A border adjustment tax is not productive, former Varsity Brands CEO says

Key Points
  • A border adjustment tax would lead to more unemployment and would lead to a tremendous disruption, Matt Rubel told CNBC.
  • The House is expected to turn its attention to tax reform now that it has passed the GOP health-care bill.
  • GOP lawmakers believe including the border adjustment tax is important to keep the plan revenue-neutral.

A key part of congressional Republicans' tax reform plan, the border adjustment tax, is "not productive," retail veteran and former Varsity Brands CEO Matt Rubel told CNBC on Friday.

He believes the provision, which would slap a 20 percent tax on imports, will have a negative impact on the economy, of which consumers are the biggest part. That's because it will raise prices on imported goods, he explained. Rubel serves on an advisory committee for trade policy, and was first appointed under former President Barack Obama in 2014.

"If consumers haven't had income growth over a long period of time and then you go and move to a border adjustment tax as it's articulated by Congress, it will only move things out of the range of where people can buy them," said Rubel, also the former CEO of Collective Brands, in an interview with "Power Lunch."

"Adding that to the current environment would actually lead to more unemployment and would lead to a tremendous disruption," he added.

The U.S. House of Representatives is now expected to turn its attention to tax reform in earnest after passing the GOP's health-care bill on Thursday.

President Donald Trump and Republicans in Congress have pledged to complete the biggest tax reform since 1986, when President Ronald Reagan was in office, before the end of 2017.

However, there already appear to be differences within the party, including the controversial border adjustment tax.

House leaders believe the tax is crucial to helping keep the plan revenue-neutral. However, the White House doesn't appear to support the measure, which was not included in the outline of Trump's plan released last week.

Last week, Treasury Secretary Steven Mnuchin said the administration doesn't think the provision works in its current form.

"We're going to continue to have discussions with them above revisions," he said in an event hosted by The Hill.

While retail executives have been outspoken in their criticism of the tax, General Electric CEO Jeff Immelt on Thursday supported the idea.

"All of our global competitors have some form of a border adjustment," he said. "Isn't it worth a debate?" he said in a speech at Georgetown University.

He also warned the administration to avoid protectionist policies.

Correction: Matt Rubel serves on an trade advisory committee. He does not advise President Donald Trump directly.

—CNBC's Jacob Pramuk and Reuters contributed to this report.

Watch: CEO concerns over border tax

CEOs share concerns about backlash from a potential border adjustment tax
CEOs share concerns about backlash from a potential border adjustment tax