Border Tax Showdown Comes Amid Lobbying Frenzy

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By Colleen Murphy and Laura Davison

Supporters and opponents of the House GOP border tax proposal have spent months lobbying and hundreds of thousands of dollars on television ads on the issue, according to a Bloomberg BNA analysis.

Now they’ll get their first public chance to make their cases in front of the House Ways and Means Committee.

Border adjustment, the subject of a May 23 hearing, has become the most controversial proposal in the tax rewrite discussion. Before President Donald Trump was elected and the House Republican tax blueprint became the leading proposal for overhauling the tax system, few people, save a handful of tax policy academics, spent much time thinking about the idea.

The White House has remained mum on the matter, leaving it out of a tax reform proposal released last month. Still, many House Republicans support the idea, which imposes a 20 percent tax on imports and exempts exports from tax. If lawmakers and the administration can’t come to agreement on whether the idea should be included in legislation, tax reform could fall apart.

“We get mixed signals from the White House, and if the White House isn’t on board with it, then it has no chance at all. Zero. I’m anxious to see how the White House finalizes their plan and we will move forward accordingly. Because, if we are not unified, we really have no chance of tax reform at all,” Rep. Tom Rice (R-S.C.), a member of the Ways and Means Committee, told Bloomberg BNA.

The Big Spenders

The provision is one of the main pay-fors in the House tax plan. The controversial provision has received enough blowback that some lawmakers say it is as good as dead, and it has many foes in the Senate. Ways and Means members have been working on adjustments and transition rules to ease the provision’s impact on businesses and potentially drum up more approval.

Support from the business community for border adjustment has been limited, though a few companies with large lobbying budgets have come to the proposal’s defense. Boeing Co. and Lockheed Martin Corp. are among those that promoted the border tax during the first quarter of 2017, according to lobbying disclosures for the first quarter.

At least 118 groups, including Phillips 66 Co. and Target Corp., have lobbied against the plan so far. Lobbying forms don’t distinguish the amount spent on any particular issue or bill, and many forms list topic areas outside of tax. Still, the groups opposing border adjustment spent nearly $38.8 million in the first quarter of this year on all lobbying. Opponents spent $19.4 million, according to Bloomberg BNA’s analysis.Ways and Means Committee Chairman Kevin Brady (R-Texas), one of the idea’s main supporters, has met with teams of lobbyists in the months since the presidential election, when it became clear that tax reform could be a reality. A steady stream of representatives from groups including the American International Automobile Dealers Association and the Retail Industry Leaders of America, both of which oppose border adjustment, have lined up outside Brady’s office to explain how border adjustment would affect their business models.

Spectators have said that surprisingly, it has generated more controversy than other elements of the GOP tax reform blueprint, such as one eliminating net interest expense, which has its detractors but hasn’t garnered nearly the same level of public opposition.

In the Limelight

In one of the most high-profile attacks on the border adjustment tax, the National Retail Federation spent an estimated $240,000 on a television advertisement that ran in certain markets during “Saturday Night Live” on March 4. The ad is a parody of the ubiquitous OxiClean infomercial, with a pitchman listing tax hikes expected after border adjustment.

The level of opposition requires lawmakers to engage with voters earlier in the process, Rep. Peter Roskam (R-Ill.), chairman of the Ways and Means Tax Policy Subcommittee, told Bloomberg BNA. Because tax reform has the potential to be sweeping, “it’s no surprise that these types of things are attracting attention” already, he said.

“I think it’s a foreshadowing of what’s to come,” Roskam said.

It’s unusual to produce ads about tax issues for a national audience, said Allan Louden, a professor specializing in political communication at Wake Forest University in Winston-Salem, N.C. Commercials against the tax, such as the OxiClean parody, don’t have a clear target audience, he said.

“But does it change public opinion? It’s possible. Most people don’t really know what a BAT is, and I don’t either, to tell you the truth,” Louden told Bloomberg BNA. “It changes public opinion without people knowing what they are talking about.”

Americans for Prosperity, Club for Growth, and the American Made Coalition have together spent an estimated $70,200 on ads against the border adjustment tax. Club for Growth has run local ads panning Ways and Means members who support the plan, including Rice in northeastern South Carolina and Rep. Kristi Noem (R), who is running for governor of South Dakota.

“Ads like these round up the ‘I’m against taxes’ people,” Louden said. “But you’re not going to get a groundswell of opposition.”

To contact the reporters on this story: Colleen Murphy in Washington at cmurphy@bna.com; Laura Davison in Washington at lDavison@bna.com

To contact the editor responsible for this story: Meg Shreve at mshreve@bna.com

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