During the 2016 Presidential election cycle, Donald Trump repeatedly said that he was going to build a wall on the US border with Mexico and that Mexico is going to pay for it. Trump and company are now saying that American taxpayers will front the cost, but “Mexico in some form and there are many different forms… will reimburse us for the cost of the wall. That will happen.”
One of those “many different forms” that Trump says will be used to have Mexico “reimburse us for the cost of the wall” comes in the form of a so-called border adjustment tax. Reuters reports White House spokesman Sean Spicer “told reporters that Trump wanted a 20 percent tax on Mexican imports to pay for construction of the wall.”
Reuters adds the plan being considered by Congress, which represents a significant change from current U.S. policy, “would exempt export revenues from taxation but impose a 20 percent tax on imported goods.”
It should be pointed out that this border adjustment tax is simply a tariff by another name, and will increase the cost of items from Mexico by at least 20%. Mexican Foreign Minister Luis Videgaray told reporters, “If you tax exports from Mexico into the United States, you’re going to make things ranging from avocados to appliances to flat-screen tvs… more expensive.”
Like other taxes and fees, this additional cost will be passed on to consumers. In some ways, this border adjustment tax proposal is similar to the sugary beverage taxes that have recently been implemented in Philadelphia and Berkley. In Philadelphia, a tax of 1.5-cents-per-ounce has been levied on soda, iced teas, sports drinks, and other sugary drinks at the wholesale level. Reason reports, “the city is charging a tax on the transaction that takes place when a business, like a sandwich shop or grocery store, purchases soda (or the syrup used to make soda in a fountain) from a distributor.”
However, the distributors are passing the cost along to the retailers, who are passing it along to their customers. Andy Pincus owns and operates Carbonator Rental Services, a beverage syrup wholesaler, and says a 5-gallon box of syrup makes about 3,840 ounces of soda (192 20-ounce cups), and he charges between $60 to $90 depending on the brand of the soda. For each box of syrup, Pincus says he makes between $3 and 18 dollars profit, however he says the new tax is “$57.60 on a $60 item.” Adding, “It’s too big not to pass on.”
Newsworks reports, “In Berkeley, California, the only other city in America with a sweetened-drinks tax, a November 2015 study found consumers pay between 30 and 70 percent of the penny-per-ounce tax there, depending on the beverage.”
If Trump and Co. do implement a border adjustment tax, don’t be surprised when your Corona and avocados cost more. It will not be the Mexican government or even Mexican companies that pay this tax, it will be people like you and me each time we buy a product that comes from Mexico.
Darryl W. Perry was a candidate for the 2016 Libertarian Party Presidential nomination, and is currently running a limited Presidential write-in campaign in the general election.