Flake becomes latest GOP senator concerned about border tax

Sen. Jeff Flake (R-Ariz.) took to the Senate floor Wednesday to raise concerns about House Republicans’ border-adjustment proposal, becoming the latest GOP senator to criticize a provision that already faces long odds in the chamber.

“There will always be winners and losers in a robust debate on reforming the tax code,” he said. “We ought to make sure that the middle class isn’t in the losing column.”

The border-adjustment proposal, part of the House Republicans’ tax reform blueprint, would subject imports to U.S. tax while exempting exports.

{mosads}Supporters of the proposal argue that it would raise revenue to pay for lowering tax rates and would end an advantage that foreign-made goods currently have over American-made goods. But opponents believe that the proposal will disrupt supply chains and lead to higher prices on goods.

Besides Flake, a number of Republican senators had previously expressed concerns over the proposal, including Sens. Mike Lee (Utah), Tim Scott (S.C.), David Perdue (Ga.), Tom Cotton (Ark.) and Mike Rounds (S.D.).

Presuming that no Democrats support the tax, the GOP can only afford to lose two Republican votes. But Sen. Lindsey Graham (R-S.C.) has said he doesn’t think the House GOP tax plan could get 10 votes in the Senate. 

Key House GOP supporters of border adjustability have been trying to sell the proposal to senators. Last month, Speaker Paul Ryan (R-Wis.) spoke at a lunch attended by GOP senators and urged them to “keep their powder dry” while the House Ways and Means Committee works on the details of a plan.

Flake on Wednesday acknowledged that proponents of the border tax think it would boost exports, but he said, “It turns out that that’s not so easy.”

He noted that about half of U.S. imports are used as inputs for domestic manufacturing and production. These imports are currently cheaper than they otherwise would be because of trade deals with other countries, he added.

“Cheaper inputs mean lower production costs for U.S.-based businesses, which in turn allows those companies to expand production and to reduce prices,” Flake said. “What will happen if we placed a 20 percent tax on all imports?”

Flake also expressed concerns that the border-adjustment proposal would lead to retaliation from other countries.

“If the protectionist trade policies of the past have taught us anything, it’s that countries tend to retaliate when they believe trade obligations have been violated,” he said. “When we increase barriers to trade, nobody wins.”

Flake said he supports tax reform that lowers rates, simplifies the tax code and fosters economic growth.