As Americans face Tuesday’s deadline to pay their taxes, the Trump administration is hinting that tax reform is up soon on its agenda.
A key aspect of the tax overhaul would be a border adjustment tax.
The provision, which is used in many other nations, wouldn’t tax goods that are exported but would tax imported products at about 20 percent. Its goal is to encourage companies to make their products in the United States, keeping jobs here.
It would also raise up to $1 trillion in revenue over 10 years, an inflow that will be needed as most of the GOP tax plans being floated in Washington propose cutting the corporate tax rate from 35 percent to at most 20 percent.
Critics, including big-box retailers like Costco and Walmart that would have to pay the tax because they import most of their products, predict the average American family would pay $1,700 more a year to cover the resulting increase in the price of clothes, phones and other items on their shelves.
A new nationwide TV ad funded by the conservative billionaire Koch brothers organization rails against Trump’s plan.
Alan Auerbach, professor of economics and law at UC Berkeley who is known as the “father of the border adjustment tax,” dismissed the $1,700 increase as “silly” and “outside the range” of economic projections of what the tax might do. It also doesn’t account for any tax cuts Americans may see under Trump or a stronger dollar as a result of the border tax change.
“It would encourage companies to make their products in America,” said Auerbach, who thinks it would also convince some Silicon Valley companies, such as Google and Apple, to stop basing operations in countries like Ireland, which have much lower corporate tax burdens.
Feckless and greedy Hewlett-Packard Enterprise CEO Meg Whitman told CNBC earlier this year: “Everything that is in our products comes from overseas. That supply chain has taken 30 years to set up. So when all those components come in and are taxed, it’s not going to be good. This does not create jobs. It actually lowers the number of jobs for many, many companies.”
Read the whole story in the San Francisco Chronicle