Business coalition: Federal tax could raise prices 20 percent

By Ashley Steeb
TheStatehouseFile.com 

INDIANAPOLIS­­­­­­­­­ — A coalition of business owners is concerned that a proposed tax could force them to raise prices.

The group, called Americans for Affordable Products, is asking the state’s congressional delegation to oppose the border adjustment tax being discussed by House Republicans.

Doug Pendleton, owner of Grapevine Cottage, and Justin Stevens, state director of Americans for Prosperity, oppose the proposed border adjustment tax. They say it will burden working families and companies with unnecessary price increases. Photo by Ashley Steeb, TheStatehouseFile.com

The tax would penalize American companies that import goods from other countries by taking tax breaks away, while rewarding companies with tax breaks if they export products.

The goal, supporters say, is to bring jobs back to the United States. However, members of the coalition argue some goods have to be imported due to a lack of supply in the United States.

“If you want to put that in real terms, my wife and I, really like guacamole,” said Justin Stevens, state director of Americans for Prosperity. “So, if you want to go to the store and buy an avocado you’re going to look at a 20 percent increase almost immediately, as a result of this tax.”

Hoosiers could also see families spending an additional $1,700 a year on gas, clothing and other basic everyday goods, according to the group.

But Richard Feinberg, professor of retailing and consumer science at Purdue University, is skeptical of that number. He argued no one really knows how much prices will increase.

“It could have a very negative consequence. It could be some very significant consequences to the economy,” he said. “But it depends.”

Not everyone will raise their prices, Feinberg said. Some retailers will be big enough to adjust costs. Some could eliminate jobs to cover the costs. Others might find ways around paying the tax.

If the price increase is small enough, consumers won’t notice.

“If you went to the grocery store and the price for a loaf of bread was three cents more, would you really know that?” Feinberg asked.

Research from Purdue shows shoppers don’t know how much they pay for things.

On the other end of the spectrum, if prices go to high, consumers will stop shopping and then manufacturing will slow down.

Americans for Affordable Products said tax reform needs to happen, but argued the border adjustment tax is not the proper way.

U.S. Rep. Andre Carson, a Democrat representing much of the Indianapolis area, said he’s waiting to see a formal proposal before deciding. U.S. Rep. Jackie Walorski, a Republican representing northern Indiana, released a statement only saying that the tax code is broken.

“Tax reform based on growth, simplicity, and fairness will benefit Hoosier families and businesses and boost job creation in our state,” she said.

The rest of the Indiana representatives did not respond to a request for comment.

Ashley Steeb is a reporter for TheStatehouseFile.com, a news website powered by Franklin College journalism students.

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