Five Things to Know About the Border Adjustment Tax

May 23, 2017 - Article reads in
The dome of the U.S. Capitol building surrounded by trees
Photo by Peter Griffin

By now, you’ve probably heard of the Border Adjustment Tax (BAT)—part of a proposed tax reform blueprint from the U.S. House Ways and Means Committee that would change the way companies are taxed for importing goods. It’s a big deal for Target because of its potential to raise prices for American families—something we can’t get behind.

Over the past several months, senior leaders have been meeting with Members of Congress and the Administration to express concerns about the BAT—and what it would mean for our guests, team and business. Read on for some important things to know.

It would take a toll on American families
Our main concern with the proposed BAT? It’d have a major impact on our guests, the 30 million Americans who shop Target each week. That’s because, if enacted, it would raise prices on everyday essentials by up to 20 percent. We’re not talking about luxury goods, but things like school clothes, shoes, groceries, medicine, electronics and bed sheets.

That would add up fast for, say, a new mom or dad stocking up on baby supplies, or someone moving into their first apartment. Many of our guests are middle-class working families on tight budgets, and some simply can’t afford to pay more for these important items.

It’s not realistic for our supply chain
Our broad assortment of merchandise spans many categories, and depends on complex supply chains that were built over decades. The reality is, certain product categories just aren’t available to buy from U.S. sources.

Some examples? Apparel: About 97 percent of all apparel sold in the U.S. is manufactured overseas. Electronics: Nearly all of our phones and tablets are made in places like Japan, Korea and China. And food: We’re never going to grow bananas in Michigan or coffee beans in Ohio.

U.S. vendors are already among Target’s top suppliers
While we depend on global supply chains to provide goods we can’t buy in the U.S., Target’s still a major purchaser of domestic goods. In fact, eight of our 10 largest strategic vendors are located right here in the states, including companies like Proctor & Gamble, Pepsi, Kimberly-Clark and Johnson & Johnson.

There’s a broad coalition of businesses that oppose the BAT
We’re a founding member of Americans for Affordable Products—a coalition of more than 500 businesses and trade associations opposed to the BAT proposal. It’s not just retailers … there are also main street coffee shops, car dealers, grocery stores, gas stations and restaurants. Because the BAT would be bad for both large companies like us and lots of small businesses too.

And it’s not a partisan thing—opposition to the BAT crosses party lines, with members of Congress from both sides of the aisle expressing concern with the consequences for American families.

Target wants tax reform, just not the BAT
While Target opposes the BAT, we strongly support tax reform. We already pay a high effective tax rate—an average of 35 percent over the last decade. So we’re as motivated as anyone to bring that rate down and grow the economy so we can invest and create more jobs. The House leadership’s blueprint proposes setting the rate at 20 percent and we would gladly support that change. In fact, we’ve said we would put all the current preferences we have on the table in order to achieve meaningful reform.

We’ll continue to work with Congress to help get tax reform done, but not with any provision that asks American families to pay for it. 

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