By David Morgan
WASHINGTON (Reuters) - Koch Industries, the private conglomerate owned by billionaire conservatives Charles and David Koch, warned on Wednesday that a Republican tax reform proposal meant to encourage U.S. exports could have devastating effects on the economy and consumers.
The proposal, known as border adjustability, is part of a larger tax reform plan backed by Republicans in the House of Representatives, including Speaker Paul Ryan. It has attracted the attention of advisers to President-elect Donald Trump as a potential tool for creating manufacturing jobs for blue-collar Americans.
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But the provision, which would tax imports while exempting U.S. exports from corporate income tax, has raised concerns in the retailing and energy sectors about its potential effects on prices for imported consumer items and foreign goods used in domestic production.
Corporate lobbyists say that Trump's threatened 35 percent import tax against U.S. companies that move jobs overseas could reflect an interest by the president-elect in a border-adjusted approach to tax reform.
The Trump team and Republicans in Congress are currently trying to hammer out an agreement on tax reform for 2017.
"The proposed border tax adjustment will distort the market, increase consumer prices and create an uneven playing field for companies and consumers," Philip Ellender, who oversees government and public affairs for the Wichita, Kansas-based multinational, said in a statement.
"The long-term consequences to the economy and the American consumer could be devastating," added Ellender, who said Koch otherwise supports tax reform.
Koch is the second largest private U.S. company, with operations that range from refining and chemicals to ranching and forest products. Its owners are known to spend heavily on conservative initiatives and to oppose government intervention in business.
Representative Kevin Brady, Republican chairman of the House tax committee that produced the reform plan, welcomed the Koch statement as feedback but described border adjustability as "a key provision" that would level the playing field for "Made in America" products.
Brady has said the plan would unleash economic and job growth by cutting the corporate tax rate from 35 percent to 20 percent, simplifying the tax code and encouraging investment.
Border adjustability would help pay for tax cuts by generating $1.2 trillion in revenues over a decade, according to the non-partisan Tax Policy Center.
The provision would also discourage U.S. companies from moving operations abroad as a result of another provision, which would eliminate U.S. taxes on the foreign profits of U.S. multinationals.
(Reporting by David Morgan; Editing by Andrew Hay)