Feb 9, 2017

Sen. David Perdue comes out against border adjustment

Senator David Perdue of Georgia is officially urging his colleagues to oppose a key component of the House Republican's corporate tax reform package, called border adjustment, which would raise taxes on imports and eliminate income taxes on exported products.

As the former CEO of Dollar General, Perdue is inclined to understand retailers' antipathy for the proposal, as it would greatly increase the tax bill of those who import products for resale in America. Georgia is also home to one of America's largest retailers, Home Depot. But Purdue has concerns beyond the reform's impact on his former industry. He argues:

  • Border adjustment would raise prices on consumers;
  • Higher prices would mean lower demand and fewer jobs;
  • and if the dollar appreciated in response to the new tax, it "would trigger a multi-trillion dollar reduction in the value of foreign investments held by U.S. investors including many pension funds and retirees."

Our thought bubble: Don't expect the last point to be a political winner, as the share of Americans with assets denominated in foreign currencies is far smaller than Trump's base, who wants to see the tax code written to protect domestic employment. But the first two will be strong arguments in the public relations battle over tax reform.

Senate math: With a slim Republican majority in the Senate, border adjustment proponents need every vote they can get, but opponents have the option of targeting several persuadable Republican Senators.

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