Policy

Club for Growth Singles Out Noem in Border Tax Fight

Rep. Kristi Noem, R-S.D., center, leaves a meeting of the House Republican Conference in the Capitol, May 17, 2016. (Tom Williams/CQ Roll Call)

The Club for Growth has begun an advertising campaign aimed at pressuring Rep. Kristi Noem, R-S.D., a tax writer, to oppose a contentious House GOP proposal to tax imports and exempt exports, the latest salvo in the battle to shape lawmakers’ attempts to overhaul the tax code.

David McIntosh, a former Republican representative from Indiana and now president of the conservative advocacy group, said he strongly opposed the plan’s call for border adjustments to taxes. The group still supports parts of the House GOP tax blueprint, issued by Speaker Paul D. Ryan last year, that would lower rates and end the estate tax.

The Ryan proposal would disallow companies from treating imported materials as a business cost on their tax forms. They would also not have to declare income from exports.

“Congressman Kristi Noem refuses to take a position on a new border adjustment tax,” said the group’s ad, available on its website. It didn’t explain why it was singling out Noem, the lone South Dakota representative in the House.

“Congresswoman Noem has a key position in Congress on tax policy and her constituents need to know if she will fight for them and oppose the BAT,” McIntosh said in a statement. “The border adjustment tax will drive up prices on everyday consumer goods like groceries, gas, clothes and shoes.”

Noem could not be reached for comment. She and other GOP tax writers have been working to develop legislation based on plan by Ryan, R-Wis., which he titled “A Better Way.”

Kenneth Blanchard Jr., a political scientist at Northern State University, in Aberdeen, S.D., said Noem may be the target to see whether the issue has traction. 

Kristi Noem is fairly popular.  She’s had no trouble getting re-elected,” Blanchard said. “The television rates in South Dakota are much cheaper than in California or in Houston, Texas.  If they run the ad here, and it gets traction, and Noem responds, that’s a sign they have an effective issue.  And they might invest more. It’s a cheap test market.”

The club said that it would run advertising on television in South Dakota and on the internet as the GOP plan moves through the House. The group said that the border adjustments proposal would increase an average family’s annual expenditures by about $1,700.

Ways and Means Chairman Kevin Brady, R-Texas, has yet to set a timetable to move a tax overhaul in his committee, although Ryan has called for final action by the August recess.

Economists such as Lawrence B. Lindsey, the director of the National Economic Council in the George W. Bush administration, have argued that the overall House GOP plan with border adjustments would lead to a stronger dollar, meaning that importers would pay effectively lower prices for imported items. Lindsey, who runs an economic advisory firm, and other supporters have argued the border adjustments proposal should be evaluated not as a stand-alone item but as part of the overall House GOP tax plan, which they say would have a minimal impact, as a whole, on consumer prices.

Facing strong pushback to border adjustments from retailers, energy companies and critics in the Senate such as Finance Chairman Orrin G. Hatch, R-Utah., and Sen. Tom Cotton, R-Ark., Brady has sought support from business allies, including multinationals that are big exporters.

Exporters say that border adjustments would mirror foreign countries’ value-added taxes, which are assessed on U.S.-made imports and rebated on their own exports.

The leaders of 16 companies sent a joint letter on Tuesday to Ryan and Senate Majority Leader Mitch McConnell of Kentucky on Tuesday supporting the overall House GOP tax plan, including the border adjustment proposal.

The proposal “would effectively end the ‘Made in America’ tax that creates an unfair advantage for foreign-based companies at the expense of U.S. jobs and economic growth,” and the overall blueprint would “protect American jobs from unfair foreign competition,” the letter said.

The signers included top executives from Boeing, General Electric, Oracle, Caterpillar, Raytheon, Pfizer, Eli Lilly and United Technologies.

On the other side, retailers and Koch Industries, owned by billionaire brothers Charles and David Koch, have said the proposal would create a new business tax on imports that would be passed along to consumers. In addition to the Club for Growth, the Americans for Prosperity advocacy group backed by the Koch brothers has been pushing hard against border adjustments.

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