Is the border tax a go?
While the tax reform fight has barely even started, the lobbying war against one of its provisions — border adjustment — has been going on for months. The proposal, which would make corporate income earned from exports tax-exempt and bar companies from deducting the cost of imports, is strongly supported by exporters such as GE and Boeing but vociferously opposed by import-reliant retailers like Walmart, Target, IKEA, and Best Buy. See, for example, the brutal ad from the National Retail Federation above, which labels it an “everything tax” that’ll “tax your car, your food, your gas, your medicine, your clothes — you name it, BAT will tax it!”
Border tax advocates insist that it serves an important purpose in deterring tax evasion by companies, by rendering the most common methods they use to shift income overseas impossible. And while taxing imports doesn’t raise money in the long run, the Congressional Budget Office will almost certainly score the provision as raising money over the next 10 years because the US imports more than it exports. That makes it a way for Congress to pay for deeper rate cuts.
But having retail lined up against it is tough. Retailers are extremely good at selling stuff directly to consumers. Boeing, by contrast, sells to airline executives. Which do you think is going to be better equipped to persuade voters to call their senators and representatives about the border-adjusted tax?
Already the proposal appears DOA in the Senate. Sen. Tom Cotton (R-AR), whose state includes Walmart headquarters, is a vocal opponent, as is Sen. David Perdue (R-GA), a former CEO of Dollar General. Majority Whip John Cornyn (R-TX) says the plan is “on life support,” and Sen. Lindsey Graham (R-SC) has said it wouldn’t get 10 votes in the Senate.
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