Higher tax on imports could risk price hikes
WASHINGTON — The name sounds innocuous enough: border adjustment tax.
But that three-word bureaucratic phrase could cripple the cherished Republican dream of overhauling the federal tax code for the first time in three decades.
The 20 percent tax, which would be imposed on all goods imported into the United States, would raise the money that Republicans need to dramatically lower
income tax rates for corporations without adding trillions of dollars to the federal debt during the next decade.
Although House Speaker Paul Ryan, R-Wisconsin, is among the leading advocates of the idea, it has run smack into opposition from major retailers such as Target and Best Buy and automotive companies such as Honda, which employs more than 14,000 people in Ohio.
“By definition, if you are putting a 20 percent tax on everything imported, that’s a pretty good start for a higher purchase price,” said Edward Cohen, vice president and lobbyist for Honda in Washington, D.C.
“Until we see the whole bill, I can’t tell you exactly how this will come out,” Cohen said. “A border adjustment tax could have significant negative impact on our customers if the rest of the bill doesn’t offset it.”
In a meeting at the White House last week, executives of major retailers made similar points, warning that an import tax would punish American consumers by raising the prices of electronics and other goods manufactured abroad.
But without the $1 trillion raised by the tax during the next decade, hopes of lower corporate tax rates might slip from the grasp of Republicans.
“You could do comprehensive reform without the border adjustment,” said Alan D. Viard, a resident fellow of tax policy at the conservative American Enterprise Institute and a former professor of economics at Ohio State University. “You probably would have higher tax rates.”
“I think originally one of the goals supporters had was to reduce imports and increase exports,” Viard said. “Lately, it seems like the revenue has become a more significant motivation.”
The border adjustment tax, which some financial analysts say is not much different from a sales tax or a valueadded tax, is just one part of a sweeping House Republican plan unveiled in June that is designed to scrub scores of loopholes and preferences from the tax code and substitute a far more simple system.
The election of President Donald Trump has given Republicans their big chance. If they can use their Senate and House majorities to win approval of a tax bill this year, they have a president who will sign it into law.
“I am convinced we will do tax reform” this year, said Rep. Pat Tiberi, R-Genoa Township, who remains undecided about the border tax. “We have a long way to go, and if President Trump is not for whatever we do, it will