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Progressive Policy Institute Fellow Criticizes Tax Plan

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Paul Weinstein, Jr., a Progressive Policty Institute (PPI) Senior Fellow and Director of the Graduate Program in Public Management at Johns Hopkins University, writes:

"With a growing number of President Trump’s inner circle embracing Speaker Paul Ryan’s proposed Border Adjusted Destination-Based Cash Flow Tax (DBCFT), the likelihood the concept will be included in a final tax reform package has jumped considerably.

At the same time, the Ryan proposal has split the business community and drawn fire from some prominent Senate Republicans, raising questions as to whether Republicans can unite behind the Ryan approach – or, indeed, any tax reform proposal. Meanwhile, Democrats are keeping their powder dry, noting that, at this point, no one has actually seen a concrete proposal. It’s time for Republicans to show us their plan.

PPI has long argued that fundamental corporate tax reform is urgently needed to boost economic growth and the global competitiveness of U.S. companies and workers. Despite broad agreement across the political spectrum that the corporate tax rate is too high and perversely gives U.S. firms incentives to keep revenues abroad, there’s no consensus around how to pay for tax reform."

His piece raises the following concerns with the Destination-Based Cash Flow Tax (DBCFT), also known as the Border-Adjusted Tax (BAT):

  1. Unlike the European VAT, the BAT tax has not actually been tested. 
  2. The supposed trade benefits may fail to materialize (he explains why in the PDF).
  3. The BAT significantly raises taxes on consumers, which could reduce spending and therefore reduce revenues for state and local governments.
  4. The BAT would raise prices on domestic and imported goods.
  5. The BAT tax distorts the market by picking winners and losers. For example, companies that import components and export their goods would be hurt, which would in turn hurt domestic manufacturering jobs.

Weinstein calls on Republicans to put forward a complete, coherent tax reform plan (not just a blueprint) and to allow plenty of time for analysis and debate.

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