Don't Let Multinational Corporations Derail Tax Reform
Another Tax Day has come and gone and the finish line for tax reform for Americans is still a long way from reality. Treasury Secretary Steven Mnuchin threw cold water on prospects last week by saying that the timeline has become “highly aggressive to not realistic.”
With Republicans in control of Congress and the White House, reasonable, pro-growth tax reform should be a slam dunk. Unfortunately, House Republican leadership seems intent on keeping a poison pill as part of the package — the proposed border adjustment tax (BAT).
This provision, which places a 20 percent tax on all goods and products imported into the U.S., has drawn deep divisions in the business community. On one side are several multinational corporations including Boeing, General Electric, Dow Chemical, United Technologies, Honeywell, and others that are united under the “American Made Coalition” (AMC). These companies receive billions of dollars in local, state, and federal subsidies and are seeking to expand their deep profit margins through the BAT. By not paying taxes on exports, these corporations will get even more breaks, while those on the other side — American retailers, small businesses, and middle-income families — will shoulder the trillion-dollar cost.
Do the members of the American Made Coalition really need another tax break? Our recent analysis of data from the Securities and Exchange Commission and Good Jobs First’s Subsidy Tracker produced some interesting findings. AMC members paid an average effective tax rate of 16.6 percent, including a collective $17.197 billion provision for taxes on $103.55 billion in profits, according to the last publicly available annual reports. They also received a collective “tax break” of $19.046 billion, as the group would have made a provision for $36.221 billion in taxes on $103.44 billion in total pre-tax profits at the full 35 percent statutory rate. Collectively, the AMC members received more than $19 billion in local, state, and federal subsidies since as early as 1992 — a staggering average of $800 million per company.
Meanwhile, many retailers and small business that are already shouldering a steep 35 percent statutory rate without enjoying any subsidies will see major cost hikes from the BAT. They would be forced to make tough decisions including price hikes and scaled back labor. Consumers would also be hit hard in the wallet on everyday needs such as food, medicine, gasoline, and clothing. Estimates show that family budgets could increase by $1,700 per year on these items.
The BAT isn’t just bad economics. It’s also bad politics. Americans are seeing the sticker shock of the border adjustment tax and are not happy. A new national survey conducted earlier this month found that 63 percent of voters oppose the BAT, and nearly half of them strongly oppose it. Voters in states with competitive U.S. Senate races (66 percent) strongly oppose the BAT, as do voters in states that were competitive in the 2016 Presidential election (62 percent). And key voting blocs, such as women (70 percent) and seniors (63 percent), oppose the tax as well.
If our elected leaders want to get tax reform back on track, they should ignore tax freebies for those that don’t need them. Killing the BAT is a great place to start.
Joshua Baca is spokesman for Americans for Affordable Products, a national coalition of more than 400 businesses, retailers and trade associations united to stop the border adjustment tax and its resulting higher prices on food, clothing, medicine, gasoline and more.