Concerns about the " Border Adjustable " Tax Plan from the House GOP, Part I

The Republicans in the House of Representatives, led by Ways& Means Chairman Kevin Brady and Speaker Paul Ryan, have proposeda “Better Way” tax plan that has many very desirable features.Death tax repealDepreciationreplaced with expensingCorporate tax ratedropped to 20 percentNodeduction for state and local taxesAnd there are many other provisions that would reduce penalties on work, saving, investment, and entrepreneurship. No, it ’s not quitea flat tax, which isthe gold standard of tax reform, but it is a very pro-growth initiative worthy of praise.That being said, there is a feature of the plan that merits closer inspection. The plan would radically change the structure of business taxation by imposing a 20 percent tax on all imports and providing a special exemption for all export-related income. This approach, known as “border adjustability,” is part of the plan to create a “destination-based cash flow tax” (DBCFT).When I spoke about the Better Way plan at the Heritage Foundation last month (my portion of the panel starts about 1:11:00 if you want to skip ahead), I highlighted the good features of the plan in the first few minutes of my brief remarks, but raised my concerns about the DBCFT in my final few minutes.Tax Reform in the Next CongressAllow me to elaborate on those comments with five specific worries about the proposal.Concern #1: Is the DBCFT protectionist?It certainly sounds protectionist. Here ’s how theFinancial Timesdescribed the plan.The bo...
Source: Cato-at-liberty - Category: American Health Authors: Source Type: blogs