Ryan Insists Tax Overhaul Coming as Koch Group Assails Plan

  • House Speaker says current tax code is ‘killing growth’
  • Americans For Prosperity will send message: Tax hurts shoppers

Border Adjustment Tax: Who Does It Help and Hurt?

House Speaker Paul Ryan said he isn’t backing down on overhauling the tax code, as a group funded by Koch Industries Inc. laid out its campaign to derail a centerpiece of Ryan’s tax blueprint -- border-adjusted taxes.

“Do you know why tax reform is going to happen? Because it has to happen,” Ryan said at a press conference Thursday. “America has the worst tax code in the industrialized world -- it is killing economic growth, it is driving companies to become foreign companies.”

Ryan’s comments come shortly before Americans For Prosperity unveiled an attack on border taxes that will focus on sending the message to states that the controversial measure is essentially a new levy on every U.S. shopper, according to Chris Neefus, a spokesman for the group, which receives funding from billionaire brothers Charles and David Koch. It has chapters in 35 states, making it an influential lobbying organization that has already pledged to fight the tax.

“This would be a significant tax on consumers,” Neefus said. The group has a “tactical plan” for local voting districts, he said.

The battle over border adjustments -- which would tax U.S. businesses’ domestic sales and imports, while exempting their exports -- has divided corporate America with retailers and other net importers on one side and exporters on the other. Supporters say the 20 percent levy would encourage domestic production. But opponents complain that it would just force companies to pass the increases to consumers -- potentially boosting prices for everything from food and clothing to gasoline and auto parts -- without spurring a revival of domestic manufacturing.

Targeting Republicans

Koch Industries has a long history of supporting Republicans, but now it will be targeting them. A border-adjusted levy is crucial to Ryan’s tax plan because it’s estimated to raise about $1.1 trillion in revenue over a decade, according to the conservative Tax Foundation, which would help to offset the blueprint’s corporate and income tax cuts.

President Donald Trump had initially called the border tax “too complicated,” before aides have more recently said he was warming to it. It’s still unclear whether he will Ryan’s border-adjustment concept in his tax plan.

During a meeting Wednesday between Trump and chief executive officers from chains such as Target Corp. and Gap Inc., border adjustment dominated the conversation, with several CEOs speaking out against it, according to two people familiar with the meeting who asked not to be named because it was private. The president didn’t say whether he supported the measure, but made it clear it was part of the House blueprint and his administration would be releasing its own plan in the coming weeks, the people said.

(Updates with Ryan’s comments in second paragraph. An earlier version of this story corrected the lobbying group’s number of state chapters.)
Before it's here, it's on the Bloomberg Terminal.
LEARN MORE