Ryan’s Border Adjustment Tax Is Likely Bad For The US Economy

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Robert Donachie Capitol Hill and Health Care Reporter
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Speaker of the House Paul Ryan is adamant a border adjustment tax (BAT) is crucial for revitalizing the U.S. economy, but research published Tuesday morning illustrates the potentially negative impacts it imposes on American businesses.

To achieve President Donald Trump’s ambitious tax reform proposal, Ryan is pushing for a BAT tax that would levy a 20 percent tax on imports. It would allow U.S. companies to deduct the cost of goods made in America, but not ones made in foreign countries. It would reportedly raise over $1 trillion in federal revenue over the next decade, a much needed sum to finance the government while simultaneously slashing business and corporate tax rates by 15 percent. (RELATED: Trump Unveils ‘Biggest Tax Cut’ In U.S. History)

Freedom Partners Senior Policy Advisor Alan Nguyen and Americans for Prosperity Deputy Director of Federal Affairs Mary Kate Hopkins published a report Tuesday examining how the proposed BAT tax would affect major U.S. industries. The researchers focused on areas of the U.S. economy that rely heavily upon imports, like manufacturing, energy, retail and agriculture.

Every good imported to the U.S.–from clothing to avocados to automobile parts–would be subject to a BAT tax, and, in turn, consumers would pay higher prices at the check out counter, Nguyen and Hopkins report. American consumers could pay as much as 30 to 40 cents more per gallon of gas if Congress imposes a BAT tax. Manufactures could stand to pay an additional $67 billion in new taxes. The same story plays out for retailers and farmers.

Chief executives from many major U.S. companies are pushing against the measure. A handful of executives from the retail industry met with Treasury Secretary Steve Mnuchin Tuesday to caution against imposing a border tax. The executives report that consumers would pay $1,700 more a year for their goods and services as a result of imposing a 20 percent tax on imports.

Lobbying organizations representing American business interests have taken up arms against the proposal, starting anti-BAT tax campaigns in Ohio and other states to solidify its demise in Congress. Ryan is on his own campaign to defend his proposal, making promotional stops in the heart of Ohio in early-May to sell the tax to the American people.

Ryan says the measure equalizes “the tax treatment of American goods and services” relative to other nations. “The border adjustment is basically getting us in sync with the rest of the world because the rest of the world already border adjusts their taxes,” Ryan said.

While congressional Republicans are in near unanimous support for tax reform, many remain hesitant to throw their support behind the BAT tax. Others are downright opposed to idea.

Out of the 238 House Republicans, only 15 publicly support the measure. Members of the House Freedom Caucus appear to be leading the charge against the BAT tax. Rep. Jim Jordan of Ohio expressed his concerns in March, “I’ve said all along, I have real, real concerns with that tax.”

Senate Republicans are signaling that Ryan’s beloved border tax will be dead on arrival in the Senate.

“It wouldn’t pass the Senate. The way we are trying to go forward, the Secretary of the Treasury, we are trying to find a proposal to start with. It will start in the House. We haven’t reached agreement yet. We will at some point. Border adjustability is a controversial thing in the Senate,” Senate Majority Leader Mitch McConnell of Kentucky told reporters.

Democrats are likely to stand united in opposition to Trump’s tax plan in general, with or without a BAT tax, so Republicans in Congress will also need to be united. As it stands, the BAT tax looks to be in for a tumultuous time ahead.

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