Saturday, January 14, 2017

BORDER ADJUSTMENT TAX

The latest thing is something called a Border Adjustment Tax that is creating quite a row among Republicans.*

Currently, U.S. corporations are taxed on their worldwide profits at 35 percent. The House GOP plan would change that radically.
The new tax formula would tax domestic revenue (minus domestic costs) at a much lower rate of 20 percent. The net effect would be one that favors exports over imports.*
So the costs of importing goods would be wold be higher because you can't deduct the cost of the import:

But economists who support the tax say the policy would lead to a sharp rise in the value of the dollar — anywhere from 20 percent to 25 percent. As a result, retailers' costs will go down so much that it will be a wash to consumers, they say.

I have no opinion on this - whether it is good or bad - as it is above my pay grade, but it is something we should know about. You can read up on a few opinions.**

* http://www.cnbc.com/2017/01/10/what-is-a-border-adjusted-tax-mean-and-will-it-happen.html
http://www.cnbc.com/2017/01/13/forget-obamacare--heres-the-real-republican-civil-war.html
** https://danieljmitchell.wordpress.com/2016/09/28/shocker-paul-krugman-makes-a-sensible-and-accurate-observation-about-tax-policy/

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