The border adjustability proposal at the heart of the House Republican blueprint for tax reform faces an uphill battle for survival.
As laid out in last year's blueprint, the proposal would disallow deductions on the cost of imports while excluding export receipts from income. The proposal has proven incredibly controversial and retailers and other major business sectors have lined up against it.
The House Ways and Means Committee held its first hearing to discuss the proposal last month, and three Republican members of the committee, Reps. Mike Kelly, R-Pa., James B. Renacci, R-Ohio, and Eric Paulsen, R-Minn., openly expressing opposition. Three key tax writers revolting over the provision is a bad sign, but Senate and White House objections might be even more damning.
Administration officials have been consistently critical of it, and Democrats recently emerged from a White House briefing claiming that the administration says the proposal is dead. Senate Finance Committee Orrin Hatch, R-Utah, has not definitely ruled it out, but has expressed concerns and Senate Majority Leader Mitch McConnell, R-Ky., has said flat out that he does not believe it can pass the Senate.
House Ways and Means Committee Chair Kevin Brady, R-Texas is desperately trying to salvage it, promising to address concerns. Options include phasing it in slowly, only partially implementing it, or creating exemptions for certain products and services. It may not be dead yet, but House Speaker Paul Ryan, R-Wis., a key supporter, admitted that the House is already considering options for moving forward without the provision.
"Of course, that's the kind of conversation we're having," Ryan said.
Dropping border adjustability blows a revenue hole in the Republican blueprint, but doesn't make tax reform impossible. Key Senate Republicans and White House officials are currently working toward a unified tax reform proposal that could be ready to be unveiled by briefly after the August recess
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