New border adjustment tax would amount to a $5 trillion tax hike on consumers

Any American who pays taxes can agree: our tax system is broken and in dire need of repair. While many pro-growth tax reform proposals exist, some Republican leaders, like House Speaker Paul Ryan (R-Wis.) and Ways and Means Chairman Kevin Brady (R-Texas) continue to push a border adjustment tax (BAT).

In simple terms, a BAT would tax imports and subsidize exports. For example, under current tax law, a local retailer could pay $40 to import a gadget that it sells for $50. A retailer can then deduct its cost and only owe tax on the $10 profit. But, with a BAT in place, that retailer would owe corporate taxes on the full $50 sale price.

About one-third of the durable goods that Americans buy are imported, and that number trends higher for those in the low- and middle-income brackets. So, whether they’re shopping online or at a local retailer, a BAT will be like a vast hidden sales tax that drives up the cost of purchases and forces retailers to cut costs, including jobs, in order to compete.

{mosads}Those in favor of a BAT try to rationalize it by arguing it will lead to lower taxes for large corporations, but it would do so at the expense of hardworking American families struggling to make ends meet.  It’s a regressive tax— plain and simple, and Republicans in Congress should not support it.

Beginning to recognize the unpopularity of a border adjustment tax, Rep. Brady recently proposed a five-year phase-in for a BAT to give time for businesses and consumers to “adjust” to the change. But phasing in a tax increase, doesn’t make it any less of an increase—a BAT would be a $5 trillion tax hike on American consumers. A bad idea is still bad, no matter what shade of lipstick Rep. Brady puts on it.

Today, Speaker Ryan promised to reform the tax code by the end of 2017, and we look forward to helping him do so by implementing pro-growth policies to reduce the tax burden on hardworking American families.

We agree with Republican Leadership that Congress must reform the tax code for individuals and businesses alike. Unfortunately, as long as Speaker Ryan’s plan includes a BAT, tax reform is dead.

The BAT is also a political loser. If the GOP pushes for a BAT, Democrats would have a field day—and rightfully so—on attack ads against Republicans. The ads write themselves: Republicans give tax breaks to big corporations while working class Americans get tax hikes on everything they buy.

With a Republican majority in both houses of Congress and a Republican in the White House, there is absolutely no excuse for failing to enact real tax reform that will stimulate our economy and spur job growth throughout our nation.

Speaker Ryan is correct: this is a once in a lifetime opportunity. Let’s make sure House Republicans don’t squander the opportunity by insisting on a BAT.

Plenty of pro-growth ideas for tax reform are on the table, so why are some Republicans advocating for a BAT, a tax increase by a different name? We’ll leave it to Chairman Brady to explain why he wants to impose a $5 trillion tax hike on the American people. 

Andy Roth is the vice president of government affairs at the Club for Growth, a non-profit group aimed at promoting limited government.

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