WASHINGTON _ President Donald Trump wants to tackle the tax code after the failure of the Republican health care bill, a huge undertaking considering that the code hasn't changed substantially since the Ronald Reagan administration.
Trump has a fellow businessman in Congress eager to tackle taxes. Rep. Roger Williams, R-Texas, a car dealer, proposed a tax plan last year in anticipation of a friendly face in the White House. Now, he wants to work with Trump to get something done.
But there's a potential hang-up.
A tax bill could not increase the federal deficit after 10 years without 60 60 votes in the Senate. Republicans have only 52 seats. So the House Republican leadership must propose to raise taxes or cut spending to pay for a lower tax rate.
The current proposal, supported by House Speaker Paul Ryan, R-Wis., and Ways and Means Committee Chairman Kevin Brady, R-Texas, would impose a border adjustment tax on imported goods. The tax would supposedly raise $1.2 trillion over 10 years to offset decreased federal revenue caused by lower corporate and personal taxes. Its proponents argue that the tax would benefit U.S.-based manufacturing.
But the border adjustment tax is a non-starter for Williams and some Senate Republicans.
"In my business, if I want to cut my car prices to try and sell more cars, I don't raise prices, I lower prices and cut expenses," Williams said. "That's what you do in your family, that's what we all do. This is no different. And a 5 percent border tax increases the cost of goods, it flows to the consumer and it's just a tax increase."
Instead of a border adjustment tax, Williams said conservatives need to get serious about cutting expenses to make a tax proposal deficit-neutral. Williams wants to cut the Education Department, but doing so would not come near what would be required to lower tax rates.
Harry Stein, director of fiscal policy at the liberal Center for American Progress, said Republicans don't have a plan to make tax cuts revenue-neutral in the long term, even if a boarder adjustment tax passes.
"On the House side, Ryan and Brady have been very clear they want to do something permanent, but the Better Way tax plan isn't revenue neutral," Stein said. "I think there's a rhetoric versus reality disconnect there that's important. Even if you take most dynamic score it loses $1.9 trillion in the second decade."
Williams said he's been in contact with Gary Cohn, Trump's chief economic adviser and former chief operating officer of Goldman Sachs, about his tax proposal, but it's unclear where Trump stands on the border adjustment tax. Proponents of the measure hoped that Trump would embrace the idea after railing against free-trade agreements in his campaign, and that a tax on foreign-made goods would appeal to Trump's populist streak. However, Trump has been largely silent on the proposal since taking office.
Big importers like Wal-Mart and Target are pushing the White House to reconsider the House plan.
"We have a great relationship with Chairman Brady, but on this one we just flat out disagree with the approach," said Texas Retailers Association president and chief executive George Kelemen. "Specific to Texas, it's our grocery sector ... we import avocados, bananas and coffee. Those are products we don't produce or grow enough of and if you put a 20 percent tax on all that imagine what that does to the household grocery bill."
A number of Senate Republicans oppose a border adjustment tax. Arguably the biggest opponent is Sen. Tom Cotton, R-Ark., as Wal-Mart is based in his state. Sen. John Cornyn, R-Texas, wrote in a Twitter post in January that "there's many unanswered questions about proposed border adjustment tax. Sen. David Perdue, R-Ga., sent a letter to his colleagues in February criticizing the proposal.
If three senators voted against a tax bill, plan, it would fail.
Williams said the White House can learn a lot to prepare for a tax fight after the Affordable Care Act replacement bill failed in spectacular fashion. He said speeding the bill through Congress would result in a half-baked proposal that satisfies no one.
"We have to have this conversation so we don't have another health care debacle," Williams said. "But tax reform in my mind is pretty easy."
