I am writing in support of the USU. 8: The Economic Growth Act, and more specifically the border adjustment provision. Currently, the American tax system counts imports as business costs (meaning they count as a deduction) and the corporation’s exports and profits are taxed. Under the new Economic Growth Act, imports would no longer be counted as deductions and would instead be taxed at a 20% rate (down from the current 35% rate). However, as a result, all exports would be exempt from taxation. This causes the tax system to shift from a “destination-based” rather than “origin-based” and while this is a drastic change to our current tax system, I think this is a tax reform that everyone can get behind (Miller 19).
This bill will stimulate and …show more content…
Our current system taxes exports at 35% while imports are exempt. The bill would basically reverse this effect: taxing imports at 20% and exempting exports. One of the key advantages of this plan is that it prevents profit shifting, outsourcing, and promotes buying American products. That is when a business imports its products to a parent business for a higher cost so the parent business can deduct the cost from its profits (Pomerleau 2017). Right now, this accounts for billions of tax dollars being lost to transfer of profits and this is one of the many ways businesses can find a loophole and reduce their tax liability. Under the Economic Growth Plan, it wouldn’t matter how much a business charged itself since imports are no longer deducted. Similarly, it wouldn’t matter if a business overcharged exports to themselves. It would have no effect on the business’ tax liability. This would allow billions of dollars to flow back into the U.S economy. The appeal of buying stateside products would grow as well, because it would be cheaper to buy from within the states than importing products. Because of this, internal trade would grow creating more jobs in addition to growing the