There's a battle going on inside the GOP over the border-adjustment tax, and it's not going away

House Speaker Paul Ryan (R) speaks during a news conference after a House Republican Conference meeting on Capitol Hill in Washington D.C., on February 28, 2017.
Andrew Harrer | Bloomberg | Getty Images

The more Speaker Paul Ryan tries to will the House border adjustment tax into existence as part of corporate tax reform, the more Senate Republicans push back.

Ryan sees border adjustment, which taxes imports 20 percent while exempting exports, as the linchpin of his plan for corporate tax reform. The $1 trillion it would raise over 10 years would help to partially finance a cut in the top corporate rate from the current 35 percent to 20 percent, allowing the House to avoid ballooning the budget deficit.

House GOP leaders thought they heard an endorsement of their idea in President Donald Trump's speech to Congress on Tuesday night. Later they seized on reports that a group of conservatives was told at the White House that the administration backs the House plan.

Not so fast, Senate Republicans say.

For one thing, sources familiar with the matter say Treasury Secretary Steven Mnuchin has told Senate Banking Committee Republicans that he opposes the border adjustment tax.

A Treasury spokesman said Thursday there are "concerns surrounding the proposal" but it has "interesting aspects," adding that Mnuchin is "confident there will be a unified plan between the administration and leadership. The administration will continue to engage CEOs, small business leaders, manufacturers, retailers, and other stakeholders for their input on these issues," the department said.

To make matters more complicated, Trump advisor Steve Bannon has aligned himself with Ryan on the tax, according to reports.

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

For another, Senate aides now believe at least six Republican senators oppose border adjustment. If they hold firm, that would be enough to kill the idea in a chamber where the GOP holds a bare 52-seat majority.

On CNBC earlier this week, Senate Finance Committee Chairman Orrin Hatch said only that he would "look" at the House idea.

One GOP senator who hasn't yet taken a public position told me he considers the idea not only wrong-headed but "lunatic." While Ryan argues that shifting currency values would offset price increases for imported products, the senator responded that those effects would vary by industry, creating losers as well as winners in different states.

What if the House sends the idea to the Senate anyway?

"DOA," the senator said.