Businesses roll out coalition to support House GOP border tax

A senior White House official described the border-adjusted tax, which would apply to imports from all foreign countries, as the "most nationalist" way for the U.S.to tax its companies.

It's never been tested, and it doesn't even exist in a legislative bill yet - only in a spare proposal from House Republicans.

The idea also has early support from some big names in the business world.

The idea is to stop subsidizing imports of products and materials into the United States, and stop penalizing the exports of US -made products and materials to other countries.

Import-dependent companies say the sweeping change could hurt their businesses and customers.

Levi Russell, a spokesman for the Koch-backed Americans for Prosperity, said the Koch network is generally supportive of tax reform but is concerned about consumers having to pay more for goods under border adjustment. We support creating a less complicated, more straightforward and equitable tax code, and will work with both the Administration and Congress to achieve that goal, but the Border Adjustment Tax is not the answer.


"American workers and businesses are not competing today on a level playing field with foreign competitors because of an outdated and unfair tax system", says a spokesperson for the group. American companies that export would face no such tax. The retailers argue that the proposal would increase the price of goods for consumers.

The border adjustment tax is part of broader corporate tax reform by House Republicans, which includes the lowering of the corporate tax rate from 35 to 20 percent. That, in turn, means they can lower their prices and become more attractive in foreign markets.

For example, if a foreign stock pays dividends in euros, and an investor wants to convert those euros to dollars, the investor would get fewer dollars as the USA currency strengthens. "That's going to address the balance on the imports".

A stronger dollar might prompt emerging-market countries to raise their interest rates, making it more expensive still for US investors to swap foreign-denominated assets into dollars, said Ben Emons, the chief economist at wealth management firm Intellectus Partners and a former portfolio manager at Pacific Investment Management Co.

The border adjustment tax gets positive reviews from wonkish policy experts. Other economists, however, are downplaying these concerns, noting that such companies could recoup any tax losses with gains from decreased importation costs and a stronger US economy. It would be a radical change in the structure of business taxes and cause large disruptions in the supply chains and tax liabilities of many firms.

But the difficulty in understanding the benefits of a border adjustment tax may prove its fatal flaw when it comes to attracting enough support in Congress and with President Trump to include it in the next version of tax reform. "Because essentially what this tax would say is anything that comes into the country that is sold, you pay roughly a 20 percent sales tax on it". "Ryan and his supporters did neither". But Jeremy Scott, editor in chief of commentary at Tax Analysts, thinks it may be time to put the idea aside for now.

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