Linchpin of potential legislation is a concept known as ‘border adjustment,’ which is splitting the business world into competing camps
Foreign-auto dealers worry a border-adjusted tax would force them to raise prices and hurt sales. Above, a salesman at Jack Taylor’s Alexandria Toyota in Virginia.Photo: T.J. Kirkpatrick for The Wall Street Journal
WASHINGTON—Republicans see a once-in-a-generation opportunity to overhaul the U.S. tax code. Just weeks into Donald Trump’s presidency, they are getting a taste of why such attempts are always confounding—every action creates an equal and opposite reaction.
A linchpin of the House Republicans’ tax plan, an approach called “border adjustment,” has split Republicans and fractured the business world into competing coalitions before a bill has even been drafted.
A border-adjusted tax would impose a levy on imports, including components used in manufacturing, and exempt exports altogether. Opposing it are retailers, car dealers, toy manufacturers, Koch Industries Inc., oil refiners and others that say it would drive up import costs and force them to raise prices.