Koch Industries Inc., the influential private firm headed by billionaire Republican supporters Charles and David Koch, slammed a key element of the House Republicans’ plan to overhaul corporate taxes, saying it would raise prices for American consumers and “could be devastating” to the economy.

In a statement, Koch objected to the plan’s proposal to replace the current corporate income tax with a 20 percent levy on U.S. companies’ domestic sales and on their imports of foreign goods and materials. Exports under the plan would be tax-free.

The proposal, which is generally known by the term “border adjustments,” would “adversely impact American consumers by forcing them to pay higher prices on products produced in and goods imported to the U.S. that they use every single day,” the company said in the statement.

Koch’s statement made clear that the company supports a comprehensive overhaul of the U.S. tax system. But its opposition to border adjustments is the most politically prominent yet in a swelling chorus of corporate voices concerned that the proposal would damage companies such as Wal-Mart Stores Inc. that rely on imported goods to sell products at low cost. For Republicans, buoyed by Donald Trump’s surprise electoral victory last month, the opposition demonstrates that their call for a tax overhaul early in Trump’s administration may hit some speed bumps.

Trump’s Plan

Trump hasn’t signed on to the border-adjustments plan, but has embraced other elements of a blueprint for tax policy that House Republicans released last summer: Both would cut tax rates for individuals and businesses, eliminate the estate tax and offer a corporate tax break designed to bring to the U.S. roughly $2.6 trillion in untaxed profits now held by American companies’ offshore subsidiaries.

House Republicans have been working with Trump’s transition team to meld their tax proposals as they try to pass the biggest tax overhaul in three decades next year. Trump’s plans for corporate taxes include a major rate cut -- to 15 percent from 35 percent -- and ending companies’ ability to defer taxes on their overseas earnings. Economist Stephen Moore, an adviser to Trump during the campaign, has said several times recently that the border-adjustment provision is the biggest difference between the two plans.

Border adjustments would mark a seismic shift in U.S. corporate taxation. Under current law, U.S. companies face a statutory tax rate of 35 percent on their global profits, regardless of where they’re earned. They can use credits for foreign taxes they pay to reduce their U.S. taxes -- and they can defer U.S. levies indefinitely by leaving the earnings overseas.

The House’s corporate tax plan moves from that “origin-based” approach to a “destination-based” system. U.S. companies would no longer be taxed the profit they earn all over the world, a feature of the current system that makes the U.S. an anomaly. Instead, companies would be taxed based on their sales inside the U.S. The blueprint says that such a system, combined with the 20 percent rate, would remove the incentive for companies to shift profit overseas to low-tax countries like Ireland.

Koch Industries, a Wichita, Kansas-based conglomerate with interests ranging from oil and ranching to farming and the manufacturing of electrical components, would benefit from the change because it produces many products domestically, according to its statement, which was released by Koch’s lobbying arm, Koch Companies Public Sector LLC. However, “the long term consequences to the economy and the American consumer could be devastating,” the statement said.

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