The U.S. tax code is massive. Spanning over 73,000 pages, it touches the lives of every American and every American business. Even minor tweaks to the tax code can have an outsized impact. So, it’s not surprising that major reform proposals only make their way through the legislative process once in a generation.
With change coming so infrequently, the promise of a major reform bill often draws out risky and untested ideas. One of the early tax-reform proposals called for a new 20 percent tax on products imported into the United States.
This border adjustment tax, or BAT, would have added over $28 billion in new taxes to the U.S. auto industry; this would result in the average cost of a new car going up $2,000 to $2,500.
For some Lexus and Toyota vehicles, the added cost would have been substantially higher. There is little doubt that such dramatic price increases would have had a negative impact on new-car sales — including the Kentucky-made Camry, Avalon and Lexus ES.
In the beginning, efforts to remove the punitive 20-percent tax from reform proposals were blocked by powerful policy makers in Congress. Because of his strong relationship with the Toyota Georgetown plant, U.S. Rep. Andy Barr recognized the damaging impact the BAT would have on the local economy and became one of the strongest advocates for removing it from the tax-reform bill.
Barr met with numerous Toyota team members and then shared their stories with key officials in Washington. Within months, even President Donald Trump publicly rejected the BAT.
With the threat of the BAT removed, Congress quickly turned its attention to a more pro-growth tax reform bill which was signed into law Dec. 22. The “Tax Cuts and Jobs Act” provides tax relief to Kentucky families as well to companies like Toyota that support our state’s economy.
We believe the tax bill will create more American jobs, encourage more long-term investment and strengthen the U.S. economy. By reducing the corporate tax rate, providing immediate expensing of machinery and equipment costs and retaining the research credit, this law will continue to make the U.S. an attractive global hub for business.
Since consumers now have more disposable income due to the tax cuts, this will help continue the robust pace of vehicle sales we’ve seen over the last several years.
Since 1988, over 11 million vehicles have rolled off Toyota’s assembly lines in Georgetown, where full-time employment is more than 8,000. In 2017, Toyota invested $1.33 billion in the plant; and today, Georgetown represents a $7 billion investment.
We appreciate the support from Congress for policies that ensure a business and tax-friendly environment at Georgetown which serve to enable future investments in our state.
Susan Elkington is president of Toyota Motor Manufacturing, Kentucky.