Will Washington Put a 20% Tax on Coffee?

The following is an excerpt from the NCA Member Alert

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A Border Adjustment Tax (BAT) could mean a 15% or 20% import tax on coffee. That’s why the National Coffee Association went to Washington last week to lobby against it.

Twenty-five NCA members met with Senate and House legislators and their staffs in 68 pre-arranged meetings. The two-day “Fly-In” brought a united industry message to Capitol Hill: that coffee should be exempt since, if enacted, a BAT would have a devastating impact on the U.S. coffee industry – and the nearly 1,700,000 jobs is supports.

As detailed in an earlier NCA Member Alert, a BAT would make profits from imports, as well as exports, taxable. It’s included in the comprehensive Ryan-Brady tax reform framework to make the plan “budget neutral” by offsetting a reduction in the corporate tax rate from 35% to 20%. In a separate White House plan, the rate would drop to 15%.

In effect, that’s an across-the-board tariff of 15% or 20% on the raw material on which the industry relies. Since 99.9% of coffee must be imported, the cost to the industry would be astronomical.

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Beyond the obvious burden on cash flow, a BAT could also impede imports of certain coffees, increase the price paid by consumers and stretch coffee farmers beyond the bounds of sustainability.

Ultimately, as NCA President and CEO William M. Murray wrote in a previous post, “[The BAT] could not only increase the cost of America’s favorite beverage, but could very likely have a negative impact on jobs, the exact opposite of what was intended.”

These unexpected consequences would likely have a ripple effect beyond coffee: According to the NCA report, “Understanding the Economic Impact of the U.S. Coffee Industry,” the industry generates $225.2 billion in revenue a year, representing nearly 1.6% of the entire U.S. Gross Domestic Product (GDP).

 

Read the full NCA Member Alert here (unlocked for non-members for a limited time), or see the NCA Border Adjustment Tax and the Coffee Industry Overview to learn more.

Questions? Comments? Share them below, or contact us at info@ncausa.org.

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