American Companies May Be Hurt by BATs (Border Adjustment Taxes)

Bob Ulrich
Posted on February 23, 2017

There is a potential game-changing proposal under consideration in Congress that would set the business community on its ear. According to multiple sources, the proposal would disallow U.S. companies from deducting the cost of the products they import from their taxes.

The proposal is being considered in conjunction with other tax reforms. It is part of a number of options being considered as Congressional Republicans try to define what the Border Adjustability Tax, or BAT, actually means.

Will it subsidize exports? Will it tax imports? Will it do both? No one knows what the final BAT proposal will be. It's too early to tell.

“There are numerous proposals being floated," says Roy Littlefield, executive vice president of the Tire Industry Association. "The bottom line is that (President) Trump is pushing to build the wall, to build up the military, to invest $1 trillion in the infrastructure, and to cut personal and business taxes. And nobody knows yet what will happen to Obamacare, social security or Medicare.

“It does not add up, and Republican leadership in Congress does not want to increase the nation's debt. So border adjustment options are being considered. It is in the current Republican tax plan.

“If the business community does not give a little on this, we might lose the estate tax or some of the tax cuts,” says Littlefield. “But we are early in the game and we have not had to finalize a position yet.”

The Auto Care Association, for one, is concerned.

“The BAT, which subjects imports to essentially a new tariff by denying U.S. companies the ability to deduct import costs from taxable income, would be damaging to the auto care industry,” says the association. It lists two major reasons why the proposal should be scuttled before it gains momentum.

1. “Companies that rely on imports for a large portion of their product lines would see their taxes skyrocket. For example, a company that imports over 90% of its product would see its effective tax rate rise to at least 300% of its profits, thus putting it out of business.”

2. “The tax would increase prices throughout the supply chain, ultimately impacting the end consumer who is likely to pay more for parts and components.”

“The Border Adjustment Tax is an immediate threat to economic viability of thousands of small, family-owned businesses in the auto care industry," says Bill Hanvey, CEO and president of the Auto Care Association. “We have a complex supply chain throughout the country that distributes the right auto part to the right place at the right time, so that the American consumer can keep their vehicle on the road.

"The effect of the BAT will rapidly be felt by the consumer, and will bring real, downward pressure on growth, planning and employment in the industry.”

There also are opponents to the proposal in general, and President Trump has reportedly called it too complicated. When all is said and done, it may not even have the cost-of-goods-sold provision in it.

A formal comprehensive tax reform policy is not expected to be released until next year, so there is enough time to let your state and federal congressmen, congresswomen and senators know where you stand on any of their tax proposals before they gain momentum.

What are your thoughts on the matter? Let us know what you think by leaving a comment!

Related Topics: Auto Care Association, Bill Hanvey, Border Adjustment Tax, President Donald Trump, Roy Littlefield, tax reform, TIA

Bob Ulrich Editor
Comments ( 1 )
  • Dave Richards

     | about 2 years ago

    Hey ! Should the cost of imports get too high lets' make it in America again ! It was the attractive cheep labor and "free trade" that cost those jobs to begin with. Many automotive components went south and over seas with the deals made. Where were or unions then ?

More Stories
The Geolandar X-MT will be available in July 2018 in 10 sizes.
News

Yokohama Adds Another MT Tire: the Geolandar X-MT

How hot are mud-terrain tires? So hot that Yokohama Tire Corp. is adding another MT tire to its lineup. The Geolandar X-MT will be the second MT tire addition to the Geolandar family in a year.  

News

Tire Sales Were Down at Monro in Fiscal 2018

New stores provided Monro Inc. with $96.2 million in sales during fiscal year 2018, and they helped the company record a 10% increase in sales for the period that ended March 31, 2018.  

Yokohama will meet with tire dealers across the country during the 2018 ride and drive training program.
News

Yokohama Takes Dealer Training on the Road

Yokohama Tire Corp. is once again taking its dealer training program on the road. The 2018 experiential Ride and Drive Dealer Training Program kicks off with a multi-city tour May 22 in Anaheim, Calif.

The new Monroe ads will run in a broad range of automotive service industry publications and reach thousands of additional industry professionals.
News

Tenneco Ad Campaign Touts Advantages of Monroe Products

Tenneco Inc. has launched an extensive print and digital advertising campaign called “If It Doesn’t Say Monroe” which highlights the quality, performance and value benefits of the Monroe brand of ride control products.

Be the First to Know

Get the latest news and most popular articles from MTD delivered straight to your inbox. Stay on top of the tire industry and don't miss a thing!