The border adjustment tax House Republicans are mulling over could cost an average Florida importer hundreds of thousands of dollars in new taxes according to a report released Friday.
The Americans for Prosperity and Freedom Partners Chamber of Commerce report identified 23,005 importers in the Sunshine State and estimated the average cost of the tax on such businesses to be $624,000.
The plan would tack on a 20 percent tax on imported goods while allowing exported goods to be sold tax free.
A BAT would bring big tax reductions to American exporters, though the retail industry and oil refining industries would be particularly hard hit by the change, which is being tossed around to counteract the large reduction to the corporate income tax being pushed by President Donald Trump.
The tax would bring in an estimated $1.2 trillion in revenue over the next 10 years, but the way the tax works could cost some states much more than that.
The report said three states – California, Texas and Illinois – would be on the hook for a combined $170 billion had the tax been in place in 2014, which far outstrips the net federal government income of about $100 billion a year.
In 2015, the retail industry accounted for more than 1 million Florida jobs, or about 15 percent of private sector jobs, and in order to keep those jobs consumers could see prices on retail goods skyrocket.
“Consider a shoe retailer that imports the shoes it sells from a manufacturer in China. It buys a pair of shoes from the manufacturer for $50 and pays $10 in shipping costs. The retailer sells the shoes for $70, earning a $10 profit. Under the current tax system, the retailer would owe 35 percent in taxes on the $10 profit, because it would get to deduct the $60 it paid in business costs acquiring the shoes. The total tax bill would be $3.50.
“Under the proposed tax reform plan with a border adjustment tax, the retailer would pay a 20 percent (the proposed corporate rate) tax on the $10 profit, or $2. However, the retailer would also pay a 20 percent BAT on the $50 cost of the imported shoes, bringing the total tax bill to $12 — which is more than the retailer’s profit from the sale.”
The report closes out by saying that if a BAT is implemented, the cost to businesses and could be “on par with the Affordable Care Act or former presidential candidate Hillary Clinton’s plans to reshape the American tax system.”
“Lawmakers who think that the BAT can’t impact their states are mistaken; the risks and costs that would come along with border adjustment are too much for American consumers and businesses to bear,” the report said.