Campaign Promise

The proposed border-adjustment plan would tax U.S. companies’ domestic sales and imports at a new 20 percent rate, while exempting their exports. The change -- which would replace the existing 35 percent tax on companies’ global income -- would encourage companies to bring manufacturing back to the U.S. and reverse the tide of corporate tax inversions, Ryan says.

The border-adjusted tax is estimated to raise more than $1 trillion over 10 years -- revenue that Ryan and other supporters say is needed to help pay for other tax cuts for U.S. businesses and individuals. The eventual tax bill must reduce the deficit or be revenue-neutral to be considered under a maneuver called reconciliation, which would allow the Senate to bypass the usual 60-vote threshold and pass it with only GOP votes.

Democrats would likely filibuster the GOP’s broader tax plan if it were brought up as regular legislation. Ryan has warned his Republican colleagues that if they don’t use border adjustment to raise revenue, there won’t be any room to implement their desired tax cuts under reconciliation.

Still, the border-adjustment concept faces fierce opposition from retailers like Wal-Mart Stores Inc., automakers including Toyota Motor Corp. and oil refiners that rely on imported goods and materials. They argue the tax will be passed along to U.S. consumers, who’ll face higher prices for everyday materials. Billionaire investor Warren Buffett joined the criticism Monday, saying the plan “would be a big sales tax” and that it would hit “items that are not yachts or anything like that; they’re things that the ordinary person buys.”

Slashing the corporate and individual tax rates was a central campaign promise of Trump’s and a longtime dream for conservative lawmakers like Ryan. The expectation of a significant corporate tax cut has also contributed to the stock market’s rally since Trump was elected in November.

‘Some Concerns’

Cohn and Mnuchin, who like Bannon are veterans of Goldman Sachs Group Inc., oppose the border-adjustment concept, which critics say would be very disruptive to the global economy for its impact on trade, consumer prices and global commodity markets. Mnuchin said during a CNBC interview last week that he’s looking closely at border adjustments and has “some concerns” with the idea.

Cohn, the former president and chief operating officer of Goldman Sachs, is said to be working on a White House tax plan that Trump promised would be “phenomenal.” Cohn said earlier this month that he was meeting with members of Congress on proposals to cut income taxes for businesses and individuals, but hasn’t spoken publicly about the border adjustment element.

Ryan has spoken with Cohn at least five times in the past two months about tax changes, according to the person briefed on the meetings.