The Trump administration has passed the most sweeping immigration reform bill in US history, but a key plank in the bill — the so-called border adjustment tax — has already been flagged as a potential revenue drain.
The tax could add as much as $1 trillion to the federal deficit, and many economists say it’s unlikely to make much of a dent.
In fact, the tax could make the country’s economic recovery worse.
In a recent report, a group of leading economists estimated the border adjustment could generate an additional $1.4 trillion in revenue in 2027.
The bill would impose a 10 percent tax on imports and a 10.25 percent tax in domestic trade.
The revenue generated would help pay for the border adjustments needed to keep pace with an expected rise in the cost of health care.
The Tax Policy Center estimates that the border tax could generate as much revenue as $2.8 trillion in 2026, with the remaining $2 trillion going to cover other parts of the bill, including the elimination of Obamacare subsidies and other spending cuts.
The Trump Administration has promised to make the border changes permanent, but it’s not clear whether they will be enforced.
“In the first three years of this law, the border is expected to remain open at approximately the same level as it is today,” a White House official told the Associated Press on Sunday.
“The current rate of enforcement, in our view, is not sustainable and is a major obstacle to the achievement of the American people’s goals of reducing the deficit and promoting growth.”
Some border security experts have argued that the administration could make it easier for undocumented immigrants to obtain visas to travel and work in the US, or that they could be able to bring family members and spouses back to the country.
“There are other ways that the Administration can be incentivizing the economy,” the Tax Policy Institute’s Andrew Prokop told ABC News.
“For instance, by requiring employers to pay an additional 10 percent on the wages of their undocumented workers, or by forcing employers to hire more American workers.
The White House can also incentivize private sector firms to provide services to American workers and expand their presence in the country.”
But others have suggested that the tax will hurt the economy in several ways.
“If the border has become a magnet for undocumented people, it will lead to a drop in employment, particularly for lower-skilled workers,” said the Center on Budget and Policy Priorities’ Heather Zichal.
“And the border could become a new magnet for employers who have already lost workers and have no incentives to bring them back into the country and hire them.”
As The Washington Post’s Scott Wong has noted, it’s unclear how the tax would actually impact the economy.
But the tax might still have a major impact on the labor market.
“It could reduce the supply of labor that’s needed by employers and hurt job creation,” said Kevin Hassett, a professor of economics at the University of Southern California.
“I’m not convinced that the burden of the border border tax is so big as to make it worthwhile to impose the tax.
And I think the administration has to figure out how to do that.”
Economists have long predicted that the bill would lead to fewer Americans receiving health insurance and a bigger increase in the number of uninsured Americans.
A recent report from the nonpartisan Congressional Budget Office estimated that under current law, health insurance premiums would rise by $6,400 for each additional person without health insurance, according to the Congressional Budget Committee.
“Many states are already facing the impact of a 10% increase in health costs, and it is projected that states could experience an additional 1.6 million uninsured people by 2026,” the CBO wrote.
The CBO also noted that under the tax, “people with lower incomes would likely see a greater impact from the tax because their health insurance costs would rise.”
“If you look at the data from the CBO and the Kaiser Family Foundation, you see that under Obamacare, the uninsured rate in many states has fallen to record lows,” the Center for American Progress’ Ilya Somin said.
“What this bill does is make it much harder for the millions of Americans who currently have health insurance to purchase it, because it will drive up their costs.”
“The CBO estimated that if Obamacare’s taxes were implemented without the border-adjustment tax, insurance premiums for older Americans would rise at the same rate as those for younger people, but in a more meaningful way,” wrote the Brookings Institution’s John Nichols.
“This would lead many Americans who previously were insured to choose to leave the health insurance market, and some states would be able afford to maintain an even more robust Medicaid program than currently exists.
The new CBO report also suggests that many people who are eligible for subsidies to purchase private insurance would be negatively impacted by the border increase.”
The CBO concluded that “this would result in a substantial drop in insurance coverage for many Americans.”
Economies with large immigrant populations would be hit hardest.
“These estimates suggest that