Trump and the Border Adjusted Tax

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Trump is planning on releasing his “phenomenal” tax reform this upcoming week, which based on his campaign platform will cut corporate taxes from 35% down to 15%, more than half. This will skyrocket economic growth because companies can retain more of their revenue by paying less taxes. According to KPMG there are only 8 other countries with corporate tax rates lower than 15%: Bulgaria (10%), Cyprus (12.5%), Gibraltar (12.5%), Ireland (12.5%), Liechtenstein (12.5%), Macau (12%), Oman (12%) and Montenegro (9%). This will not only skyrocket growth, but give huge incentives for U.S. companies to stay and invest within our borders instead of outside of it. This will also attract many foreign companies, growing our Foreign Direct Investments as well as create more jobs.

However, Speaker of the House of Representatives, Paul Ryan, has another idea. The “border adjustment tax” has been described as “the most complex tax on the table” and a “hidden sales tax.” But what is this tax exactly, and how would it affect you?

Note: This tax is not the same as the Trump border tax the new president has threatened to impose on U.S. manufacturers selling goods in the U.S. that they made overseas.

Republicans have been wanting to reform the corporate tax code for years, which they criticized as too complicated and difficult for U.S. companies.

However, some U.S. corporations use loopholes and other tax breaks to lower their effective rate to 10.6 percent. Nonetheless, GOP lawmakers are pushing for an overhaul they say would provide tax relief to many businesses.

16 CEOs from companies including GE, Boeing, Caterpillar, Pfizer and Eli Lilly, part of the American Made coalition, sent a letter in support of the border adjusted tax to Congress, saying:

“This reform is consistent with the tax policies of nearly every other country in the world, and it would effectively end the “Made in America” tax that creates an unfair advantage for foreign-based companies at the expense of US jobs and economic growth.”

Now that policymakers are the majority Republicans, the door flies wide open for the opportunity to consider the border adjustment tax, an approach that would provide tax relief for U.S. manufacturers while creating higher taxes for imported products that are bought within America’s borders. The proposed tax is called a “destination-based tax” because products would be taxed based on where they’re sold rather than where they’re made.

Analysts have stated that this “border adjusted tax” can cut retail earnings per share by more than 50%. Thankfully, this tax has had very little support from both Democrats and Republicans.

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