Michigan Business Groups Oppose Proposed Border Tax

(Michael Carroll, Watchdog.org) Michigan business organizations want to put the brakes on a section of the GOP tax reform plan that would tax goods imported into the country, arguing that the measure could burden import-dependent companies such as car makers.

Veronique de Rugy photo

Veronique de Rugy Photo by Gage Skidmore (CC)

A study released this month by Freedom Partners, a nonprofit, nonpartisan policy institute, found that Michigan would be ground zero in terms of potential new tax burdens imposed by the proposed border adjustment tax (BAT). That tax proposal would impose a 20 percent tax on everything imported into the United States, including parts and raw materials for manufactured goods.

“Michigan – perhaps not coincidentally – is both the most sensitive state to a border adjustment tax and the state with the most auto manufacturing jobs,” says the Freedom Partners report, which found that imported goods represent 27.4 percent of Michigan’s Gross Domestic product.

That puts Michigan’s “sensitivity rank” for the border tax at No. 1 in the nation, the report said. The state has 124,500 motor vehicle manufacturing jobs on the line, according to a 2014 estimate.

“It’s going to seriously rock the boat,” Veronique de Rugy, senior research fellow at the Mercatus Center at George Mason University, told Watchdog.org.

Although de Rugy, who is also a syndicated columnist, supports reforming the federal corporate tax system, she expressed concern about potential BAT effects on the auto industry.

“Parts of cars made in America come from abroad,” said de Rugy, predicting that the border adjustment tax could disrupt a lot of companies that depend on imported parts for their products.

Michigan in particular will be hit hard by the tax, she said, although other parts of the Republican tax package could offset that burden somewhat.

The border adjustment tax has the support of House Ways and Means Committee Chairman Kevin Brady, a Texas Republican. Brady and other supporters have argued that the tax would strengthen the dollar to the point of offsetting the increase in the corporate tax bills. But de Rugy said that empirical research has shown otherwise – that the strengthening of the currency would not be enough to offset the tax burden.

“This is an untested idea,” she said, expressing doubt that the currency would adjust as perfectly as supporters claim. “It is so focused on importers. The burden is on that group of producers.”

The net effect, said de Rugy, could be on millions of American consumers.

“Companies will pass on costs to consumers in the form of higher prices,” she said.

U.S. companies that export their goods tend to support the border adjustment tax, but de Rugy said that economic research indicates that they too would be affected.

“Exporters are behind it because they see it as a potential source of income growth,” she said. “But it’s not going to be the bone they’re hoping for.”

A Motor and Equipment Manufacturers Association (MEMA) position statement also expresses concern about the proposal. The association concludes the plan would boost costs for car manufacturers, reduce the amount of capital invested in new product development, bump up consumer prices, cut sales and possibly lead to an erosion of manufacturing jobs in the nation.

“The BAT issue does seem to bump up against larger trade issues,” MEMA spokeswoman Cindy Sebrell said in an email.

Sebrell pointed to a MEMA position statement expressing concern about possible changes to the North American Free Trade Agreement.

“During the last four years, MEMA member companies have invested more in the U.S. than in any other NAFTA country,” the statement said. “NAFTA has been a key contributor to this investment and U.S. growth. As such, any changes to NAFTA should not risk disrupting motor vehicle supply chains.”

Both the National Retail Federation and the Michigan Retailers Association have come out in opposition to the tax.

“The BAT would be felt immediately in the pocketbooks of middle-class Americans, effectively amounting to a $1 trillion tax that would punish employers, consumers and the American economy,” the Michigan Retailers Association said in a statement this spring.

And a business coalition against the tax called Americans for Affordable Products predicts dire consequences if the tax is approved, including a 35-cent-per-gallon boost in the cost of gasoline and added new car costs of $2,500.

“The border adjustment tax will push the cost of a new car out of reach for middle-class consumers, who will already be saddled with higher costs on everyday necessities like food, clothing and medicine,” said George Sharpe Jr., general manager of The Sharpe Collection, a car dealership in Grand Rapids, Mich., in a prepared statement.

Original Source

  • John

    I wonder if it’s the same business groups that hire illegals in their companies or at their homes. BUY AMERICAN HIRE AMERICAN.

    • Craig Vandertie

      You are joking, right?, of course not, they believe they have the right to violate immigration laws just as their illegally employed workers.

    • creed

      That is how we make America great again!

  • James Langham

    Drumpf and family should lead by example and manufactor their goods in the US instead of every where but!!

    • gman

      Amen brother, the Trumps should lead by example.
      Shoes made in U.S.A, Not China Sweatshops,

      • James Langham

        Yeah, his grifting daughter, Ivanka, just got a multi-million dollar deal to produce her goods in China, after her and grifter father’s meeting with the Chinese President and delegation. Why else do you think she is sitting in on these high level meetings with world leaders? ?? Because of her vast experience and knowledge in world diplomacy!! I don’t think so. People are such fools.

  • Centurion

    Hey, all you Michigan business organizations! Listen up! The solution is to bring your factories back to the USA. Work with Trump. He’s trying to cut taxes to help you bring jobs back here.

  • Fed up!

    First why is she the so called only expert opinion in the article. If car makers would by parts from American companies with legal American workers the 20% tax would be a wash. Actually American would be ahead, you pay American workers 20% higher wages, they spend and are taxed on that money in America. These so called educated experts are dumber than tree stumps.

    • PRINCE4EVER O(->

      How about eliminating all taxes?

      • Fed up!

        I am a big time Fair Tax supporter! Eliminate the IRS and Congress Power.

        • PRINCE4EVER O(->

          No Tax!

      • Jim

        Another free loader! We pay Taxes to support our Country, the problem is all the theft from our Legislators that can’t balance a check book, are in charge of public funds. Paying Taxes is not the problem … not putting these thieves in prison is the PROBLEM!

  • Maxine Albritton

    Unless there is a valid reason I don’t know about I agree with all comments , the sensible solution is to purchase car parts made in the USA or at least bring back the factories>business that do make them. Some things will cost more until everything takes place but that is something I guess we will have to cope with. Till the pipelines are up and working gas might cost more etc.

    • Craig Vandertie

      Sad fact is that from Middle Management up to top Executives of the U.S. Automobile companies watch their salaries increase almost as fast as that of the leading shareholders which of course most of latter sit on the company board.

      None of prior mentioned care to see the ascension of their profit margin slow which of course it would if they had to return to the day of all parts for the U.S. Automobile industry being manufactured in the United States.

      Tax the crap out of U.S. owned corporations who have products made in foreign lands, it is bad enough when U.S. owned factories in nations with economies/COL almost equal to our own are taking jobs from U.S. citizens, but almost all nations of the Orient and Latin America that type of labor cost effectiveness is the ultimate in being sinfully greedy.

      • Jim

        The best way to control Prices: DO NOT BUY THE PRODUCT IF IT IS OVER PRICED! PRETTY SIMPLE! ALSO, YOU CAN OFFER LESS AT ANY STORE FOR ANY ITEM, IF THEY DISCOUNT IT GREAT, IF NOT, YOU HAVE A CHOICE … BUY IT, OR LEAVE IT … AGAIN PRETTY SIMPLE! I use to go to the store and just pay what ever the price is …… I retired ….. I do not just pay the price they ask, some times I get a discount, some times I don’t … some times I buy it any way, and some times I don’t. 4 out of 10 times they stop me and say ok, the manager said ok. ( just this once) but I still get it EVERY time I go. if you have MORE money then sense then don’t worry about it …. BUT, if you are on a tight budget …. ASK FOR THE DISCOUNT. EVERY TIME!

    • Jim

      Check the cost of items, many items are Made in the USA, and cost less YES LESS, then imported products. Check price and labels before you buy!

  • KittyKittyKit

    FORGET THE BORDER TAX. That only cost AMERICANS more money and it does not benefit the individual citizen in any way.

    PUT A 5 YEAR MORATORIUM ON ALL IMPORTS FROM MEXICO. NOTHING comes into America THROUGH or FROM Mexico.

    NOW BUILD THE WALL, AND BE DONE WITH IT.

  • Craig Vandertie

    The article pertains to criminal U.S. businesses illegally being allowed to employ illegal aliens, true justice would be a $500,000 fine and 20 to 25 years in prison for employing illegal aliens.

    Any and all business owners who mock the intelligence of true cognizant patriots by their lame claim they had no clue they were employing illegal aliens are the genuine mentally incapacitated ones, you knew and we know you knew you were committing a crime.

    Make sure there is adequate oversight and use the money collected through fines to build that wall and have it efficiently patrolled.

  • PRINCE4EVER O(->

    They just gotta tax everything….

  • Spunky

    Michigan has allot of muslims – I think there is a connection

  • Jim

    More Fake news, President Trump, has a business boom coming, and any business person with only 1/2 a brain would be in favor of Trumps program to make America First again! Make it here, or PAY TO SELL IT HERE!

  • Jim

    Build the wall for free! I wrote this letter to President Trump, last week, no word back yet:
    Dear, President Donald Trump,

    Regarding the Border Wall. This wall can be free and actually pay for it’s self.
    Placing Wind Powered Generators, every 200 feet apart, or what ever the correct distance would be,
    with the solid wall between each Generator, complete with detection devices and cameras.
    The Generators can be purchased or leased by or to the Utility Companies.
    The Generators would be made in America by Americans.
    Wall Street could fund the wall for a percentage of the return “GENERATED” from 1,000’s of Wind Generators.
    This would reduce a huge carbon foot print, and insure America’s energy supply would no longer be dependent on other sources,
    while Protecting AMERICANS FROM invaders entering our Country illegally!
    Thank you, Mr. President Donald J. Trump,

  • creed

    Yes. The cost of vehicles may go up, but, when (hopefully) the border adjustment taxes (BATs) get high enough to make foreign products non competitive with American equivalents, we will gain many thousands of jobs and higher wages in all sectors. De Rugy is a Marxist who is spouting Malthusian (bogus) economic theory that previous administrations have followed, which has never worked. That is precisely what has gotten our economy into such a mess. This has been one way that the New World Order Marxists have used to “redistribute” wealth out of this nation; by major trade deficits. To make this work properly, business taxes (which are the highest in the world) should be cut drastically (hopefully to zero) in this same bill. Anyone know the proposed bill well enough to comment on the business tax part?