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1 Kyle Pomerleau, Understanding the House GOP's Border Adjustment 1 (2017)

handle is hein.taxfoundation/ugopbdaj0001 and id is 1 raw text is: SPECIAL REPORT Feb. 2017 The Tax Foundation is the nation's leading independent tax policy research organization. Since 1937, our research, analysis, and experts have informed smarter tax policy at the federal, state, and local levels. We are a 501(c)(3) non profit organization. ©2017 Tax Foundation Distributed under Creative Commons CC BY NC 4.0 Editor, Rachel Shuster Designer, Dan Carvajal Tax Foundation 1325 G Street, NW, Suite 950 Washington, DC 20005 202.464.6200 taxfoundation.org Understanding the House GOP's Border Adjustment Kyle Pomerleau Director of Federal Projects Key Findings: In 2016, the House Republicans released a tax plan that would lower the corporate income tax rate to 20 percent and convert it into a destination- based cash-flow tax. An important feature of this tax is a border adjustment. This provision would apply the tax to imports and exempt exports. The application of the border adjustment moves the corporate income tax from an origin-based tax to a destination-based tax. Both origin- and destination-based taxes are trade-neutral. As such, switching from one to the other does not alter the trade balance, nor put the United States at a trade advantage or disadvantage. Although economists do not expect there to be a trade advantage to switching to a destination-based tax, there are a few positive aspects of doing so: it would prevent profit shifting, eliminate the need for complex anti-base erosion provisions, and broaden the tax base within the budget window. There are also challenges with this approach. It is not known yet whether this provision could be struck down by the World Trade Organization (WTO). In addition, a few implementation and transition issues may exist.

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