SPECIAL EDITION: Border Adjustment Tax
You Auto Know has transformed into You Auto Know…All About the BAT.
Congress has proposed a new 20 percent tax on all goods or services imported into the U.S.; it’s called the Border Adjustment Tax (BAT). It would apply to all autos and auto parts coming across our border into the United States, even from countries with which we have existing trade agreements. No car made in America has 100 percent domestic content. Therefore, this 20 percent import tax will increase the price on ALL new vehicles. This proposal is part of the House Republican Ways and Means “A Better Way” agenda; it is not a plan that President Trump has offered.
AIADA supports pro-growth, comprehensive tax reform, but believes the BAT provision currently being deliberated by the House of Representatives will have unintended consequences that will cause harm to auto dealers and their business, their employees, and their customers. A recent Deutsche Bank study found: “…that border adjustments could increase the cost of an average vehicle by $2,300, reducing U.S. demand by 1.2 million units per year in the short term and 0.5 million in the longer term. Consumers will also have to absorb the effects of higher regulatory cost ($2000 over 5-years) and interest rates.” AIADA opposes the BAT and is working to make sure it is not included in the final tax reform package.
AIADA is your resource center on this issue. So, stay tuned and stay alert. Learn all you need to know about the BAT and what you can do to help #StopTheBAT.
CLICK HERE to learn more about the BAT.
CLICK HERE to send a letter to your Member of Congress.
Now, here’s what YOU AUTO KNOW…All About the BAT.
Border Adjustment: The War Officially Begins (Axios)
Background: House Speaker Paul Ryan thinks the only way he can pay for massive tax cuts is through a $1.2 trillion revenue plan known as "border adjustment" that raises taxes on imports and lowers them on exports.
Fighting for border adjustment: The “American Made Coalition”, a coalition of more than 25 American businesses. GE is playing a leading role and hosted coalition partners at its D.C. offices recently. Boeing is another big player on this side of the fight. Other industries include manufacturing, high tech, software, medical device production, agriculture, energy production, biopharmaceuticals and information services.
Oh, and Paul Ryan, House GOP leadership, Trump's chief strategist Steve Bannon and (maybe) a lukewarm President Trump.
Fighting against border adjustment: "Americans for Affordable Products." As the AP reports: "More than 100 retailers including Wal-Mart and Target as well as key trade associations are launching a new coalition" aimed at fighting border adjustment. The coalition includes The National Retail Federation, along with the American International Automobile Dealers Association, the National Grocers Association. Walmart is a major hitter in this group and the well-funded Koch network will be supporting the opposition to border adjustment.
Why this matters: It's the biggest fight of the tax season. But, as we have reported, Ryan has his work cut out for him. Especially in the Senate.
To read more from Axios, please click HERE.
Retailers, Auto Groups, Others Announce Coalition Opposing Border Adjustable Tax (World Trade Online)
More than 100 companies and industry organizations have formed a coalition, “Americans for Affordable Products,” to oppose the border adjustable tax portion of the House Republican tax reform blueprint, a provision some analysts say could lead to a World Trade Organization dispute resulting in massive retaliation against the U.S.
The coalition will engage in a “national campaign” to convince lawmakers and the public that a border adjustable tax as envisioned in the House GOP blueprint will increase the costs of basic items for consumers, including food, gas and clothing, the group said in a Feb. 1 press release.
Among the coalition's members are retail industry groups like the National Retail Federation, the American Apparel & Footwear Association, Footwear Distributors & Retailers of America and numerous state-level retail coalitions. Large companies such as Gap, Target, Walmart, QVC, Rite Aid, Nike, Petco, Macy's, Best Buy, Ikea and Pernod Ricard have also signed on.
Auto companies and organizations, including the Association of Global Automakers, AutoZone and the American International Automobile Dealers Association, are involved as well.
The border adjustable tax would function as a consumption-based tax that essentially exempts revenue from exports from taxation but generally prevents deductions for imports. It would also have the effect of shifting the tax base to consumption in the U.S., a major overhaul of the federal tax system.
To read more from World Trade Online, please click HERE.
Auto Industry: Possible Border Tax Would Raise Prices, Even On American-Made Cars (Consumer Reports)
Facing a possible new tax on imported goods, some of the biggest name in auto manufacturing and retail are calling on lawmakers to rethink the tax, claiming it will hurt their businesses and lead to higher prices.
While no actual legislation has been introduced, the proposal that has been kicking around Capitol Hill for the last month or so involves cutting the current corporate income tax rate of 35% to 20%. To make up for that rate drop, companies would no longer be able to deduct the cost of imported goods from their profits.
So, for example, imagine a U.S. company that imports $1 million worth of product, and sells them for $2 million stateside after spending about $500,000 domestically, resulting in a profit of $500,000.
Under the current tax code, the company deducts the import and domestic expenses, and pays 35% tax, but only on the $500,000 profit. If this proposal is put in place, that company would not be able to deduct the $1 million of import costs, so it would pay the lower 20% tax, but on $1.5 million instead of $500,000.
Given the volume and cost of imported cars into the U.S., it’s little wonder that the automotive industry is making a big push for Congress to rethink this tactic.
The American International Automobile Dealers Association — a trade group that lobbies lawmakers on behalf of some 9,500 U.S. car dealers — has called on its members to pen letters to legislators, arguing that automaking is an inherently international industry, so taxing imports is going to drive up the cost of vehicles regardless of where they are assembled.
“Auto parts would be subject to a BAT, so even the most American-made vehicle sold in the U.S. today – the Toyota Camry – would be subject to a significant price increase,” writes AIADA. “Rising prices will drive away regular Americans looking for a new car and, as a result, vehicle demand will drop. Both American auto manufacturing plants and retailers like you will feel the pain, and be forced to shed jobs.”
To read more from Consumer Reports, please click HERE.
In Trade and Tax News
U.S. Tax Plan Would Break WTO Rules, Lawyers Say, As EU Business Frets (Reuters)
Here's a Glimpse of the Global Trade Carnage From a U.S. Border Tax (Bloomberg)
Hatch Has Questions About House GOP Border Tax (The Hill)
In Auto News
Auto Industry Begins 2017 with a Steady Pace (AIADA’s Market Watch)
Volkswagen to Pay $1.2 Billion to U.S. Vehicle Owners Affected by Emissions Scandal (The Wall Street Journal)
Dealers Inch Closer to Full Online Sales (Automotive News)
Many of you watch the Super Bowl for the football, but there are many who watch for the commercials. For you commercial lovers here’s a little preview.
Budweiser, Skittles, Mr. Clean, More: Watch Every 2017 Super Bowl Commercial Already Released (USA Today)