The GOP is advocating for a "Border Adjustment Tax," which is something like a complicated Value Added Tax that is meant to encourage companies to on-shore or re-shore their manufacturing, without raising prices for Americans (because the US dollar is supposed to rise by up to 25% (!) as a result), while removing the complexity that allows companies to dodge tax by finding loopholes.
But as Tyler Cowen demonstrates with a few well-chosen examples, simplicity is no guarantee of closing loopholes. Companies with lots of money -- and lots of money to lose by closing off loopholes -- will find it worth their while to trade in today's baroque schemes for a whole new set of ones, which will create "a game of tax lawyers on each side, where the better paid advocates are working for the corporations rather than Uncle Sam."
Trump is on record as opposing the tax, which he says -- correctly, it seems -- will be complicated enough for big companies to game.
Similar loophole problems arise from the elimination of interest deductibility. Let’s say my company is buying a machine from your company, and normally you would offer trade credit to ease the purchase. If the interest on that trade credit is not deductible, we would build the interest payments into the upfront price of the machine, making the expense deductible and circumventing the intent of the tax reform. Or I could seek such trade credit from you (and your bank behind the scenes), rather than taking out a traditional loan, again converting a nondeductible expense into a deductible expense.
'Border Adjustment Tax' Just Means New Loopholes
When you look at the list of people that Wells Fargo stole from -- ordinary depositors, struggling mortgage borrowers, 800,000 car loan borrowers, mom and pop businesses, medium businesses and home owners -- a commonality emerges: they're all poor people, or middle-class people, or slightly rich people.
Wells Fargo CEO Tim Sloan has only been on the job since October, but he's earned a 35%, $4.6m raise, despite flat earnings and a series of scandals since Sloan took over from the cartoonishly villainous John Stumpf.
United Airlines has repeatedly attained viral fame for its mistreatment of its passengers and their belongings, and has even dabbled in pet murder, but now the airline has crossed another item off its worst-airline bucket-list, murdering a passenger's puppy by insisting that a dog-carrier be stored in an overhead locker during a 3.5 hour flight, […]
Creative designers play a pivotal role in engaging target audiences and customers, and while companies are eager to bring more of these professionals on board, you’ll have a hard time getting your foot in the door if you’re not using the industry’s best tools. From Adobe to Maya, the eduCBA Design & Multimedia Lifetime Subscription Bundle […]
As more companies aim to reel in costs and boost productivity, project managers are becoming an essential part of many operations, and they’re paid handsomely for their expertise. But, while demand is high, you’ll have a hard time getting your foot in the door if you’re not toting the right certifications. The Official Lean Six Sigma […]
Learning how to play the guitar is no easy feat, and plenty of aspiring rock stars wash out due to either lost interest or simply lousy teaching. The Jamstik+ aims to remedy both of these issues with a 21st-century approach. This smart guitar teaches you about chords, scales, and the like via an app on […]