Treasury Secretary Steven Mnuchin took the unusual step of openly criticizing the provision. | AP Photo Central pillar of House tax reform plan draws friendly fire

The fault lines widened Tuesday over a major pillar of the tax overhaul being pushed by House Republican leaders, with the proposal drawing stronger criticism from the Trump administration and getting a cool reception by some GOP members of the House tax-writing committee whose chairman is a staunch advocate.

Treasury Secretary Steven Mnuchin took the unusual step of openly criticizing the provision, which is 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.”

Those same points were debated across town, as the House Ways and Means Committee held its first hearing on the issue.

Several Republican members of the committee expressed qualms or outright opposition to border adjustment, including Rep. Erik Paulsen, a moderate from the suburbs of Minneapolis who had previously backed the proposal.

POLITICO Playbook newsletter Sign up today to receive the #1-rated newsletter in politics Email Sign Up By signing up you agree to receive email newsletters or alerts from POLITICO. You can unsubscribe at any time. This site is protected by reCAPTCHA and the Google Privacy Policy and Terms of Service apply.

"I cannot support the border adjustability provisions as introduced," he said. "I really want to urge this committee to listen, to be educated and to address" criticism of the plan "as we move forward with reform."

Paulsen had come under heavy pressure to oppose the plan from retailing giant Target, a major employer in his district and a big contributor to his reelection campaigns. The corporation's chairman, Brian Cornell, testified against the proposal at the hearing.

Ways and Means Chairman Kevin Brady defended the proposal, saying it would boost economic growth – and with it, wages – while also acknowledging criticisms of the plan.

“We recognize this is a significant change from our current tax code – we know there are legitimate concerns including from some of our witnesses here today and our colleagues on the other side of the aisle,” he said. “We are committed to working with all of you to address these concerns.”

Though Washington has been debating the border adjustment plan for more than six months, and many have left it for dead, the hearing and Mnuchin's comments provided a more visible airing of the strife. The plan would apply a 20 percent levy on imports, while allowing exports to be sold tax-free.

Ryan and Brady are counting on border adjustment to raise more than $1 trillion to underwrite their tax reform plan, which also includes cutting the corporate tax rate to 20 percent from 35 percent. They also see the move as a way to keep U.S. jobs from moving abroad and leveling the playing field with other countries that have similar tax systems.

But the proposal has come under heavy criticism, especially from retailers who fear they will face giant tax increases under the plan. Target’s Cornell told the Ways and Means Committee his company, a heavy importer, could see its tax rate soar to 75 percent under the proposal.

Exporters see things from the opposite perspective.

"A competitive tax code will help us continue providing American-made food and feed to your customers in the United States and abroad in the face of robust and, from a tax perspective, ever strengthening competition from abroad," Juan Luciano, the head of the agriculture giant Archer Daniels Midland Co., told the committee.

Many economists say importers would be made whole by a stronger dollar that would increase their buying power abroad, offsetting the hit they’d take at tax time.

