Ten states to feel brunt of proposed border tax: report

[April 06, 2017]  By David Morgan

WASHINGTON (Reuters) - Seven U.S. Republican states carried by President Donald Trump would be among the hardest hit if a Republican-backed border adjustment tax became law as part of a broad tax reform, according to a report from conservative groups that oppose the tax.

The 15-page document, released on Thursday by the Koch-backed Freedom Partners and Americans for Prosperity, warned that border adjustment's proposed 20 percent import tax would harm all 50 states, but identified 10 that could suffer the most because of their dependence on imports.

The report predicts harm to Georgia, Kentucky, Louisiana, Michigan, South Carolina, Tennessee and Texas -- all states Trump won in the 2016 presidential election. The list of hard-hit states also includes California, New Jersey and Illinois, carried by Democrat Hillary Clinton.

The report is the latest in a long-running assault on the centerpiece of a Republican tax reform plan, backed by House Speaker Paul Ryan, from a network of groups associated with the billionaire industrialists Charles and David Koch, who are major supporters of conservative political candidates and causes.

Opposition to the border adjustment tax, or BAT, from the Kochs and import-dependent industries suggests a rocky road ahead for Trump's next top priority: passing the biggest tax reform package since the Reagan era.

The Koch network also opposed Trump's failed healthcare legislation, pledging campaign support for conservative lawmakers who refused to vote for the bill last month.

BAT is already opposed by a number of Senate Republicans who could prevent its passage, should the House approve a tax reform bill that contains it. The Koch report's state-by-state breakdown could help reinforce opposition among House and Senate lawmakers.

The proposed tax would exempt U.S. export revenues from federal corporate tax but levy an implicit 20 percent tax on imports by preventing U.S. companies from deducting the cost of imported goods and supplies.

Koch organizations, including the brothers' privately held conglomerate Koch Industries, have warned that the border adjustment tax could devastate the U.S. economy by raising prices on consumer goods, including gasoline.

The groups made their assessment by comparing the value of each state's 2014 imports to its gross domestic product.

The Koch groups say they support tax reform but oppose BAT. Refineries owned by Koch Industries rely on oil imports from Canada.

(Reporting by David Morgan; Editing by Kevin Drawbaugh and Lisa Shumaker)

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