tax-reform package is an essential component of the GOP’s larger goal of slashing business tax rates and allowing companies to fully and immediately expense capital investments.
“We need them all for us to compete,” Brady said.
The retail industry has resisted the border adjustment tax provision because of its potential effects on supply chains and pricing. Brady said he understands concerns about how the proposal is worded in the tax reform package but warned there would be “severe consequences” if it is blocked, saying it would risk “undercutting President Trump’s focus on American jobs and growth.”
Trump’s position on the border adjustment tax is unclear. In a Jan. 13 interview with The Wall Street Journal, Trump hinted at some skepticism about the provision. But in separate comments to Axios, published in a Jan. 18 article, Trump indicated that he hasn’t made up his mind on the proposal.
Brady’s public comments on Tuesday were his first since Trump was inaugurated.
Brady said he expects major economies that compete with the U.S. to push back on the border adjustment plan if it’s implemented, a prediction he said reflects the fact that the U.S. tax system is not internationally competitive. He said he expects the tax legislation will be drafted so that it complies with World Trade Organization rules on tax policy.
That would not stop competing economies from challenging the U.S., though.
“I do expect China and Europe and Mexico to yell about this,” Brady said. “They have a tax advantage built in that America voluntarily gives them.”
Correction: This story has been updated to reflect the timing of Brady’s remarks relative to Trump’s interviews.