ABPA - Automotive Body Parts Association

Automotive Body Parts Association

News and Articles

“Border Adjustability” Tax Plan Faces Growing Opposition

The administration of President-elect Donald Trump has promised sweeping tax reforms that include a reduction in corporate tax rates for U.S. companies. A final figure has not been determined, but a reduction of the current 35 percent corporate tax rate to 20 percent or even 15 percent is on the table for discussion.

But other new tax provisions are causing a stir and bringing opposition from trade groups. Among the most controversial is the “border adjustability” provision that would tax imports, including auto parts being shipped into the U.S. from overseas manufacturers. The article below from the Wall Street Journal provides a succinct overview of the border adjustability tax and why so many trade groups are opposed to it.

Opponents believe that the added costs of a “border tax” on imports would not be offset by the proposed decrease in the corporate tax rate, or by the expected surge in the value of the U.S. dollar. In fact, the Tax Foundation estimates that a border tax on imports would generate more than $1 trillion in new tax revenue over the next decade.

What can you do about it? Contact your U.S. Representative and U.S. Senators to express your opinion about the proposed “border adjustability” tax and how it will negatively affect U.S. companies that rely on imports.

The ABPA will continue to monitor this evolving situation and keep you apprised of any developments.

House GOP to Press Ahead With Business-Tax Plan Criticized by Importers

Ways and Means chief Kevin Brady says Republicans haven’t settled on how quickly Affordable Care Act to be repealed

By Richard Rubin

WASHINGTON—House Republicans plan to press ahead with a business-tax plan that has drawn criticism from retailers, refiners and other importers, the chairman of the tax-writing House Ways and Means Committee said on Friday.

“This is a key part of our built-for-growth tax code. It’s going to stay,” Rep. Kevin Brady (R., Texas) said on C-SPAN’s “Newsmakers,” to be aired this weekend. “Because tax reform affects everyone differently and industries differently, we want to listen to and find solutions with those who rely a lot on imported goods.”

Mr. Brady and the Republicans on his committee held a two-day retreat in Washington this week, staying behind after the rest of Congress left for the year, to plan major tax and health policy changes they plan to implement in 2017, as the GOP controls the White House and Congress.

Mr. Brady’s plan for revamping business taxes would apply U.S. corporate taxes to imports and remove them from exports.

Congressional Republicans are pitching this idea as their alternative to the import-only tariffs President-elect Donald Trump has proposed. The taxes would be based on the location of sales, not on the location of profits or a company’s headquarters.

The plan also would cut the corporate tax rate from 35% to 20%, let companies write off capital investments immediately and deny deductions for businesses’ net interest expenses.

Altering the way imports and exports are taxed is a crucial piece of what would be an extraordinary set of changes in U.S. business taxation. Republicans such as Mr. Brady say their plan would encourage companies to locate production in the U.S. instead of abroad. And the conservative-leaning Tax Foundation says it would provide about $1 trillion in revenue over a decade, which Republicans need to offset their proposed tax-rate cuts.

Businesses reliant on imports, however, are concerned the proposed application of tax on what they bring into the country could deal them a financial blow. But economists say importers’ concerns are overblown, because currency adjustments to the imposition of such a tax would make imports into the U.S. cheaper as the dollar in all likelihood increases in value.

If economists are wrong, costs of imports wouldn’t drop enough to offset the tax change, pinching importers’ profits or force them to raise prices.

If the economists are right about a rise in the value of the dollar, Americans who own assets outside the country and countries whose currencies would fall against the dollar could be hurt. The post-election surge in the dollar has already presented new challenges for governments and companies.

A study from the Brattle Group released on Friday said such a so-called border adjustment would cause the retail price of gasoline to increase by about 30 cents a gallon in the U.S.

“Making America more competitive again does have an impact around the world,” Mr. Brady said. “We cannot leave in place any tax policies that encourage our companies to move their operations overseas just to sell back in the United States. Those [policies] won’t stay.”

“Ultimately, those taxes, those 23 taxes on Americans and businesses and their insurance plans are going. They are part of the problem,” Mr. Brady said, adding, however, that changes can’t happen overnight. “No decision’s been made for this year and going forward. But all that’s going to be considered as we look at a good, responsible, assuring transition.”


Body Language

Body Language is the official newsletter of the ABPA. Click here for more information, and to sign up for the mailing list!


Certified Automotive Parts Association (CAPA)
NSF Automotive
K Source - The Mirror People