Mnuchin Tells Democrats No Go on Border Tax in Private Meeting

(Bloomberg) -- Treasury Secretary Steven Mnuchin pronounced House Speaker Paul Ryan’s proposal for a border-adjusted tax dead during closed-door conversations with Democrats on the tax-writing Ways and Means Committee, according to two members of the panel.

The remarks they described in private were stronger than Mnuchin’s public comments about the plan to tax companies’ imported goods while exempting their exports. During two appearances in Washington this week, Mnuchin repeated that he’s looking forward to seeing changes to the controversial proposal, which is a central part of the House GOP plan to overhaul the U.S. tax code.

Judy Chu, a California Democrat on the Ways and Means Committee, said she asked Mnuchin directly during a private meeting Tuesday if he supports the border-adjusted tax.

“He actually said straight out that he doesn’t support it and the president doesn’t support it,” Chu said, adding that Mnuchin cited concern from businesses about price increases for consumers. “Unless he was lying to us yesterday, I really felt it was dead on arrival,” Chu said.

Mnuchin’s statements during a Ways and Means hearing Wednesday were “softer,” Chu said, since he was sitting directly in front of Chairman Kevin Brady, who helped write the border-adjustment plan.

‘Too Disruptive’

The Treasury secretary also told the conservative Republican members of the House Freedom Caucus earlier this week that he and Trump are inclined to oppose the border-adjusted tax, according to two people familiar with the conversation who asked not to be identified because the meeting was private.

Molly Meiners, a Treasury spokeswoman, didn’t immediately respond to a request for comment.

Mnuchin’s private comments are a serious blow to the border-adjusted tax proposal, which is a centerpiece of the tax blueprint backed by Brady and House Speaker Paul Ryan. Border adjustments face opposition from within the ranks of the GOP, and would need White House support if there were any chance for it to be included in a tax bill.

Ryan said Wednesday he agrees that immediately imposing the border-adjusted tax in its full form would be “too disruptive,” and it needs to be changed to assuage widespread opposition among retailers and other industries. And he noted that Republican leaders are discussing whether it’s possible to move forward without the controversial proposal.

Life Support

The border adjustment portion of the House leaders’ tax plan is estimated to raise more than $1 trillion in new revenue over the next decade -- helping to pay for cuts to the corporate and individual income-tax rates that the GOP also wants. Writing a revenue-neutral tax bill is important to Republicans, who plan to move the legislation through the Senate without any Democratic votes. To achieve that aim, Senate rules require that the bill can’t increase the federal deficit in the long run.

Lloyd Doggett, a Democrat from Texas who also participated in Tuesday’s meeting, said Mnuchin told Democrats that the administration isn’t willing to propose any improvements to border adjustments. The Treasury secretary said the border-adjusted tax isn’t fixable, according to Doggett.

“My question to him was: ‘I said it was on life support, are you here pulling the plug on it?’ and he said yes,” Doggett said.

During the two-hour hearing Wednesday before the Ways and Means Committee, the Treasury secretary faced more than half a dozen questions about the border-adjusted tax. He repeated several times that he had concerns with it in its current form, but was working with Brady and would consider revisions made to the proposal.

“We’re looking forward to potential changes that Chairman Brady may look at,” Mnuchin said. “Our job is to get comprehensive tax reform done.”

During the hearing, Doggett pressed Mnuchin on whether the administration would be making changes to the border-adjusted tax proposal, or if Brady would be doing so. Mnuchin’s response: “I don’t think it’s our job to fix it.”

To contact the reporter on this story: Anna Edgerton in Washington at aedgerton@bloomberg.net.

To contact the editors responsible for this story: Kevin Whitelaw at kwhitelaw@bloomberg.net, Alexis Leondis, John Voskuhl