Paulsen, emboldened by full GOP rule but skeptical of Trump, tries to shape federal tax reform

Feb. 16--WASHINGTON -- After eight years in Congress, U.S. Rep. Erik Paulsen finds himself for the first time in what should be ideal circumstances to finally accomplish big goals that have driven his political career: full Republican control of Congress, and a Republican in the White House.

Instead, the Minnesota Republican is juggling the polarizing priorities of President Trump -- who he didn't vote for last fall -- while also trying to help shape a major tax reform initiative, put forward by some of his own closest allies in Congress, that has him at odds with two of Minnesota's most high-profile companies.

"(T) his is actually a time to be able to propose ideas and see them signed into law," said Paulsen, who represents much of the Twin Cities' western suburbs.

He's discovering that could be tougher than it sounds.

As a member of the influential House Ways and Means Committee, Paulsen is in the middle of a heated debate over a sweeping tax overhaul plan put forward by the committee's GOP chairman -- who also happens to be Paulsen's Washington, D.C. roommate. It would boost U.S. taxes on imported goods, which Minnesota retailers Best Buy and Target say would be a huge blow to their respective bottom lines.

Paulsen is supporting the so-called "border adjustment tax" with reservations, even as the Target and Best Buy CEOs mount an increasingly public bid to stop it. They and a handful of other retail leaders met with Trump privately on Wednesday to criticize the plan.

At the same time, Paulsen is at odds with major facets of the new president's agenda. He doesn't support building a wall along the Mexican border, and doesn't want taxpayers footing its projected multibillion dollar cost. And he is adamantly opposed to repealing the Affordable Care Act unless a replacement is in place, putting him at odds with many of his fellow House Republicans. On Thursday, Paulsen unveiled a new proposal to simplify and expand options for Americans to make tax-deductible contributions to health savings accounts.

But it's the border adjustment plan that promises to test Paulsen's ability to shape legislation of consequence to important constituents, on an issue -- tax reform -- that has long been one of his principal legislative interests. He says he's hoping for a "win-win," even as he acknowledges that retailers are not pleased.

"I personally, I want to make sure we go down the direction of increased tariffs and increased border taxes. It keeps the tax system from tilting the playing field," Paulsen said.

Republicans first released the border adjustment plan last year, proposing to levy new taxes on imports while lessening the tax burden on exports. The goal is to incentivize buying American, but it would also disproportionately affect certain retailers that rely on imports to fill their stores -- items like clothing and electronics.

Representatives for those companies say the added cost would land directly on consumers.

"We fundamentally believe this is a consumer tax, one that will force consumers to pay 20 percent more for the products they need," said Brian Dodge, of the Retail Industry Leaders Association, which is about to launch television ads targeted across the country to talk about the border adjustment proposal. "We view this as an education campaign because we believe once people understand this is a tax on consumers, they will recognize that it is unacceptable."

Paulsen said he's taking the feedback from his district seriously. He said he's met with dozens of business owners on Capitol Hill and has offered to get them directly in touch with Rep. Kevin Brady, the Ways and Means chairman who's also his D.C. roomie. It's hard to pull off large-scale tax reform without irking someone, Paulsen said.

Paulsen argued that if imports are taxed, the U.S. dollar would eventually grow stronger, making it easier for companies like Target to absorb the cuts -- a claim the companies say is not true.

Robert Kudrle, a University of Minnesota professor who specializes in international trade, said he sees on paper how the tax adjustments could boost the dollar. But he said negative effects could also be felt if other countries started retaliating against the United States.

"The problem is you can't predict what a major change in U.S. policy like this will do or how other people will react," Kudrle said. "It can be quite destabilizing to the world economy."

Asked whether he supports increasing the of consumer goods -- everything from oil and gas to pharmaceuticals to school supplies could be affected -- Paulsen said "we want to make sure it's a soft landing."

Paulsen's free-trade politics are at odds with broader Trump administration rhetoric. The president has said he wants to renegotiate NAFTA. He quickly tossed out the Trans-Pacific Partnership, an Obama trade agreement proposal with Asian nations that Paulsen endorsed, and said he won't get into further trade agreements without putting America first.

Paulsen, who wrote in Florida Sen. Marco Rubio for president last November, called those stances worrisome. He said the best way to advance American interests in the global economy is to be a major player rather than pulling away.

"We can keep the momentum going so China doesn't fill the vacuum," Paulsen said.

Charlie Weaver, executive director of the Minnesota Business Partnership, said he has pushed Minnesota's delegation, including Paulsen, to resist Trump on trade.

"Mostly, we've emphasized that tearing up NAFTA would be devastating to Minnesota companies," Weaver said. "This is a global economy. Protectionism is not good for the economy and it's not good for jobs in this America. It doesn't work."

Vin Weber, a former Minnesota congressman and now DC lobbyist and political consultant, called the tax reform conundrum a "big problem" for Republicans.

"(T)ax reform is a central promise of the president and the Republicans in the House and they have to do it," Weber said. "They've made a lot of promises but now they have to figure out how to reconcile those promises."

___

(c)2017 the Star Tribune (Minneapolis)

Visit the Star Tribune (Minneapolis) at www.startribune.com

Distributed by Tribune Content Agency, LLC.