The Corner

Koch Network Ready for a Fight on the Border Adjustment Tax

INDIAN WELLS, Calif. — The Koch network is deeply displeased about the “border adjustment tax” proposal being discussed by the Trump administration and some congressional leaders, and it’s prepared to send a strong message to the group’s traditional allies on Capitol Hill.

Under the proposal, U.S. companies that import goods from foreign suppliers would no longer be allowed to deduct those purchases, so a new tax would be effectively implemented on all imported goods, including crude oil. At the winter meeting of the Koch-affiliated organizations and their donors at a resort outside Palm Springs, several key leaders of the network indicated this is one of their biggest worries about the new administration and GOP-controlled Congress.

“That’s just a tax that’s going to be passed on to people who shouldn’t be taxed,” said Mark Holden, who is now co-chairman of the Koch Seminar Network. He indicated the issue could be a key one for evaluating how strongly to support lawmakers in future elections.

“It will be one of the things we look at,” Holden said. “Sure, there aren’t elections for a few years, but we’re hopeful that we can get with leadership and get them to think of better ways to do this, and not pass on a huge new burden to consumers.”

Americans for Prosperity President Tim Phillips asked whether GOP members of Congress “really want to have to go home and explain a $1.2 trillion tax on consumers over the next ten years. . . . Think about folks on a fixed income and senior citizens. It would be a devastating impact.”

Late last week, Americans for Prosperity sent a letter to congressional leaders indicating their opposition to the idea, warning it would “create a new, wide-reaching distortion that would impact all sectors of the economy and every consumer.”

AFP contends the change would represent the government’s picking winners and losers in the market, because exporters and domestic producers would thrive while any company that needed materials from abroad would take a hit. Ironically, one of the companies that would probably benefit greatly from the new policy would be#…#Koch Industries, whose subsidiaries produce oil, paper products, fertilizer, chemicals, pipelines, and cattle.

Beyond the brewing fight on an import tax, the Koch-affiliated group is cautiously optimistic about the new administration, and the likelihood of getting their ideas enacted into law.

Holden said he was pleased with the administration’s approach toward regulatory reform and the decision to give the green light to the Keystone Pipeline.

“It’s too soon to tell, though,” he cautioned. “It’s only been a week.”

Phillips said he liked some of the administration’s Cabinet nominations, notably Scott Pruitt at the Environmental Protection Agency and Tom Price to be secretary of Health and Human Services. But he cautioned the devil is in the details: “We have to see the legislation being put forward.”

The good news is the Koch team will see a lot of familiar faces in the Trump administration. The White House director of legislative affairs is Marc Short, who previously served as president of the Koch brothers’ Freedom Partners Chamber of Commerce.

The Koch network’s groups did not support a candidate in the presidential race between Donald Trump and Hillary Clinton in 2016, preferring to focus on eight key Senate races. The candidate they backed won seven of those races. The network foresees collectively spending $300 million to $400 million on political operations in the coming cycle, “depending upon the opportunities before us,” Phillips said. The network spent $250 million last cycle.

Holden said the network has “a number of good friends who are in White House now in pretty significant roles. . . . I don’t think it will be any problem at all.”

James Davis, a spokesman for the Koch Seminar Network, concurred, noting that “our former staffers remain good friends of ours. Conversations have been open and have continued.”

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