Paul Ryan showed up to Senate Republicans’ weekly lunch on Tuesday hoping to salvage a controversial pillar of his tax reform plan that would change how imports and exports are taxed. “Keep your powder dry,” the House speaker pleaded.

The next day, Sen. Tom Cotton took to the Senate floor to slam Ryan’s so-called border adjustment tax, saying “some ideas are so stupid only an intellectual could believe them.”


“Many other senators share these concerns and we most certainly will not ‘keep our powder dry,’” Cotton went on, without naming the speaker in his speech.

The sequence was an ominous sign for a linchpin of Ryan’s tax plan — and perhaps for the prospects of tax reform happening at all. The border adjustment tax would generate more than a trillion dollars over a decade; there’s no obvious way to replace that money, which is needed to help pay for a steep cut in corporate and income taxes.

In meetings with administration officials and Senate leaders, Ryan has framed his proposal as a compromise between a tariff, which the president wants, and conservative orthodoxy against border taxes. He has suggested it's in keeping with President Donald Trump’s “America first” mantra, since it would reward American manufacturers that make products here and sell it abroad.

But the idea is sharply dividing Republicans — even within the White House.

Trump's chief strategist Steve Bannon likes it, but the president’s chief economic adviser, Gary Cohn, is opposed, according to people who have talked with them. Trump himself has acknowledged he doesn’t think much of the proposal, though he has said he will keep an open mind.

Many Republican senators say privately they detest the concept, fretting that it will hurt their in-state retailers like Walmart, which is headquartered in Cotton's state of Arkansas. Senate Finance Chairman Orrin Hatch (R-Utah), sources said, has warned Trump and Ryan that border adjustment won't likely have the support needed to clear the Senate.

Hatch, in an interview after Ryan's presentation, said the speaker “didn’t cover [the border adjustment proposal] as specifically as I would have liked.” And Sen. Roy Blunt of Missouri, the fifth-ranking GOP senator, said the Finance Committee will likely go a “different way.”

Others were more unequivocal.

“It’s beyond a complication. It’s a bad economic proposition,” said Sen. David Perdue (R-Ga.).

That’s not to mention Ryan’s issue in his own chamber. A handful of Ways and Means Republicans — including some with close ties to Trump — are fretting that retailers slapped with an import tax will ultimately pass the cost onto consumers. One member of the tax-writing Ways and Means Committee, Rep. Jim Renacci (R-Ohio), asked his chairman Wednesday to hold hearings on the proposal.

The clock is ticking for Ryan. Senior House Republican sources told POLITICO that if the border adjustment proposal is not included in Trump’s tax blueprint, set to be unveiled in the coming weeks, it could be even tougher to rally Republicans to the idea. Supporters of Ryan’s proposal are crossing their fingers that Trump doesn’t introduce a detailed tax plan at all, worried it could complicate their work.

A source familiar with the White House’s thinking said it’s unlikely Trump would try to push through the border-adjustment tax if key administration officials and senators are still divided over it.

“It’s fair to say there’s a lot of questions about how it would work and the assumptions on which it’s based,” said Senate Majority Whip John Cornyn (R-Texas).

During a news conference Thursday, Ryan downplayed questions about opposition to the border adjustment tax and argued some people simply don’t understand how it works. Holding up reporters’ tape recorders as props, he explained how an American-made recorder is taxed much more than a Japanese product. His idea, he added, would make American businesses more competitive worldwide.

Senior House Republican sources who back him say the House has been working on tax reform for years and has already considered numerous financing mechanisms. But all of them have set off firestorms within various industries. A border adjustment tax, they say, is the best option on a limited menu.

Without it, they contend, tax reform will die.

Ryan has made the same pitch to his colleagues privately, according to one source close with the speaker who heard it.

“Ryan is impressing on his fellow Republicans that any tax reform proposal is bound to contain controversial measures — which is precisely why it hasn’t gotten done,” the source said. If the new Republican majority is going to clear the hurdle, he has told colleagues, it is going to have to be with this plan.

Ryan spent at least a half-hour explaining why the border adjustment is essential. But multiple GOP senators told POLITICO they felt his talk was too wonkish and hard to follow. Some bristled at being told to keep their “powder dry” while Ryan is aggressively campaigning for the tax.

“I heard 'keep your powder dry' as, ‘Don’t articulate your cogent arguments against our bad idea,’” one senator said. “I have not yet talked to a single senator who’s enthusiastic about it. Ryan and [Ways and Means Chairman Kevin] Brady seem to have a near-theological commitment to it.”

At the Senate GOP lunch a week earlier, former Sen. Phil Gramm of Texas blasted the border adjustment tax idea. His arguments were easier to follow and resonated with many of his ex-colleagues, attendees said.

“To me he made more sense,” said Sen. Jim Inhofe (R-Okla.), contrasting Gramm’s presentation with Ryan’s.

Not all Senate Republicans are panning Ryan's idea. Sen. John Thune of South Dakota, the No. 3 GOP leader, said “they've got a bold proposal out there" and said "at least conceptually, there are a lot of things in it to like."

However, "I think the border adjustability is the hard thing to sell," he added.

Ironically, the speaker seems to have a strong ally in Bannon, the ex-boss of Breitbart News, which attacked the speaker mercilessly during the campaign. A senior House Republican source, however, said it would depend on who most has the ear of the president when he decides whether or not to support the proposal. In other words: Bannon's support doesn't necessarily mean Trump will follow suit.

Ryan is hoping he can also win the support of Trump’s influential son-in-law, Jared Kushner, Commerce Secretary Wilbur Ross, Treasury Secretary pick Steven Mnuchin and senior adviser Stephen Miller.

While a host of conservative groups led by the Koch brothers and the Club for Growth have lined up in opposition, other outside groups with close Senate contacts are set to begin a campaign to pressure the chamber to take a closer look. It's led by former National Republican Senatorial Committee Executive Director Ward Baker at a firm run by Josh Holmes, Senate Majority Leader Mitch McConnell’s former chief of staff — well-connected former ex-Senate staffers who could help Ryan tremendously.

But the prospects in the Senate, at this point, appear grim.

Sen. Tim Scott (R-S.C.) called Ryan a “brilliant man” and — parroting Ryan's talking point — said he’s keeping his “proverbial powder dry.” Yet Scott said Ryan needs to be aware that he might not have the votes to get his way in the chamber.

“It’s not what we think about border adjustability. It’s what we do think about having 51 of 52 senators saying yes to border adjustability,” Scott said. “I’m not yet sold.”