White House Proposes 20 Percent Import Tax On Mexico To Pay For Wall

The White House has proposed a 20 percent tax on Mexican imports to pay for President Trump's proposed border wall, a central talking point in his campaign, White House Press Secretary Sean Spicer told reporters Thursday on Air Force One, according to the press pool.

“This is something that we’ve been in close contact with both houses in moving forward and creating a plan,” Spicer said. “It clearly provides the funding and does so in a way that the American taxpayer is wholly respected.”

After news of the plan broke, NBC News' Peter Alexander reported that Spicer backed off somewhat from the proposal.

"Spicer tells me 20% tax on Mexican imports is NOT a policy proposal, but example of options how to pay for wall," Alexander wrote in a tweet.

Later comments to Cameron Joseph of the New York Daily News suggested that Spicer was either backing off from his previous comments, or had previously miscommunicated the White House message to reporters.

"There's nothing to roll out so the idea of asking for the details on something, we're not there yet," he said. "It could be multiple things. Instead of 20 percent, it could be 18, it could be 5."

Trump has long promised that Mexico would pay for the wall, but President Enrique Peña Nieto has said that his country will not comply.

Some of Spicer's earlier comment appeared to imply that the tax may apply to other countries, in addition to Mexico, with which the United States has a trade deficit.

"If you tax that $50 billion at 20 percent of imports – which is by the way a practice that 160 other countries do – right now our country’s policy is to tax exports and let imports flow freely in, which is ridiculous," Spicer said. "By doing it that we can do $10 billion a year and easily pay for the wall just through that mechanism alone. That’s really going to provide the funding."

Spicer might have been referring to what's known as a "destination-based cash flow tax," an approach to imports and exports known as "border adjustability" as part of broader tax reform.

A little more than a week ago, Trump said the border adjustment tax plans were "too complicated."

Major retailers and other companies, including Koch Industries Inc., have expressed serious concern of the impacts of such a plan.

Spicer told pool reporters the plan "clearly provides the funding [for the wall] and does so in a way that the American taxpayer is wholly respected.”

Brad Jaffy on NBC News pointed out that Mexico is the third largest supplier of imported goods to the United States, including cars, machinery, food, wine and beer. Were an import tax levied, Americans would pay more for all of these goods.

Senator Lindsey Graham expressed concerns about this possibility:

Jaffy points out that some might see this as a retreat from Trump's promise that Mexico would pay for the wall.

"Unless I'm missing something — that would mean American consumers will essentially pay for the wall by buying higher-priced imported goods," he wrote.

When asked whether American consumers would end up bearing the burden of the tax, Spicer said,"What it's going to do is lift up the wages of American workers."

He continued: “We are probably the only major country that doesn’t treat imports this way.”

The Wall Street Journal, citing American Enterprise Institute scholar Alan Viard, explained that a border adjustment effectively raises money for the government presently that it has to pay back over the long term. This makes the plan the economic equivalent of the country borrowing more from foreign investors in the short term, Viard said.

Photo credit: Edmond Meinfelder