Border adjustment appears to be 'winning' inside White House walls, informal Trump advisor Kudlow says

Kudlow: Trump speech the best he's done so far
Kudlow: Trump speech the best he's done so far

The White House may be warming to a key provision of the House Republican tax plan.

Though President Donald Trump did not specifically mention it in his address to Congress on Tuesday, the White House appears to lean toward supporting border adjustment, according to informal Trump advisor Larry Kudlow. He said "conservative activists" who met with "White House representatives" were told the White House does "favor the border adjustment."

"The president last night went to the water's edge, didn't quite mention it, but in fact inside the White House, the BAT is winning," Kudlow, senior CNBC contributor, said Wednesday.

A U.S. Customs and Border Protection official directs trucks at the Mexico border.
Sam Hodgson | Bloomberg | Getty Images

Border adjustment faces opposition from parts of the American business community and some Republicans senators. The resistance to it threatens to hold up aspirations to pass tax reform this year. White House support for it could potentially tip the balance.

A Bloomberg report Tuesday said top Trump advisor Steve Bannon, among others in the White House, supports border adjustment. Trump has publicly endorsed some form of a border tax, but has not explicitly supported border adjustment as the House drafted it.

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.

Many large retailers have argued against border adjustment, saying the tax on lower-cost imported goods may get passed on to consumers. Senate Finance Committee Chairman Orrin Hatch, R-Utah, told CNBC on Tuesday that border adjustment has "a long way to go" and that it will be "a difficult matter to get through both bodies."

Kudlow said that it appears border adjustment will ultimately "be part of the deal."