Koch escalates tax reform battle with report on gasoline prices

Ty Wright | Bloomberg | Getty Images

A Koch Industries-funded report warned on Friday U.S. gasoline prices would rise if Congress passed a Republican proposal to adjust U.S. corporate tax rates to favor exports over imports, escalating a lobbying battle over the measure.

The report by energy consultant Philip Verleger surfaced a week after the private conglomerate, controlled by conservative billionaires Charles and , predicted the Republican measure called "border adjustability" would devastate the economy.

The actions are unusual for the Koch brothers, who spend heavily in elections to support Republicans and conservative policies. They are part of the early lobbying salvo by a range of industries that hope to eliminate the measure as President-elect Donald Trump and the Republicans in Congress edge toward agreement on a tax reform agenda for 2017.

Analysts said the specter of higher gasoline prices could prove embarrassing for Trump, who supports the energy sector and has nominated prominent industry advocates to top cabinet positions, including Exxon Mobil Chief Executive Rex Tillerson as Secretary of State.

Border adjustabililty would exempt U.S. export sales from corporate income tax but impose it on imported goods including crude oil used by U.S. oil refineries. The measure is included in a larger tax reform blueprint backed by Republicans in the House of Representatives, who say it would greatly expand economic growth and job creation.

Verleger's report, issued by the Brattle Group consulting firm, estimates that the price of gasoline would increase by 13 percent, or about $0.30 per gallon (3.79 liters), should border adjustabililty become law. The price would be higher if world oil prices rise, the report says.

Republicans have touted border-adjustability as a way to encourage manufacturing in the United States. The measure would also raise over $1 trillion to help pay for tax cuts in other areas.

The House blueprint would slash the U.S. corporate tax rate from 35 percent to 20 percent, end taxation of U.S. corporate profits overseas and allow businesses to expense capital investments immediately.

House Ways and Means Committee Chairman Kevin Brady insisted in a Friday C-SPAN interview that border adjustability would stay in the House plan.

"Making sure that American-made products can compete here and around the world does make a difference, and so industries will have to adjust," he said.

His committee, which produced the blueprint, later issued a statement saying members are listening to the concerns of oil refiners and other importers.