Congress' New Border Tax Could Spell Disaster

It’s encouraging that lawmakers in Washington are giving tax reform some long-overdue consideration—but it’s extremely disappointing that part of their answer includes a new $1.2 trillion tax American consumers will have to pay.

A provision of their plan, the border adjustment tax, is effectively a 20 percent tax on everything imported into the country. This cost will ultimately be paid by American consumers in the form of higher prices for basic, everyday essentials.

Border adjustment would mean that corporate income for goods sold overseas is not taxable, but the goods sold to American consumers are. A plan that makes life more expensive for the average American will be a disastrous policy, and a bad political move.

Everything from clothing to electronics will become more expensive under this plan.  Target’s CEO Brian Cornell recently told CNBC that the border adjustment tax would result in a 75% effective tax rate for the company, forcing price hikes as high as 25% on clothes for our kids, school supplies, and daily staples.

Energy too will be hard hit, particularly in Wisconsin, as the lion’s share of the gasoline we consume is refined from Canadian crude.  According to experts, we can expect to pay $.30/gallon more on average as we fill our gas tanks if the border adjustment tax becomes law. 

Speaking of gas stations, if you’re a fan of Kwik Trip’s amazing bananas get ready for a hit to your wallet.  The border adjustment tax applies to them too. Apparently, the tax is supposed to bring back banana plantation jobs to Wausau but we’re skeptical.

In all seriousness, a border adjustment tax will put thousands of Wisconsin jobs in jeopardy. Some estimates show that in the near-term, the border adjustment tax could create a dramatic increase in unemployment to levels not seen since the post-financial crisis highs of 2010.

Many lawmakers hope the plan will incentivize companies to stay in the U.S., but instead of passing on a giant tax burden on Americans, perhaps they should simplify the tax code by eliminating loopholes and lowering rates for all of us. Or, they could follow through on promises made before the election and consider spending cuts.

Our economy has grown to be the largest and most prosperous in history because it was built on a free market and a free flow of goods and services. With a current economic outlook that’s still sluggish and families across the country still struggling, we should stick to our roots.

Wisconsinites deserve real, meaningful tax reform but as AEI scholar Phil Gramm recently put it in the Wall Street Journal, border adjustment isn’t the key to accomplishing tax reform.  It’s the poison pill that will kill it.


Cross-posted with Americans for Prosperity.



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