Everything You Wanted to Know about Border Adjustability but Were Afraid to Ask
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House Republicans have proposed to replace the corporate income tax with a destination‐based cash flow tax. Proponents say this new tax is desirable because it is “border adjustable,” which means that exports would be exempt from tax and all imports would be subject to tax. Critics, by contrast, say such a tax violates the rules of the World Trade Organization and worry that an adverse WTO decision could set the stage for a value‐added tax. Moreover, there are concerns that destination‐based taxes undermine tax competition, thus making it easier for politicians to raise tax rates and increase the burden of government spending.
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