by Matthew Townsend , Ben Brody , and Elizabeth Dexheimer
April 4, 2017
Donald Trump’s surprising election and his promise to overhaul the U.S. tax code set off celebrations across corporate America -- but some industries had barely applauded before they began gearing up for a fight.
Trump’s win gave Republicans control of the U.S. government for the first time in a decade and quickly drew attention to a tax plan that House Speaker Paul Ryan unveiled last summer with little fanfare. Ryan’s radical tax-code rewrite would replace the corporate income tax with a 20 percent tax on businesses’ domestic sales and imports; their exports would be exempt.
Cue the alarm bells for import-heavy companies like Wal-Mart Stores Inc., Target Corp. and Nike Inc. Retailers, apparel-makers, shoemakers, automakers and others unleashed one of their most robust lobbying and public-relations pushes in recent memory against the so-called “border-adjusted” tax. Buttressed by more than 10,000 phone calls to congressional offices, by a parody-style TV ad that aired during “Saturday Night Live” and by a succession of Republicans who’ve expressed concern about the plan, the opponents’ efforts appear to be winning. So far.
But the action has now shifted to the White House, which will be “driving the train” on tax legislation, Press Secretary Sean Spicer says. There, the picture gets cloudier; lobbyists on both sides of the border-adjustment tax issue say they’re not sure who’ll determine the final contents of the administration’s plan.
Still Early
“Clearly, the retailers getting out so fast and so aggressively early was” an advantage in lining up congressional opposition to Ryan’s plan, said Gordon Gray, director of fiscal policy for the American Action Forum, a right-of-center think tank in Washington. But it’s still early, he said, and “unless we know where the White House is going to come down on it, it’s hard to say who is winning.”
Ryan and Representative Kevin Brady, the Texas Republican who chairs the House Ways and Means Committee, have championed the border-adjustment plan as a way to raise revenue that would help finance tax-rate cuts. Independent estimates have said it would raise more than $1 trillion in tax revenue over 10 years. They also say it would help American-made products compete more effectively in overseas markets, while stimulating more domestic manufacturing.
Those who oppose the border-adjusted tax say it would lead to higher prices on a range of consumer goods -- though supporters say a strengthening dollar would ultimately even such effects out. Opponents have gained valuable allies in Trump’s administration. Treasury Secretary Steven Mnuchin is said to oppose the border-adjustment concept, as is Gary Cohn, Trump’s top economic adviser.
‘Economic Nationalist’
Meanwhile, Stephen Bannon, the president’s chief strategist who favors an “economic nationalist” approach, is said to favor the proposal.
The retailers were aided early when, less than a month into Trump’s presidency, they scheduled the chief executive officers of several retail companies to meet with Cohn, the head of the National Economic Council. Cohn elevated the event to a meeting with the president on Feb. 15, at which the border-adjustment plan was discussed, according to people familiar with the meeting.
Trump himself hasn’t weighed in yet -- and that lack of clarity has left Ryan’s plan without much political cover, leaving it open to attack, said Gray of the AAF.
The main opposition group, Americans for Affordable Products, debuted on Feb. 1, and now has more than 400 member companies. A flood of CEOs including J.C. Penney haven’t been shy about lambasting the border-adjustment proposal. Wall Street analysts have chimed in; the concept “would be a really big hit to some companies,” said Scot Ciccarelli of RBC Capital Markets. Retail stocks have declined this year while the overall market hit new heights.
Fight Continues
“No other issue galvanized the industry like this one,” said Brian Dodge, senior executive vice president of public affairs for the Retail Industry Leaders Association, one of the groups leading the opposition. “Until the sponsors declare it dead, we will continue to fight against it.”
Opposition to border adjustments also came from Americans for Prosperity, the conservative advocacy group founded by billionaire brothers Charles and David Koch. AFP says it has placed more than 10,000 telephone calls to members of Congress and made more than 100 visits to district offices in the past six weeks.
The border-adjustment plan has supporters too. One day after the opposition group made its debut, the American Made Coalition was announced. It has fewer than 30 major companies as members -- almost all of them net exporters -- but they include household names like General Electric Co., Caterpillar Inc., and Merck & Co.
Ads Planned
The supporters say border adjustments would boost domestic manufacturing and reduce incentives for U.S. companies to move jobs overseas. They’re planning to launch new ads this month as Congress takes a two-week spring recess.
“There’s a lot of tax reform debate to be had,” said John Gentzel, a spokesman for the supporters’ group. He said the border-adjustment measure would create 1.7 million new jobs and boost wages by almost 8 percent. “Meanwhile, the opposition has spent all this time and energy trying to maintain status-quo tax policies that promote foreign-made products over U.S. jobs.”
Amid the corporate division on the issue, Washington’s usual business lobbying has been thrown into disarray. Powerhouses like the U.S. Chamber of Commerce, the American Petroleum Institute and National Association of Manufacturers have been neutral because their memberships are split on the issue. Same for the Business Roundtable.
‘Finish Line’
“Regardless of how that issue comes out, you will see the Business Roundtable coming in strongly to help pull reform across the finish line,” JPMorgan Chase & Co. CEO Jamie Dimon, who chairs the group, told Bloomberg last month.
Wall Street has also mostly stayed quiet on border adjustments because it’s not clear how businesses such as trading and lending would be treated under the House GOP plan. Financial industry lobbyists see the proposal as a non-starter in the Senate because of the opposition generated there by the retailers and their allies.
“It has proved to be a very controversial issue, particularly on the Senate side where it doesn’t look like there is going to be enough support for it,” said Mike Sommers, the president of American Investment Council, which represents private equity firms.
But all bets are off if the House plan for a border-adjusted tax, or BAT, is defeated and Congress begins looking for other ways to help finance tax cuts -- which might draw any number of other companies into the fray.
“If you think the fight over BAT is ugly, just wait -- because what comes next is going to be a much bigger food fight,” said Charles Gabriel, president of Capital Alpha Partners, a policy-research group in Washington. “We haven’t even begun.”
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The issue is simple
Those who love the 99 cents products can they afford to pay for the same product for $10? That is the question. Citizens are looking to save, not increase in prices - the question is who benefit by the increase of the price? Fat cats (Trump buddies).
It is strange, Trump campaign promises are pushed or disguised as Ryan's plans.
The failed Trump care who got blamed for it Ryan. Now the BAT Trump campaign promise has been renamed to Ryan Border Tax that is indicating it will fail (due to the fact it has no support - it was just a campaign fake promise for those simpletons - it’s like a talk when you are drunk).
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