January 8, 2017

WE ARE ALL NEOCONOMIST NOW:

Border Adjustability Is Already Fueling Tax Reform Controversy (Howard Gleckman, 12/08/16, Forbes)

Consider border adjustability--one way the tax code could treat imports and exports. Today's code taxes US firms on their worldwide income so that, at least in theory, profits earned overseas are taxed at the same 35 percent rate as domestic earnings. However, taxes on foreign income are deferred until a firm either reinvests those profits in the US or distributes them to shareholders.

But the tax blueprint released by House Republicans last June goes a different route. It adopts a tax system that would be based on where a firm's products are consumed, rather than where they are produced or where the company is headquartered.

And the House plan does three other things: It would reduce U.S. corporate tax rates from 35 percent to 20 percent, below the average for developed countries. It would change the corporate income tax to a form of cash flow consumption tax. And would be border adjustable so that exports would be exempt from U.S. tax while imports would be taxed.

Posted by at January 8, 2017 2:30 PM

  

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