The conservative political group Americans for Prosperity released a report today arguing a “border adjustment” tax would harm Louisiana more than almost any other state.
The tea party-allied group, which opened a Louisiana chapter in 2014, has long railed against taxes and has lobbied state lawmakers for specific legislation in recent years. The report says import reliant-states like Louisiana would be burdened by the border adjustment tax, which would give American companies tax breaks for exports and levy higher taxes for imports, replacing the corporate income tax.
President Donald Trump’s administration and Republican congressional leadership have floated a 20% border adjustment tax, which has companies like Nike and Walmart that rely on imports up in arms, Bloomberg reported this week.
LSU Economics Professor Milton Dek Terrell says the idea of a border adjustment tax is different than simply imposing a tariff on goods imported from Mexico or China. Instead, the idea aims to prevent companies from shifting their costs and revenues to different countries to reduce their tax liability, and would likely be part of a broader tax restructuring.
Southern University Economics Professor Ashagre Yigletu says the effects of such a tax will not be known for certain until specific legislation is proposed.
Generally speaking, Yigletu says, border taxes aim to protect domestic industry, but could also set off retaliations from other countries in the form of taxes on U.S. exports, which could devolve into a trade war.
But Terrell says the border adjustment tax differs from traditional border taxes, and proponents argue an appreciation in U.S. currency would offset any price increases.
Alan Auerbach, a University of California, Berkeley economist, wrote a policy paper proposing border adjustments as part of a tax overhaul, and is considered the modern founder of the idea. And in a separate New York Times op-ed, Auerbach said the tax would be much simpler than the current system and would encourage companies not to shift costs and revenues offshore to lower their tax liability.