Business & Lobbying

Border tax sets off frenzy of lobbying

Businesses are lobbying furiously to shape a proposal from House Republicans that would levy a tax on goods imported to the United States.

The idea, known as border adjustment, is part of the “Better Way” plan that House Republicans released ahead of the November elections. Now that Donald Trump is president, Republicans are using that blueprint as the starting point for tax reform.

{mosads}Implementing border adjustment would represent a seismic shift in tax policy — one that Republicans say would level the playing field for domestic manufacturers.

In addition to subjecting imports to a U.S. tax, the proposal would exempt from taxes exported goods.

But some major businesses are against the plan, fearing the impact it could have on sales and global supply chains.

In the last six months of 2016, more than 35 companies and groups specifically lobbied on the border-adjustment tax, with many opposed to it.

The groups and companies that have weighed in on the idea include 3M, banking giant HSBC, electronics company Siemens, petroleum refiner Tesoro, and several retail and clothing manufactures such as Target, Gap, Nike and Sears.

Global Automakers, an industry group representing international automakers, has also lobbied on the plan.

Action on the import tax has escalated quickly in recent weeks.

After Trump won the White House, the “Better Way” plan “stopped being a campaign document for House Republicans and became a serious threat to be the opening draft of a comprehensive tax reform plan by the House Republicans,” said David French, senior vice president for government relations at the National Retail Federation.

Dollar Tree in January hired its first lobbying firm in almost a decade, Off Hill Strategies, to specifically work on the tax issue. The store’s inventory largely consists of inexpensive imported products.

While retailers are among those most concerned about the tax plan, it could also have major repercussions for the oil and gas industry.

Petroleum refiners such as Tesoro import billions of barrels of crude oil each year to refine into fuels like gasoline and diesel. The tax on imports could significantly increase their costs. 

“No one in the refining sector is leaping at the chance to support this, largely because no one knows what the impact is on their respective companies,” said Stephen Brown, a vice president and counsel at Tesoro. “You can take assumptions from the blueprint, but until you see the actual language … you’re kind of stymied.”

“Bottom line is, Mr. Ryan and Mr. Brady are friends of Tesoro and friends of the oil and gas industry, so this is not a comfortable place to be,” Brown said, referring to Speaker Paul Ryan (R-Wis.) and Rep. Kevin Brady (R-Texas), head of the House tax-writing panel.

Other companies are not expressing outright opposition to the tax idea just yet but are instead seeking more information about how it would work.

House GOP leadership and top Republican tax-writers have fiercely defended border adjustment, saying it would make the U.S. tax system more like the tax systems in other countries and would remove incentives for companies to move their headquarters or jobs overseas. 

The White House appeared to signal it is open to the proposal last week when Trump said tax reform could be a vehicle to generate revenue to pay for a border wall between the U.S. and Mexico.

The idea also has early support from some big names in the business world.

A group of exporters and domestic manufacturers — which reportedly includes Boeing, General Electric and Dow Chemical — is working to form a coalition to support the proposal. 

More than 50 businesses have committed to being part of the group or have expressed interest in doing so, according to a source familiar with the planning.

Supporters of border adjustment argue that it would not result in higher prices, because the dollar would strengthen and the cost of importing goods would go down. Opponents are skeptical, fearing that it would take a considerable amount of time for the currency adjustment to occur.

Critics also argue that the $1 trillion in earnings Republicans say will be garnered from the tax shift could be undercut if certain companies with razor-thin margins go out of business or otherwise shift operations.

Lobbyists such as Stephen Lamar of the American Apparel & Footwear Association warn that the tax, as proposed, could hit consumers with higher prices.

Brian Dodge, a spokesman for the Retail Industry Leaders Association, said that pushing back against border adjustment is “easily the No. 1 priority for the retail industry this year” and called it the “most galvanizing” issue for the industry in the last decade.

The influential GOP donors Charles and David Koch are also opposed to the proposal. 

Levi Russell, a spokesman for the Koch-backed Americans for Prosperity, said the Koch network is generally supportive of tax reform but is concerned about consumers having to pay more for goods under border adjustment.

He said that “everything is on the table” in terms of advocating against border adjustment, adding that he hoped House Republicans would start looking at alternatives.

Tags Donald Trump Kevin Brady Paul Ryan

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