Does the current tax system truly favor the foreign corporation – PB/TK
Why A Border-Adjusted Tax Would Hurt U.S. Companies – By Veronique de Rugy 20, 2017
There are many bizarre and unsubstantiated claims about the merits of adopting a border adjustment tax (BAT) as part of a fundamental tax code reform, as House Republicans have proposed. For instance, we are told that taxing imports and exempting exports creates economic growth. However, estimates show that the boost to the economy comes from the overall plan’s other features like lowing the rates or moving to a territorial system, not from the BAT.
We are told that the BAT may be a tax on imports but it’s not protectionist since currencies will perfectly adjust to offset the penalty to importers and the benefits to exporters. That’s in spite of empirical evidence finding that currencies are unlikely to adjust perfectly or rapidly. We are told that we are the only country without a border tax. But no other country border adjusts their corporate income tax, only their consumption taxes.
However, no argument is more confusing to me than the one made in these pages by Scott Ruesterholz. He claims our tax code advantages foreign businesses or, as he puts it, “Without a border adjustment, U.S. tax code subsidizes international importers at the expense of domestic producers.” Now there is no doubt that the U.S. corporate income tax system is awful and needs to be reformed, but it is terribly wrong to say that it subsidizes foreign imports or justifies passing a BAT.
Continue to thefederalist.com article: http://thefederalist.com/2017/03/20/border-adjusted-tax-hurt-u-s-companies/
