Americans will pay at the pump and the checkout if the Republican-dominated U.S. Congress proceeds with a plan to adopt a 20% “border tax adjustment”, voices in the oil and retail sectors say, prompting “reservations” from at least one influential GOP Senate leader.
“The border-adjusted tax being considered would eliminate corporate income taxes on U.S. exports, including crude oil and refined products, while imposing a tax as high as 20% on imports,” Reuters explains. Imports include crude oil from both Canada and Mexico, among other suppliers.
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And any border tax on imported crude oil, one oil executive made clear, is going to flow straight through to the price of refined gasoline and diesel.
“Refiners are going to have to pass any incremental costs on to the consumer,” Marathon Petroleum Corporation CEO Gary Heminger told equity analysts in a conference call. “I am very confident that we will be able to do that, just as we did when crude prices were $100-$147.” Marathon imports roughly 700,000 barrels of oil per day, mostly from Canada and Saudi Arabia, according to figures cited by Reuters.
While a handful of Gulf Coast refiners “would be able to take advantage of the reduced costs of exports,” the news agency adds, citing Heminger, “landlocked refiners in the Midwest and import-dependent refiners on the U.S. East Coast would be disproportionately hurt.”
Separately, Reuters reports that the Republican tax plan “faces opposition from retailers, oil refiners, and automakers who say it could raise prices for American consumers.” That outcry prompted influential Senate Finance Committee Chair Orrin Hatch (R-UT), speaking to the U.S. Chamber of Commerce, to question whether a border adjustment tax measure could pass the upper house against his colleagues’ “serious reservations” about it.
Bloomberg reports that “a broad coalition of lobbyists for retailers like Wal-Mart Stores Inc., energy companies, and the auto industry” has launched a campaign to scuttle the proposal. “The campaign, called ‘Americans for Affordable Products,’ will center on how a border-adjusted tax could increase prices for consumers.”
“This reform is supposed to help all companies, but this particular provision would make it much more regressive on industries like retail, oil and gas, and apparel,” Bloomberg Intelligence analyst Caitlin Webber commented. “It’s going to be an absolutely huge fight.”
Border taxes have previously been suggested as a way for countries that implement domestic carbon taxes to put pressure on those that have not yet done so.
