Report: White House Considers Carbon and Value-Added Taxes in Reform Proposal

The Trump administration will explore two controversial ideas, a value-added tax and a carbon tax, as part of a broad tax reform package.

The White House will consider alternative taxes to balance out the missing revenue from the lowered corporate and individual tax rates in the proposed tax reform. Some conservatives remain opposed to the idea of a border-adjustment tax, proposed by Ways and Means Committee Chairman Kevin Brady (R-TX).

The border-adjustment tax, or BAT, would tax imports and incentivize exports, and also fulfill President Trump’s pledge to protect American companies from unfair international trade. The BAT would encourage businesses to produce goods domestically. Some conservatives panned the idea for raising the cost of consumer goods such as automobiles, electronics, and clothing, while others contend it will fulfill Trump’s pledge to boost American manufacturing.

The value-added tax (VAT), often popular in Europe, would act as a form of a national sales tax. Consumers would pay for the value-added tax at the cash register, while businesses would pay the VAT when paying for supplies, services, and raw materials. A carbon tax would target emissions of carbon dioxide and other greenhouse gasses in the burning of gasoline, coal, and other fossil fuels.

Administration officials told reporters that the White House will continue to review alternative tax measures.

Beltway Republicans met with White House National Economic Council director Gary Cohn in February, where insider Republicans such as James Baker and Hank Paulson argued for enacting a carbon tax.

President Trump previously tweeted opposition to a carbon tax:***

.@thehill Your story about me & the carbon tax is absolutely incorrect—it is just the opposite. I will not support or endorse a carbon tax!

— Donald J. Trump (@realDonaldTrump) May 13, 2016

***Update***

According to CNBC, the White House says that neither a VAT nor a carbon tax are under consideration as part of a tax reform package. A White House spokesman said, “As we have said many times, the President’s team is hearing input from experts on all sides of the tax reform debate as we formulate what will ultimately be the President’s plan to enact the first significant tax reform since 1986. As of now, neither a carbon tax nor a VAT are under consideration.”