Club for Growth bashes border tax ahead of Ryan speech

The conservative Club for Growth is urging congressional Republicans to oppose the border-adjustment tax ahead of a major speech on Tuesday by Speaker Paul Ryan (R-Wis.), who proposed the measure.

“The biggest impediment to pro-growth tax reform is the Border Adjustment Tax (BAT),” Club for Growth President David McIntosh said in a statement. “It is a political loser. The BAT has become a ball and chain that is dragging down real, pro-growth tax reform.”  

Under the border-adjustment proposal, imports would be subject to the U.S. corporate tax while exports would be exempt. The tax was a key element of the tax reform blueprint that Ryan released last year, and supporters of the proposal argue that it would help to encourage domestic manufacturing. But retailers, conservative groups, Trump administration officials and many GOP lawmakers have raised concerns that the BAT would translate to a tax increase for consumers.

In his speech to the National Association of Manufacturers, Ryan is expected to discuss the need to end the incentive for companies to make products overseas, while acknowledging that lawmakers and the administration are still working to agree on a mechanism to do that, the Speaker’s office said.

“We want foreign companies to become U.S. companies. We must think differently, so that once again we make things here and export them around the world,” Ryan will say, according to excerpts of the speech. “There are a number of ways to achieve this — we in the House have our own idea — and that is one of the things that we are discussing with the administration. But the bottom line here is this: We cannot accept a system that perpetuates the drain of American businesses overseas.”

Last week, House Ways and Means Committee Chairman Kevin Brady (R-Texas) suggested that the border-adjustment tax be phased in over five years to help import-heavy businesses adapt.

{mosads}But the Club for Growth does not think a five-year transition would improve the proposal.

“No matter how Rep. Brady and others may try to sell it — like with a five-year transition period — a BAT will effectively be a $5 trillion tax hike on American consumers,” McIntosh said on Tuesday.

The border-adjustment proposal has been estimated to raise about $1 trillion that could be used to help offset cuts to tax rates. But McIntosh said that the proposal is not needed to cut taxes.

“Just last week, Club for Growth and Americans for Tax Reform made the case for lasting tax reforms by extending the budget window beyond 10 years,” he said. “And that’s one of many pro-growth approaches to tax reform, but the border adjustment tax is not.”

The Club for Growth has been pressing lawmakers to oppose the tax for the last several months. Earlier this year, the group released ads urging specific House Republicans to oppose the provision.

“Any member who campaigned on lowering taxes should not even entertain the idea of a BAT,” McIntosh said Tuesday.

– This report was updated at 11:43 a.m.