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Trump Team May Be Getting Serious About Border Tax, Tariffs

POSTED ON Dec. 23, 2016

It's still unclear how the incoming Donald Trump administration views a border-adjustable tax -- a key element in House Republicans' tax reform plan -- but there are now further indications the Trump transition team is giving the new tax a closer look, alongside a 10 percent tariff on imports.

According to CNN, a senior transition team official said December 22 that the 10 percent tariff has been discussed as a potential element of a tax reform package and that the border-adjustable tax might be one area of "common ground" between Trump and congressional Republicans. The House GOP's "Better Way" tax reform blueprint 2016 TNT 122-22: Congressional News Releases proposes a destination-based tax system that allows for border adjustments exempting exports and taxing imports. Some economists argue that border-adjustable taxes ultimately confer no special tax advantages on export-heavy industries like manufacturing, but the border tax proposal has nevertheless been discussed in tandem with Trump's goal of improving U.S. manufacturers' competitiveness with other countries'.

A spokesperson for House Ways and Means Committee Chair Kevin Brady, R-Texas, told Tax Analysts on December 22 that Brady, one of the main architects of the House tax reform plan, has been having ongoing discussions with the Trump transition team about all aspects of the plan, "including the specific proposal to end the 'Made in America' tax" -- a reference to exempting U.S. exports under a border-adjustable tax. Brady has championed the border-adjustable tax and signaled that Republicans intend to push forward with it despite concerns by some industry groups that it could place them at a disadvantage. (Prior coverage 2016 TNT 243-7: News Stories.)

Trump himself has not specifically spoken in favor of border tax adjustments, but Reince Priebus, Trump's choice for chief of staff, suggested recently that border adjustability could help protect U.S. workers from losing jobs. (Prior coverage 2016 TNT 241-2: News Stories.)

Also unclear is the extent to which a Trump administration intends to wield tariffs to address trade deficits. While Trump has on several occasions threatened tariff-like actions against U.S. companies that move production facilities overseas and then sell products back into the United States, his choice of campaign advisers and future executive branch staff suggests that imposing tariffs more widely could be a frequent tool of the incoming president.

For example, Peter Navarro, a University of California at Irvine professor selected to head up Trump's newly created National Trade Council, and Wilbur Ross, an investor chosen to serve as Trump's commerce secretary, advocated strongly during the campaign for aggressive new trade policies. A paper 2016 TNT 187-48: Washington Roundup by Navarro and Ross released during the campaign said that if elected, Trump would crack down on "trade cheating" using "all available means," including tariffs.

And according to CNN's sources, Ross has been preparing for his Senate confirmation hearing by practicing a defense of new tariffs.

Yet the Trump transition team still publicly maintains that any speculation about a tariff or border-adjustable tax is premature. "I think that CNN story got a little too far over its skis," transition team spokesman Jason Miller told reporters on a December 22 call. "The incoming administration is, obviously, discussing numerous trade deals and tax reform packages with members of our own team, as well as members of Congress."

Follow Jonathan Curry (jtcurry005) on Twitter for real-time updates.