Taxes

Consumers could see 20% price hike with border adjustment tax, retail group says

Border adjustment tax: Good or bad for America?
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Border adjustment tax: Good or bad for America?

The Republicans' plan to enact a border adjustment tax will leave consumers digging deeper into their pockets, an advisor to a coalition of major retailers told CNBC on Monday.

The measure is part of the House GOP's corporate tax plan and would tax imports and exempt exports.

"It will force consumers to pay as much as 20 percent more for the products they need. Gasoline is estimated to go up as much as 35 cents a gallon," said "Americans for Affordable Products" advisor Brian Dodge in an interview with "Power Lunch."

"Common household goods, apparel, things that people count on every day, pajamas, will cost more and really just so a certain, select group of corporations can avoid paying taxes forever. We think that's bad policy," he added.

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The coalition is made up of retailers like Wal-Mart, Macy's and Nike.

However, other corporations in the U.S. are cheering the move. Names like General Electric, Boeing and Pfizer are members of the "American Made Coalition," which supports the border adjustment tax.

Brian Reardon, an advisor to "American Made Coalition," told "Power Lunch" the Republicans' tax reform bill will keep jobs and money in the United States and the border adjustment tax is the "glue" that keeps the whole thing together.

"The point is to ensure that when Americans are investing in the United States and creating products here that they are not at a tax disadvantage," he said. "The whole point … is to cut taxes so that we have more investment, more jobs, higher wages and at the end of the day, the consumer is going to be benefited, not hurt."

In fact, the consumer will not be paying more for goods, he argued, pointing out that almost every country the U.S. competes with has this type of tax.

"What we found when countries move to a border adjusted tax is that currencies adjust, markets work and the consumers are protected," said Reardon.

However, Dodge called the notion that this type of border adjustment tax is common around the globe "grossly misleading." Instead of being a component of a corporate tax package, it is actually a proponent of a value-added tax — and that is different, he said.

"The argument that currencies will adjust will be cold comfort and probably not fly with Middle American consumers who are concerned about having to pay more for products," he said.

— CNBC's Gino Siniscalchi contributed to this report.

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