Editor's Pick: Brady Confident in Border Adjustment WTO Compliance 

House Ways and Means Committee Chair Kevin Brady, R-Texas, expressed confidence February 3 that Republicans' proposed border-adjustable tax would fit within WTO guidelines and cited increasing agreement with the White House on the overall tax reform plan.

While speculation continues about whether the key feature of the House GOP tax reform blueprint would comply with WTO obligations, Brady told tax policy scholars and stakeholders at an international tax policy conference at Georgetown University Law Center in Washington that committee staff have been focused on the issue. (Prior coverage .)

"I think talk of a trade war is silly," Brady said. "Frankly, what will they do? [Say] 'Stop copying us? Stop border-adjusting your taxes as we do?'"

Brady said the destination-based cash flow tax in the "Better Way" tax reform proposal is "economically equivalent" to the VATs implemented in European countries. "We chose not to use a value-added tax for a number of reasons and [instead] go to the simpler cash flow system based on consumption in the United States," he said. "We think it's far more pro-growth and simpler to comply with."

Brady said he was not worried about complying with WTO guidelines and meeting other countries' challenges to the tax because "we're no longer merely adjusting an income tax; we're transforming ourselves to this cash flow tax, based on consumption here. We believe it meets the standards and the critique of the WTO."

Brady said his staff and Trump administration officials have "had discussions on every provision in the blueprint. I only see our common ground growing more and more each day."

He suggested that Senate Republicans "need to develop their ideas for tax reform," but noted that several bills highlighted in the Better Way document are from the upper chamber. "Not only do we share some of the goals of fairness and competitiveness, we actually share the solutions to those as well," Brady said.

Brady explained that the proposal's separate small business income tax rate for passthroughs would apply to all non-C corporations, regardless of size. "We want to make sure, from a pro-growth standpoint, that we are becoming competitive not just on a part of the ledger, but on the entire job creation network of the United States," he said.

Brady added that the decision to separate small business income from wage income was a result of the difficulties in trying to lower the individual rate if the two are combined, which he said was an issue during the reform efforts of former Ways and Means chairs Dave Camp and Paul D. Ryan, R-Wis.

Asked about the concerns raised from retailers and oil refiners about the effects of the border-adjustment tax, Brady said that "true competition" is the main driver of better prices and quality and that the tax reform proposal would put American businesses "on an equal playing field" with the rest of the world.

"Imports are as equally important to our economy as exports, but no one deserves special or favorite treatment in our tax code, especially compared to our competitors worldwide," Brady said.

Brady added that staff are looking at a "number of ideas on both the design and the transition of this provision to accommodate some of the valid concerns."

A key White House economic adviser declined to reveal which way the Trump administration is leaning when it comes to the border-adjustable tax.

Gary Cohn, director of the National Economic Council, was asked February 3 in an interview on CNBC if the Trump administration supported the border-adjustment tax proposal backed by House Republicans.

Cohn responded that the White House is exploring "all options to get our U.S. corporate tax rate down to the lowest possible level we can get it." A border-adjustable tax is one of those options, according to Cohn, but he added, "You should not take it from me that that's the option we're going with."

Two democratic senators sent Cohn a letter February 3 asking him to recuse himself from decisions that might directly or indirectly affect Goldman Sachs, where he was president and chief operating officer before joining the administration. They also request that Cohn pay full taxes on the $284 million payout he received when he left the firm.

In the letter , Sens. Elizabeth Warren, D-Mass, and Tammy Baldwin, D-Wis., complained that Cohn will be able to defer taxes on the payout as long as he invests it "in certain mutual funds or government securities."

The senators asked that Cohn recuse himself from Goldman Sachs decisions for his entire term as NEC director, considering that his $284 million payment was "orders of magnitude higher than the 'extraordinary payment' threshold" of $10,000 from a former employer, which they say typically requires a recusal period of one to two years.

Jonathan Curry contributed to this article.

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