Business Owners Tout Tax Reform but Some Oppose Border-Adjustment Tax

Reuters

The committee is holding a hearing this morning on the border adjustment proposal, which is part of the "Better Way" tax reform plan proposed by House Speaker Paul Ryan, R-Wis., and committee Chairman Kevin Brady, R-Texas.

Target officials have held more than 200 meetings with congressional staffers and lawmakers, and Cornell has met with 30 lawmakers to try to persuade them to abandon the tax proposal, Target spokeswoman Dustee Jenkins said. "We can have the best engineering, the best business plan, the best customer service, and the most efficient operations, and still be challenged to compete with tax-advantaged non-U.S. firms", he said.

"I do believe that there are very serious and legitimate concerns to any version of tax reform", Ryan said.

"However, we've concluded that the new border-adjustment tax would undermine the pro-growth principles in the blueprint", he said, noting that more than 500 companies and associations feel the same way.

Simon also suggested the tax could be set up so a rawer product could be exported from the US, then reimported at a lower border tax, because it was produced with a USA raw material.

Target CEO Brian Cornell says prices on everyday essentials would go up by as much as 20-percent if lawmakers pass a proposed border tax.

A House Ways and Means Committee hearing on Tuesday showed Republicans are divided over their leadership's border-adjustment tax proposal. The provision would allow "true competition for the first time" for American businesses, the Texas Republican said at Tuesday's hearing, where Juan Luciano, the head of Archer Daniels Midland Co., said the proposal would level the playing field for US agriculture companies.

"A competitive tax code will help us continue providing American-made food and feed to our customers in the United States and overseas in the face of robust and, from a tax perspective, ever strengthening competition from overseas", he said in prepared remarks. The border adjustment tax proposes lowering that rate to 20% and adding a destination-based tax that economists say will disadvantage importers.

He added, "We must have a globally competitive USA tax code" and encourage capital to come back to the U.S. "With the change, American sourcing will become increasingly viable", Simon said. Simon specifically pointed to American cotton on the worldwide market as a possible example.

Still, it's hard to declare the border tax idea totally dead. Lawrence Lindsey, who served as an economic adviser under former President George W. Bush, praised the tax, indicating it would bring back more manufacturing and further increase wages for people because of the tight labor market in the country.

The House hearing on Tuesday, which was organized by supporters, will seek to make a more vocal case for the tax.

Afterward, Brady told reporters that a key point is to "address this transition and design in a way that eliminates those uncertainties and creates that good solid deliberate approach going forward". "One of the problems with the border adjustment tax is that it doesn't create a level playing field", Treasury Secretary Steve Mnuchin recently said.

Luciano noted crop production is concentrated between the U.S., South America and Eastern Europe. "The long-run benefits to the US economy are many times any short-term costs involved in transition".

"Right now, 97% of apparel bought in the U.S.is made outside of the U.S. Those supply chains don't exist here", he said.

"The issue is a race between South America, eastern Europe and the U.S.", Luciano said.

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