The proposed Border Adjustment Tax could have a disproportionate effect on the agriculture sector, including in Nebraska, according to a report released Wednesday.
The report from Freedom Partners and Americans For Prosperity — both groups that advocate for smaller government — says the agricultural industry as a whole could face $2.1 billion in additional taxes based on more than $21 billion in imports in 2015, and that’s using an assumption pushed by supporters that up to half of the tax would be offset by currency adjustments.
In addition to the direct threat from the 20 percent tax on imports, the agriculture industry could also face indirect effects, including increased costs for farm machinery and the potential for trade retaliation that could hurt exports, the report says.
The report also says that the industries that would be most affected by the tax — manufacturing, energy, retail, financial services and agriculture — make up more than 34 percent of Nebraska’s total gross domestic product and nearly 29 percent of all jobs.
“If Congress wants to spur economic growth, they should focus on reducing tax rates instead of increasing taxes on imports that would directly affect Nebraska’s top industry,” Americans for Prosperity Nebraska State Director Matt Litt said in a statement. “Farmers and ranchers are already reeling from low commodity prices and ever-increasing property taxes, and piling this tax on top could effectively wipe out the agriculture industry in the state.”
Creighton University economist Ernie Goss said he saw a couple of potential problems with the report’s conclusions.
Because of that, it’s impossible to know what the actual effect of the tax would be.
The report does acknowledge that fact, stating that, “the dollar is unlikely to adjust in the ways that supporters suggest.”
Goss said the report also didn’t seem to take into account the responsiveness of purchasers, consumers, businesses and farmers to price changes stemming from the tax. They are likely to absorb more cost increases for products that can’t easily be replaced by something produced domestically, he said.
Source : Lincoln Journal Star