For over 50 years, Bloomberg Tax’s renowned flagship daily news service, Daily Tax Report® has helped leading practitioners and policymakers stay on the cutting edge of taxation and...
A group of large exporters, including General Electric Co., Dow Chemical Co. and Eli Lilly and Co., are publicly embracing one of the most contentious aspects of the House Republican tax plan.
The exporters will push the border adjustment provisions, which would tax imports and exempt exports. Oracle Corp. and Tabasco sauce maker McIlhenny Co. are also among those joining the coalition, which doesn’t yet have a name and will officially launch in the coming weeks. The company names were included in the event program at a Jan. 26 Washington International Trade Association event.
The provisions are a central feature of House Ways and Means Committee Chairman Kevin Brady’s (R-Texas) proposal to rewrite the tax code. Supporters say it protects the U.S. tax base. Importers, such as retailers, have opposed the idea, saying it would raise prices for consumers.
It’s what our major trading partners do, Brian Reardon, a consultant who is advising the group, said at the WITA event. “If it’s such a bad idea, why are they all making this bad choice?”
The formation of the pro-border-adjustability group comes as another organization, Alliance for Competitive Taxation, said it supports the House GOP blueprint as a framework for “forward thinking business tax reform” to help grow the economy.
The alliance includes Eli Lilly and Dow, as well as Honeywell International Inc., Pfizer Inc. and Procter & Gamble Co.
For Brady, the support for border adjustability comes after weeks of being under intense pressure from retailers such as Wal-Mart Stores Inc. and Best Buy Co. Inc.
Companies that rely heavily on imports would see their taxes “skyrocket,” said Rachelle Bernstein, tax counsel at the National Retail Federation.
“We will have many members who will have tax burdens larger than their profits,” she said. “There will be no choice but to pass that on to consumers.”
Rick Woldenberg, chairman of toymaker Learning Resources Inc., said under the plan he would have to raise prices by a third. He would expect his volume to decline by 40 percent and would have to fire about 20 percent of his 150 employees.
“This plan is not good for me if it kills me,” Woldenberg said.
“Sometimes the negativity comes when you just focus on what the border adjustment might do, particularly in the short run on prices,” said Janet Boyd, Dow’s director of government relations. “But when you put it in total, it’s a much better and stronger tax system.”
Some of the disparate views can be attributed to the lack of empirical evidence of how such a plan would play out if it is implemented.
“No country has moved to everything like the tax blueprint and then border adjusted it after-the-fact,” said Gordon Gray, director of fiscal policy at the American Action Forum.
Economists who support border adjustments say the dollar should rise about 25 percent to compensate for the tax. But that doesn't account for other economic factors.
“There is a whole other realm of things that affect currency prices,” Gordon said. “There will be things pushing the currency upward, things pushing downward.”
To contact the editor responsible for this story: Meg Shreve at email@example.com
Copyright © 2017 The Bureau of National Affairs, Inc. All Rights Reserved.
All Bloomberg BNA treatises are available on standing order, which ensures you will always receive the most current edition of the book or supplement of the title you have ordered from Bloomberg BNA’s book division. As soon as a new supplement or edition is published (usually annually) for a title you’ve previously purchased and requested to be placed on standing order, we’ll ship it to you to review for 30 days without any obligation. During this period, you can either (a) honor the invoice and receive a 5% discount (in addition to any other discounts you may qualify for) off the then-current price of the update, plus shipping and handling or (b) return the book(s), in which case, your invoice will be cancelled upon receipt of the book(s). Call us for a prepaid UPS label for your return. It’s as simple and easy as that. Most importantly, standing orders mean you will never have to worry about the timeliness of the information you’re relying on. And, you may discontinue standing orders at any time by contacting us at 1.800.960.1220 or by sending an email to firstname.lastname@example.org.
Put me on standing order at a 5% discount off list price of all future updates, in addition to any other discounts I may quality for. (Returnable within 30 days.)
Notify me when updates are available (No standing order will be created).
This Bloomberg BNA report is available on standing order, which ensures you will all receive the latest edition. This report is updated annually and we will send you the latest edition once it has been published. By signing up for standing order you will never have to worry about the timeliness of the information you need. And, you may discontinue standing orders at any time by contacting us at 1.800.372.1033, option 5, or by sending us an email to email@example.com.
Put me on standing order
Notify me when new releases are available (no standing order will be created)