Sen. Heidi Heitkamp (D-N.D.), who is up for reelection next year in a state President Trump won, expressed concerns that the House Republicans’ proposed border-adjustment tax would be harmful for agriculture.
“I don’t think the border-adjustment tax can pass the Senate,” she said Thursday at a Wall Street Journal event. “I think there’s too many concerns among agriculture.”
The border-adjustment proposal would tax imports and exempt exports. House Republicans have made the proposal a key part of their tax plan and argue that the proposal would remove incentives for companies to move factories and jobs overseas.
However, the proposal has met considerable opposition from senators, who are worried that it would lead to higher prices for consumers.
Heitkamp said she’s willing to consider the proposal but needs to be persuaded that it wouldn’t actually lead to higher prices for families who are struggling to get by.
Many economists argue that consumers wouldn’t be worse off under the proposal because the value of the dollar would strengthen. But Heitkamp said, “I don’t think I believe that.”
She also said when she hears the value of the dollar would be higher, “my head explodes, because that’s never good for agriculture, it’s never good for a commodity-based state.”
Sen. Rob Portman (R-Ohio), a former U.S. trade representative, said at the WSJ event that there could be issues with whether the World Trade Organization views the border-adjustment proposal as compatible with its rules.
The WTO allows border adjustments for consumption taxes. The question is whether the corporate tax in the House blueprint would be eligible to be border adjusted, since it allows a deduction for wages, Portman said.
“Most of the trade experts I talked to say they’re concerned about that, that this could be incompatible,” he said. “Some people say it is, some people say it isn’t.”
“That concerns our exporters a lot, because if it’s not deemed to be compatible, then other countries could retaliate against the United States,” he added.
However, Portman also said that the proposal “would be great for growth, economic growth.” He said that tax reform that lowers rates, expands the tax base and moves to a territorial tax system would be “great for manufacturing.”
Both Portman and Heitkamp agreed that the corporate tax rate should be lowered and said that Congress should work on comprehensive tax-reform legislation rather than corporate-only tax reform. Tax reform also needs to lower taxes for “pass-through” businesses whose income is taxed through the individual code, they said.