John Magnus is the president of TradeWins LLC, a member of the Global Business Dialogue's Board of Advisers, and an especially astute observer of American trade policy. Last Wednesday, March 29, he served as the moderator for the GBD colloquium on
Border Taxes, the Background, A Proposal, and The Challenges.
Congress, or, more specifically, the House Committee on Ways and Means, set the stage for this event with its blueprint for a new American tax code that includes a Destination-Based Cash Flow Tax, which is adjustable at the border. Here is a bit more of what Mr. Magnus said in framing the issue:
MR. MAGNUS
I suspect that if the tax bar could file a safeguard case they probably would, in order to deal with that surge of injurious imports [from trade lawyers].
There are good reasons for this of course; I don't think we are going to kill each other. The question is, during our collaboration, what kind of policies will we produce? The stakes are sort of high, the world's watching.
Moving off of net income as the basis for taxing business feels momentous in some way, maybe not like moving off the gold standard, but I'm sure that it's prompted as much email traffic, [as] some of you may have experienced.
Border adjustment, depending on whom you ask, is either an abomination or maybe it's a regrettable necessity because it broadens the tax base and allows rates to be brought down without damaging fiscal consequences; or, it's affirmatively desirable in its own right and like virtue, its own reward.
Either it's a flagrant violation of trade obligations, or else it's the correct and legitimate way to do what we too clumsily tried to do with DISC and FSC and ETI. ...
On the terminology, you know, is the blueprint proposing a border adjustment tax or is it proposing the border adjustment of a tax? ...
Which of those policy arguments [making the rounds from inbox to inbox] are relevant to any destination-based tax, and which of them apply very specifically to the one that has been proposed in the blueprint - the "Destination-Based Cash Flow Tax?" And how are we supposed to understand the competing claims about ... the situation today in regard to the burden of non-border adjusted taxes faced by U.S. companies and by their foreign rivals?
