Treasury Secretary Steven Mnuchin took the unusual step Tuesday of openly criticizing a House Republican plan that would tax imports but not exports, a major pillar of the tax overhaul being pushed by Speaker Paul Ryan and other GOP leaders.
“One of the problems with the border adjustment tax is that it doesn’t create a level playing field,” Mnuchin said at the Peter G. Peterson Fiscal Policy Summit, using the plan’s technical name. “It has very different impacts on different companies. It has the potential to pass on significant costs to the consumer. It has the potential of moving the currencies. We want to make sure we’re creating a level playing field.”
Mnuchin also backed off his pledge that the administration will not propose a tax plan that would ultimately cut taxes for the wealthy.
“I can’t pledge what the results will be since the results are going to be a combined effort of the administration, the House and the Senate,” he said.
The border adjustment tax is becoming a major flashpoint between House Republicans and the Trump administration. Mnuchin and other officials have expressed their concerns to GOP leaders behind closed doors, but his comments Tuesday were a more pointed public critique.
Ryan and other House GOP leaders have pushed a blueprint for major changes to the tax code built around border adjustment for close to a year. Supporters say the plan would help preserve American jobs and discourage U.S. corporations from moving operations abroad.
But import-reliant industries, notably retailers, are waging a fierce battle against border adjustability, saying it would pummel their bottom lines, despite assurances from supporters that the plan would boost the value of the dollar and take much of the sting out of the tax hit.
The House Ways and Means Committee held its first hearing Tuesday on the provision. A committee spokesperson responded by email with an excerpt from opening remarks given by Ways and Means Committee Chairman Kevin Brady (R-Texas), a staunch advocate of border adjustment.
“We recognize this is a significant change from our current tax code,” Brady said. “We know there are legitimate concerns — including from some of our witnesses here today and our colleagues on the other side of the aisle —about how it will affect American workers, businesses, and consumers.”
Brady pledged to pledged to work with critics to address their concerns.
In wide-ranging comments on tax reform, Mnuchin also backed off his pledge that tax reform will not lead to a net tax cut for the wealthy. He said he couldn’t predict how the plan will affect individual income brackets since it is in flux.
But, he said, “The president’s priority is about creating a middle income-tax cut.”