United States border tax could lead to higher retail prices

Target store is shown in San Diego California

Target store is shown in San Diego California

The plan mirrored numerous same provisions in the blueprint, without mentioning the border adjustment tax.

"Under the new border adjustment tax, American families - your constituents - would pay more so many multinational corporations can pay even less", Target CEO Brian Cornell testified in a House of Representatives committee meeting on Tuesday.

Miller is part of a group of small business owners who are headed to Washington on Tuesday as the proposed tax receives its first hearing in the House Ways and Means Committee, the group tasked with overseeing the nation's tax system. However, he said the proposed border adjustment tax, which taxes imports 20% while exempting exports, would only hurt American retailers and shoppers.

The National Retail Federation estimates price increases of at least 15 percent, costing the average family as much as $1,700 a year. "It became apparent that there is a growing consensus in the administration that we must act soon to advance tax reform and BAT [the border adjustment tax] is seen as a major impediment".

"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. "Eighty-five percent of Americans shop at Target every year".

Americans for Prosperity (AFP) and other critics warn companies could be forced to increase prices to compensate for lost revenue.

"Retailers will continue to aggressively oppose any plan that attempts to shift the nation's tax burden from certain corporations that now are subject to low effective tax rates onto America's working families".

In contrast to many in the retail industry, William Simon, a retail and consumer products veteran who left his post as CEO of Wal-Mart U.S.in 2014 and is now a senior advisor at private equity firm KKR, argued the border adjustment tax is in the best interests of the country - and the retail industry - if "properly implemented".

"Simply applying a 20 percent tax on day one to those products would have a serious impact on the industry and the consumer", Simon said.

Republican lawmakers including Jim Renacci of OH and Mike Kelly of Pennsylvania criticized the border-adjusted tax's potential impact on working Americans. The nation's tax system has not been overhauled since Ronald Reagan's administration. "But until we substantially change the pieces, the puzzle will continue to be assembled in a way that inhibits the development of our manufacturing base".

"It is in the best interest of our country for this to be considered", Simon said.

Juan Luciano, president and CEO of Archer Daniels Midland Company, an agricultural processor, criticized the current tax system, saying it makes it hard for them to compete globally. Many border adjustment tax critics support the blueprint generally. The United States, however, has done little to its tax code to stay competitive during that time.

Luciano, on the other hand, argued that the tax would make American companies more competitive.

"American companies are at a huge competitive disadvantage with our global competitors", Safavian told the Committee.

"Right now, 97% of apparel bought in the U.S.is made outside of the U.S. Those supply chains don't exist here". "We have strengths we can't realize and potential we can't fulfill".

"One of the problems with the border-adjusted tax is that it doesn't create a level playing field", said Mnuchin, who is playing a key role in shaping legislation with the House and Senate.

When asked by the Economist whether he supports a border adjustment tax, President Trump said, "It's not really what I'm considering".

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