Apr 06, 2017

New Report: States Stand to Lose Big Under BAT

Post by Freedom Partners

For the first time in more than 30 years, federal lawmakers have an opportunity to replace our nation’s broken tax code. However, as part of comprehensive tax reform, some House leaders are proposing a Border Adjustment Tax (BAT), a new 20-percent tax on everything imported into the United States, from t-shirts and tennis shoes to crude oil and auto parts. American importers – 95 percent of whom are small businesses – could see their tax bills skyrocket to unsustainable levels.

The size and scope of this trillion-dollar tax that will ultimately be passed on to consumers is staggering – especially as it relates to impacts on individual state economies. According to a new study released today by Freedom Partners and Americans for Prosperity, “The Impact of the Border Adjustment Tax on the States,” every state would be hurt by this massive tax hike. The only question is by how much.

The report finds that even with partial dollar appreciation, a new import tax could mean billions in new taxes for many states – especially Michigan, Louisiana, Tennessee, New Jersey, Kentucky, South Carolina, Illinois, Texas, Georgia and California. Though these states are most vulnerable to a BAT because of their high value of imports relative to the state’s economy, consumers in every state would face a very real cost in the form of higher prices on things they buy every day.

Here are the top ten states that will bear the brunt of this harmful policy:

Border Adjustment Tax Chart

The industries hit hardest by a 20 percent import tax? American auto manufacturing and retail.

  • The import tax could prove to be devastating for domestic automakers. Of the ten states most sensitive to a BAT overall, nine are home to a significant number of auto manufacturing jobs, representing more than 214,000 jobs potentially imperiled by the import tax. Michigan alone has 125,000 auto manufacturing jobs.
  • The retail industry would also be particularly vulnerable to a 20 percent import tax, considering most retailers heavily rely on imports to stock their shelves with consumer goods. In Florida, for example, retail jobs account for more than 15 percent of the private job market, with over 1 million employees. And even though the potential risk for this massive consumer tax varies from state to state, all states stand to lose big under BAT because in every state the retail industry employs more than 10 percent of private employees.

Lawmakers should consider the retail industry’s large and vital role in their states, and consider if they are willing to put so many good jobs at risk as state and local economies are beginning to turn around after our nation’s long economic recovery.

This is not to say lawmakers shouldn’t pursue comprehensive tax reform. They should. Overhauling our broken and inefficient tax code is critical for restoring opportunity and prosperity in America. Americans for Prosperity has identified more than $2 trillion in wasteful spending, unnecessary programs and corporate welfare that could be eliminated instead of imposing a new tax on U.S. consumers.

While we are encouraged by efforts to reform our tax code, Freedom Partners opposes the inclusion of this proposed 20 percent tax hike on imports. This new consumer tax undermines the larger effort and places new, unfair burdens on Americans. The BAT consumer tax has no place in comprehensive tax reform.

To read a full copy of the study, download it here.