May 17, 2017
Freedom Partners & Americans for Prosperity Analysis Shows Trillion-Dollar Border Adjustment Tax Would Harm U.S. Industries
Post by Freedom Partners
Arlington, VA – Freedom Partners Chamber of Commerce and Americans for Prosperity today released a new analysis providing an industry-specific look into how the proposed Border Adjustment Tax (BAT) would affect key components of the U.S. economy and employment. The manufacturing, energy, retail, financial services, and agricultural industries – which together employ nearly one-third of all private domestic employees – are especially susceptible to harm from BAT.
The new revenue stream proposed as part of the House Blueprint for tax reform would impose a 20-percent tax on everything that companies import into the United States, effectively raising over a trillion dollars in new tax revenue paid by consumers in the form of higher costs. Due to skyrocketing tax bills, domestic businesses that rely on imports would likely be forced to raise prices, slash production, reduce employment – or possibly go out of business.
A previous analysis from Freedom Partners and Americans for Prosperity found that a blanket tax on imported goods would spare no state from higher costs and soaring tax bills. But there would also be a dramatic impact to individual industries, such as manufacturing, energy, retail, financial services and agriculture, as well.
Our analysis shows that these industries and their many sectors tend to rely heavily on imported goods and would be negatively affected by a tax on imports.
Key Highlights: BAT-by-Industry
- Though a 20 percent tax on imports would burden every manufacturing sector, it would particularly threaten high-end manufacturing jobs in the U.S.
- American manufacturers could face an additional $67 billion burden from a 20 percent tax on imports, even assuming partial currency adjustment.
- Gas prices could increase by 30 to 40 cents a gallon.
- Retailers that rely heavily on imports could see their tax bills soar higher than their profits in many cases.
- Complexities in the financial services industry make it almost impossible to apply a BAT, but using carve outs and loopholes to “fix” that problem would only make things worse.
- The agricultural industry is vulnerable to the threat of trade retaliation as trading partners look to buy from other countries in response to the BAT.
State Economies That Rely Heavily On Select Industries Would Be Disproportionately Impacted by BAT
- When taken together and compared to total GDP by state, the contributions of the manufacturing, retail, financial services, and agricultural industries are most significant in Indiana, Iowa, Delaware, South Dakota, Nebraska, North Carolina, Wisconsin, Oregon, Ohio, and Louisiana.
- When taken together and compared to total employment by state, the contributions of manufacturing, retail, financial services, and farms are most significant in Wisconsin, South Dakota, Indiana, Nebraska, Kentucky, Arkansas, Kansas, Alabama, and New Hampshire.
Freedom Partners Vice President of Policy Nathan Nascimento issued the following statement:
“Implementing a crushing tax on imports would have significant ripple effects throughout American industries, threatening jobs and economic growth along the way. Freedom Partners and our coalition allies urge Congress to drop this harmful policy and move on with tax reform without the gut punch to importers and the economy. There are many positive aspects of pro-growth tax reform embraced by Congress and the administration, but a new trillion-dollar tax that handicaps one industry over the other threatens to upend reform from happening at all.”
Americans for Prosperity Chief Government Affairs Officer Brent Gardner issued the following statement:
“If Congress wants to grow the economy and improve competitiveness of U.S. businesses in the global marketplace, they should lower our unprecedented tax rates – not penalize them for relying on cost-effective imports. AFP is urging Congress to drop the import tax and make pro-growth reform a reality – without new taxes putting comprehensive reform further out of reach.”
Americans for Prosperity has already identified more than $2 trillion in wasteful spending, unnecessary programs, and corporate welfare that could to be eliminated instead of imposing a new trillion-dollar tax on U.S. consumers.