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Tags: Trump | Border | Jobs | Economy

Border Adjustability Can Save Jobs and Help Grow the Economy

Border Adjustability Can Save Jobs and Help Grow the Economy

 (iStock Photo)

By    |   Thursday, 09 February 2017 01:28 PM

With the support of President Donald J. Trump, the Speaker of the House, Paul Ryan (R-Wisconsin), has declared that Congress will undertake an effort to reform the U.S. Tax Code.

The last time such a comprehensive tax reform was undertaken was during the Reagan presidency. 

Generally speaking, there is broad agreement that corporate and personal taxes should be reduced, and the consensus view is that, yes, the tax code should be simplified. With most things in Washington, however, things aren’t always that simple and here too there is some disagreement, particularly over the issue of the “border adjustment tax” or BAT.

The BAT would raise about $1 trillion over the next ten years that would be a tool in comprehensive tax reform to help lower the corporate tax rate and shift corporate taxation to a “territorial system.”  The BAT, as part of comprehensive tax reform, is also likely to quell Trump Administration demands for tarrifs as part of any tax reform plan.  If the goal is to improve the business climate for domestic companies then the BAT is a viable alternative to tarrifs.

As a candidate for President, Mr. Trump argued that the tax code incentivizes companies to move workers and facilities abroad. As we have seen, over the past generation, more and more corporations have uprooted from places like Ohio and Michigan and moved to China, Ireland and Mexico.

The House Republicans have submitted a draft tax reform proposal that reduces taxes across the board, calls for simplification, and implements numerous economic pro-growth policies.  The bill includes a provision creating a territorial system of international taxation, and adding a border adjustability component.  That has become ground zero in a battle between lobbyist for Fortune 500 companies – many of which have shipped jobs and facilities overseas.  They are intent on removing this provision from tax reform legislation.

As a means of removing the provision, companies like Nike, WalMart and Levi’s have announced the formation of the “Americans for Affordable Products.” The group describes itself as a “coalition of job creators, entrepreneurs, and business leaders united against higher prices on everyday necessities.” It should come as no surprise group members have a long history of closing American factories and opening them overseas.

In the early 1980s, Levi’s had 63 manufacturing plants in the U.S.  Today, Levi’s has no U.S. factories save a small factory that produces specialty jeans that retail for $260 – not necessarily affordable..  Nike has pushing production for the U.S. shoe market almost entirely overseas   There are a few thousand workers producing for Nike in the United States, but they’re rapidly disappearing -- there were 13,922 as of April 2014, and Nike’s manufacturing map lists 8,408 as of March 2016[CJV1] . According to a report by the Economic Policy Institute, Chinese imports to Walmart have cost the U.S. 400,000 jobs, mostly in manufacturing.

What the House Republicans and the President suggest is the imposition of a provision known as border adjustability. While some, including members of the coalition describe the issue as a tax, proponents including the anti-tax Americans for Tax Reform (ATR) believe that is a mischaracterization. 

ATR argues that “border adjustability should also be considered in the context of the many, pro-growth changes in the Better Way plan, and as part of a system that equalizes the taxation of American businesses relative to foreign competitors. It is a dramatic tax cut for businesses and consumers relative to our existing system of taxation, as the plan creates a new, low rate for corporations of 20 percent and a 25 percent rate for pass-through entities.” As part of a larger tax reduction package, the proposal combined with reductions in taxes on small business and corporations would reduce taxes by $2.4 trillion. 

In short, if undertaken properly. Border adjustment would protect American jobs while making corporations more competitive.  Another step in helping make America great again.

Christopher (Chris) Versace is the editor of the newsletter The Growth & Dividend Report and is a featured columnist to The Street.com as well as a contributor to FoxBusiness.com and Forbes.com.


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With most things in Washington, however, things aren’t always that simple and here too there is some disagreement, particularly over the issue of the “border adjustment tax” or BAT.
Trump, Border, Jobs, Economy
Thursday, 09 February 2017 01:28 PM
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