Pub. 16 2017-2018 Issue 1

N E W J E R S E Y C O A L I T I O N O F A U T O M O T I V E R E T A I L E R S I S S U E N O . 2 , 2 0 1 7 6 new jersey auto retailer Chairman’s MESSAGE | BY RICHARD A. DESILVA, JR. CHAIRMAN’S MESSAGE  continued on page 9 Tax Reform- The Good, The Bad & The Potentially Disastrous The business community craves tax reform. But it has to be the right kind of tax reform or the U.S. economy could be sent into a tailspin. Republicans in the House and Senate are working on legislation, but it remains unclear what components will (and won’t) be included in a tax reform bill when it comes up for a vote. President Donald Trump has also weighed in and released a tax reform outline he favors, which eliminates the Estate Tax and proposes a variety of other tax cuts. Dealers support tax reform that streamlines the federal tax code, promotes economic growth, boosts employment and spurs new, entrepreneurial investment. It is noteworthy that the President’s plan does NOT include a border adjustment tax (BAT) , which is reportedly a major compo- nent of Speaker Paul Ryan’s (R-Wisconsin) House Tax Reform Blueprint. The BAT, as currently envisioned, would subject imports to U.S. taxes (reportedly as high as 20%), while exempting U.S. exports. This will have an impact on virtually every new vehicle sold in the U.S. Foreign-made ve- hicles that are imported to the U.S. will be hit hardest, but even vehicles manufactured domestically contain at least some parts that are currently imported from Korea, Japan, Germany, Mexico, Canada and many other countries. The BAT is opposed by many, includ- ing some Republicans. Opponents are concerned that the BAT would lead to higher costs for a wide range of goods and services, which will eventually make these products more expensive for consumers. The National Automobile Dealers Asso- ciation (NADA) joined dozens of other business groups in sending a letter to the HouseWays andMeans Committee back in December 2016, warning that “companies that rely on global supply chains would face huge business challenges caused by increased taxes and increased cost of goods, which would in turn likely result in reduc- tions in employment, reduced capital in- vestments and higher prices for consumers.” Thankfully, the BAT appears to be on life-support, but the GOP leadership in the House continues to defend the proposal, arguing that it would end an advantage that foreign-made products have over American-made goods. In fact, House Ways and Means Committee Chairman Kevin Brady (R-Texas) floated the idea of phasing in the BAT over a five-year period on June 13, 2017. Initial feedback from opponents of the BAT was that a five-year transition would do nothing to change the negative impact on consumers, but simply delay the political con- sequences for those who vote to pass a BAT. The tax reform issue is a moving target and probably will be for the next several months. While there are no assurances that the BAT will be left out of the tax reform legislation that is ultimately crafted and introduced for a vote (likely sometime after Labor Day), it is also possible that the final bill will not contain a BAT. The American International Automobile Dealers Association (AIADA) has been fighting the BAT tooth and nail since it was first proposed, starting with a “Fly-in” back in March, which NJ CAR participated in. Jim and I traveled to Washington with a group from our NextGen Committee and took the opportunity to meet with several members of our state delegation and mem- bers of their staff to tell them, in person, about the negative effects that a BAT would have on our customers. NADA has been vocal on the subject as well, and I encourage you to read the NADA Director’s Column in this issue of the magazine to see how NADA is also taking a leadership role in voicing the in- dustry’s opposition to a BAT. In fact, just a few weeks ago, NADA Chairman Mark Scarpelli issued a lengthy statement that was the organization’s most vocal opposi- tion to the proposal to date. Much of his statement focused on the neg- ative impact a BAT would have on vehicle affordability. He explained how proposed policies will affect consumers’ ability to find affordable transportation. He pro- ceeded to state that vehicle affordability generates fleet turnover (more than 17 million new vehicles a year for the past seven year) and this turnover drives a big portion of the U.S. economy. Any policy that threatens vehicle affordability could have a negative impact on the overall economy. Right now, there are only back-room dis- cussions and media reports to inform the business community. There has been no specific legislative language introduced.