Paul Ryan

WASHINGTON — A group of more than 120 businesses, including LVMH Moët Hennessy Louis Vuitton, Gap Inc., Target Corp, Wal-Mart Stores Inc., Levi Strauss & Co. and Hudson’s Bay Co., along with key industry trade groups, launched a coalition on Wednesday aimed at stopping efforts in Congress to implement a border adjustment tax that could lead to higher retail prices and a new economic burden on consumers.

Dubbed “Americans for Affordable Products,” the coalition plans to run a national campaign to engage consumers and educate lawmakers about a tax policy that they charge will “result in higher costs for their customers on everyday items including food, gas and clothing [and] is the wrong approach.”

Other retailers and brands signing on to the coalition and effort include Abercrombie & Fitch Co., Neiman Marcus Group Inc., Kohl’s Department Stores Inc., Bealls, Chico’s FAS Inc., Clarks, Dillard’s, HSNi, Macy’s Inc., Nike Inc., QVC, Ross Stores, Sears Holding Co. and The Bon Ton Stores Inc.

The coalition has launched a web site at keepamericaaffordable.com.

The BAT tax, also referred to as a “border adjustability tax,” is a component of a House Republican tax blueprint proposal released last year that would essentially tax the value of imports but not the value of exports.

President Trump created a wave of concern last week when his aides floated the controversial idea of imposing a 20 percent tariff on imports from Mexico to pay for a massive border wall that he has ordered constructed.

Companies and industry groups are still trying to determine if Trump’s proposals is aligned with what the House Republicans have proposed. The House plan would apply to all imports, while Trump’s aides have pointed specifically to Mexican imports.

“Whether it’s the automobile you drive, the gasoline you use, the groceries you put on the table, or the shoes and the clothes you put on your feet and back, the prices of all of those things will get driven up by the Border Adjustment Tax,” said Matthew Shay, president and chief executive officer of the National Retail Federation. “Consumers ultimately are the losers from any effort to tax imports because the economy in the United States is driven by consumers. There are plenty of taxes already on hard-working Americans and the retailers that serve them, and higher prices just add to that burden.”

The NRF estimates that if such a tax were implemented in legislation, the BAT would cost families as much as $1,700.

“We support creating a less complicated, more straightforward and equitable tax code, and will work with both the administration and Congress to achieve that goal, but the Border Adjustment Tax is not the answer. Some may consider this a better way forward, but it is definitely not the best way,” Shay said, pointing to the GOP’s plan titled “A Better Way.” “American consumers oppose a policy that exempts exports from being taxed while taxing imports because of the real-life impact it will have on their everyday lives and household budgets.”

Sandy Kennedy, president of the Retail Industry Leaders Association, said: “The retail industry pays among the highest effective tax rates of all industries. We, therefore, enthusiastically support reforming the current tax code and welcome the fact that both the President and Congress do so as well. However, the Border Adjustment Tax is harmful, untested and would put American retail jobs at risk and force consumers to pay as much as 20 percent more for family essentials,” she noted. “We are committed to working with Congress to ensure they understand the impact of this proposal, and to pursue tax reform that reduces rates and benefits American consumers.”

RILA said it has supported comprehensive tax reform for years and noted that the GOP blueprint contains “some important elements,” including a reduction in the corporate tax rate from 35 to 20 percent. But the group said a border adjustable tax will “significantly hurt retail customers.”

“Taxing imports would have a disproportionate impact on U.S. retailers, who by necessity import many of the items that they sell,” RILA said.

Companies that import products can deduct the cost of the product, including materials and labor costs, when determining income taxes, according to industry officials. However, under the House GOP proposal, companies would not be allowed to deduct any of those costs on imported products.

U.S. companies, on the other hand, would be able to continue to deduct the cost of their products if made here and would only be taxed on the profit.

With controversy swirling around the BAT, some lawmakers are beginning to raise questions about the House proposal.

Senate Finance Committee Chairman Orrin Hatch (R., Utah), in a speech at the U.S. Chamber of Commerce Wednesday, raised questions about the tax, noting that a “handful” of senators have “serious reservations” about it and the Senate will take its own approach on tax reform legislation.

“First, who will ultimately bear the tax? To what extent will it be borne by consumers, workers, shareholders and foreigners,” Hatch asked. “Second, is border adjustability consistent with our international trade obligations? Finally, since border adjustability would likely be a significant shift in business tax policy, would adjustments need to be made to ensure we’re not unduly increasing the tax burden on specific industries?”

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