Top GOP senator: It will be 'difficult' to get key House tax proposal through Congress

Sen. Hatch: I have real reservations on border adjustment tax

A key Republican senator signaled Tuesday that Republicans have much more to hash out before they can pass tax reform this year.

Senate Finance Committee Chairman Orrin Hatch of Utah told CNBC that a tax system overhaul could prove "very difficult" due to Democrats' reluctance to cooperate on a bill. In addition, Hatch and other senators have signaled they may not back border adjustment, a key provision of the House GOP tax plan that could trip up Republicans' efforts to pass significant reform this year.

"We certainly have to look at it. The House seems to want it or at least some people in the House want it," Hatch told "Fast Money: Halftime Report." "And I have some real reservations about it, but I'm open to good ideas wherever they come."

"All I can say is I think it's got a long way to go and it's going to be a difficult matter to get through both bodies."

Hatch's comments come ahead of Trump's Tuesday night speech to a joint session of Congress, where he is expected outline an ambitious agenda to repeal and replace the Affordable Care Act, pass tax reform and push an infrastructure package, among other initiatives, this year. However, making those proposals a reality has looked increasingly tough.

Republicans have signaled that they want to address health-care legislation next month before tax reform due to procedural restraints. On Monday, Trump admitted that changing the health-care system turned out to be more complicated than he initially expected.

In addition, Republicans still need to decide what shape exactly their tax overhaul will take. While House Speaker Paul Ryan has reportedly won top White House advisor Steve Bannon over on the border adjustment provision in his tax plan, but senators including Hatch have put its future in doubt.

The key House GOP reform provision would tax imports, moving the U.S. closer to taxing consumption. Proponents like Ryan say it will encourage economic growth and raise $1 trillion in revenue over 10 years, enough to help to chop the corporate tax rate to 20 percent from 35 percent. Trump's tax plan outlined on the campaign trail called for a 15 percent corporate rate.

However, many large retailers have argued against border adjustment, saying the tax on lower-cost imported goods may get passed on to consumers.