House Ways and Means Chairman Kevin Brady, a Texas Republican, said he was glad to get Koch’s input.

‘Shared Goal’

“This pro-growth idea is a key provision that improves our global competitiveness and helps level the playing field for exports and imports,” Brady said in an e-mailed statement. “It also meets our shared goal to eliminate any tax incentive to move our jobs, headquarters and innovation offshore. I look forward to working with Koch Industries and all job creators as we continue to turn our blueprint into legislation.”

The border adjustments provision may face another hurdle: The World Trade Organization, whose members include the U.S., might conclude that the new approach is applying the adjustments to a direct tax, which isn’t allowed, rather than to an indirect tax, like a value-added tax, which is permitted.

That concern has diminished somewhat since Trump’s victory -- and his threats to renegotiate trade agreements and slap tariffs on products of companies that send U.S. jobs offshore. “The idea that it might not be legal is now less important,” said Rachelle Bernstein, a tax lobbyist for the National Retail Federation, a powerful lobbying group whose members include Wal-Mart, Macy’s Inc. and Neiman Marcus Group Inc.

But that doesn’t mean the retailers approve. “We want tax reform that spurs economic growth, but this one particular provision is very negative,” Bernstein said.

Economists Alan Auerbach and Douglas Holtz-Eakin, both proponents of border adjustments, argued in a recent paper that “unlike tariffs on imports or subsidies for exports, border adjustments are not trade policy. Instead, they are paired and equal adjustments that create a level tax playing field for domestic and overseas competition.”

Curt Beaulieu, a tax policy lawyer at Bracewell LLP in Washington, said that the adjustments “are not a tariff” and instead are a so-called “destination-based cash flow tax” -- what he called “mumbo jumbo” for taxing companies on revenues from sales in the U.S.

Retailers, who rely heavily on imports from China and elsewhere, are particularly concerned about the provision. Bernstein said that specialty apparel stores that import 90 percent or more of their inventory could face tax bills that are much larger than their actual profits.

Imported Cars