Automakers rally to kill proposed border tax

July 20, 2017

During the run-up to the 2016 U.S. presidential election, then-candidate Donald Trump made a lot of promises to voters--chief among them, vows to repeal the Affordable Care Act and to penalize companies that manufactured goods for the American market outside the U.S.

This hasn't been a great week for either of those efforts.

Republican-led attempts to repeal and replace the ACA sputtered in the Senate, and though majority leader Mitch McConnell plans to introduce a simple repeal of the ACA (with a replacement coming sometime later), it's doubtful that he has the votes to pass it. 

Now, a key legislator in the House says that the push for a border tax on imported goods has been effectively derailed by lobbyists, including those who represent automakers.

That legislator is Kevin Brady, who chairs the House Ways and Means Committee, which is responsible for drafting tax bills. He noted that the response to the proposed border tax was swift, strong, and well-organized. As a result, GOP representatives have been less willing to voice support for any such tax.

A spokesperson for the Retail Industry Leaders Association, which was instrumental in stopping the tax proposal in its tracks, said that he'd never seen anything galvanize the corporate community like this issue. He and others have insisted that a border tax wouldn't just harm corporate America, it would also be hugely detrimental to lower- and middle-income consumers, particularly those living on fixed budgets. As far as the auto industry is concerned, at least one study has shown that new car prices could jump by $17,000 under such a law. 

That said, the border tax isn't completely dead. It may rear its head again--not as a tax, per se, but as the erosion of incentives that make manufacturing U.S. goods in foreign countries so attractive to corporations.

Will it pass? That's hard to say. With healthcare reform stalled, many in the GOP want a major achievement to tout during the midterm elections and are turning their attention to a marginally less-divisive issue: tax reform.

Chances are good that some version of a tax reform bill will make its way to Trump's desk before the year is over. Given the pushback from automakers and other retailers, it's uncertain whether it will contain provisions that penalize foreign manufacturing. Stay tuned.

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