It’s GE vs. Wal-Mart as Corporate Feud Breaks Out Over TaxBy , , and
Exporters support border-adjustment tax proposal to cut costs
New group formed to fight retail-backed lobbying effort
General Electric Co. and Boeing Co. are girding for a showdown with corporate giants including Wal-Mart Stores Inc. over a proposed U.S. tax on imports, setting up a battle across industries that could be one of the most fractious in recent corporate history.
GE, Boeing and Pfizer Inc. are among about two dozen companies that have formed the “American Made Coalition,” a group representing makers of domestic goods that will promote efforts to overhaul the U.S. tax code. They say the so-called border-adjusted tax would help U.S. manufacturers compete with products made overseas, giving a boost to President Donald Trump’s goal of increasing factory jobs.
The battle is opening up a fault line in corporate America, with net importers mostly on one side and exporters on the other. Billions of dollars are at stake: The proposed overhaul of the corporate tax code, supported by House Speaker Paul Ryan, would reward companies that sell products outside the U.S. while punishing ones that rely on low-cost overseas suppliers.
“I respect Wal-Mart, but we’re going to have a different perspective on tax reform as Wal-Mart,” Jeffrey Immelt, GE’s chief executive officer, said in an interview this week in Boston. “I think all of our voices need to be heard.”
Opponents of the border-adjusted tax say it would force companies to pass the increases to customers -- boosting prices for everything from food and clothing to gasoline and auto parts -- without sparking a resurgence of domestic manufacturing. On Wednesday, more than 120 trade groups representing the auto industry and retailers such as Wal-Mart backed a campaign, called “Americans for Affordable Products,” which focuses on the impact of a border tax on consumers.
“This ultimately comes down to a decision of whether or not policy makers are willing to heap a tax onto consumers so that some corporations can never pay taxes again,” said Brian Dodge, a spokesman for Retail Industry Leaders Association, which is overseeing the effort to derail the proposal.
Part of the opponents’ message is that export-focused companies may get their federal taxes drastically cut, maybe even to zero. Behind the scenes, their campaign will rely in part on lobbying by industry executives.
Republicans in the House of Representatives backing an overhaul have to win support from the Republican-controlled Senate and the White House to succeed. The border-adjusted tariff is key to the Republicans’ proposal because it would help pay for a reduction in the corporate income tax rate. Trump is warming to the idea after previously criticizing it, a senior administration official told Bloomberg News last week.
Besides GE, Boeing and Pfizer, the group in favor of the tax includes Dow Chemical Co. and Eli Lilly & Co.
Immelt said the proposed tax changes would help domestic manufacturers and contribute to Trump’s goal of boosting jobs in the U.S. GE, he noted, exports more than $20 billion of products a year from the U.S., while importing just a quarter of that.
Still, he acknowledged that there will be “different camps” in the business community.
Several Republicans in the Senate have raised doubts about a border-adjusted tax, including Georgia’s David Perdue and Utah’s Mike Lee, who said in an editorial in the Federalist magazine that it “could ravage huge swaths of our economy.”
Democrats on the Senate finance committee have blasted the proposal, saying in a December memo that it was “risky, untested and especially vulnerable to unforeseen consequences” like soaring consumer prices.
— With assistance by Molly Smith, Drew Armstrong, and Julie Johnsson