Sixteen US corporate heads, including those from Boeing, Caterpillar, and General Electric, have called on lawmakers to embrace a protectionist border tax intended to make exports cheaper and imports more expensive.
In a letter to congressional leaders on Tuesday, the CEOs said a Republican-proposed 'border adjustment tax' would make products made in the USA more competitive, by doing away with a tax system they claim has penalized American factory workers, restrained US business investment and reduced economic growth.
Among the 16 executives who signed the letter are Dennis Muilenburg of Boeing, Jim Umpleby of Caterpillar, Thomas Kennedy of Raytheon, and Gregory Hayes of United Technologies. The companies backing the letter are part of the newly formed American Made Coalition, whose members believe they would benefit from the border tax proposal.
A rare tax reform opportunity
"If we miss this chance to fundamentally reshape the tax code, it might take another 30 years before we have another chance to try," the group of CEOs wrote in the letter. "Incremental tweaks will not level the playing-field for American workers, or dramatically reinvigorate economic growth."
The import tax plan is the linchpin of a proposal by Republican House Speaker Paul Ryan to overhaul the US tax code for the first time since 1986. Apart from imposing a 20-percent tax on imports, it includes a cut in corporate income tax to 20 percent from currently 35 percent, and excludes export revenue and labor costs from taxable income.
The proposal is similar to the way European countries treat imports under the value-added tax system, and companies have long complained that American products are more expensive overseas as a result.
Corporations on opposite sides
The border tax proposal has pitted large US corporations that depend on imports, like retailers and auto manufacturers, against corporations that export much of the goods they produce - which leads the latter to support the tax code changes.
A group of retail CEOs met last week with President Donald Trump and congressional leaders to argue against the border adjustment tax. They warned the new tax would raise their costs - and subsequently prices for consumers. And they have established their own lobby group, the Coalition for Affordable Products.
The new US President has yet to say whether he will embrace the tax plan to fulfill his promise of a "phenomenal" tax reform aimed at making life for US-based companies easier.
During his election campaign, Trump called for slashing the US's corporate tax rate, and also repeatedly vowed to slap double-digit tariffs on imports. Adopting Ryan's plan could fulfill both of those promises. White House spokesman Sean Spicer even suggested that part of the revenue raised through a border adjustment tax could pay for Trump's proposed wall along the Mexican border.
So far, Ryan's proposal has received a lukewarm reception in the Senate, where two of his Republican Party colleagues have come out against it. About half a dozen others have said they have significant concerns about how the system would work in practice.
This would put the Republicans' ability to garner the simple majority required for the legislation to pass in Senate in jeopardy.
uhe/nz (Reuters, Boeing, Caterpillar)