Today “Made in America” products and services are at a tax disadvantage here in America and around the globe. That’s because foreign competitors like China, Europe, Mexico and Canada all adjust their taxes at their borders – adding taxes to American-made products and taking taxes off their own. Because America doesn’t border adjust, we lose both here and abroad.
Shockingly, this means Chinese steel is cheaper here in the U.S. than American steel. Mexican beef and autos are cheaper than American beef and autos. Foreign oil is cheaper than American oil. This tax disadvantage on “Made in America” products and services can easily exceed 20 percent – destroying true competition. Worse, it often means the best location for a U.S. company to sell to America is overseas. Why accept such an unfair and job-killing tax code?
The House GOP tax reform blueprint that I lead finally ends the “Made in America” tax. By border adjusting our taxes like our foreign competitors do, we level the playing field. For the first time in U.S. history, foreign imports and American-made products and services will be taxed at exactly the same rate. No more tax subsidies for foreign products or services. No more incentives for U.S. companies to move overseas. Everything taxed exactly the same – what can be more fair?
More importantly, border adjusting our taxes helps eliminate all tax incentives for U.S. companies to move their manufacturing, technology and headquarters jobs overseas. Coupled with the new lower GOP tax rates on local businesses and ending the double-taxation of U.S. earnings overseas, this establishes America as a 21st Century magnet for new jobs, technology breakthroughs and headquarters.
The GOP tax plan is already forcing companies to ask themselves “How soon can we bring our suppliers back to the U.S.? ”
House Republicans are going bold in business tax reform. We vault America back into the world lead by moving from the current income tax based on where companies produce to a simpler cash-flow tax based on where company products are consumed. We are also proposing the lowest tax rates on local businesses in modern history, permanent repeal of the AMT and death tax and the first-ever immediate write off of all new investment in buildings, equipment, software and technology.
And while it’s new to America, border-adjustability is used throughout the world to give our foreign competitors a big advantage over the U.S. We match them, not with a hidden VAT, but with a simpler, smarter cash-flow tax.
Understandably, some companies that import a lot of foreign products have concerns. Taxing equally foreign and “Made in America” products is a big change. I’m confident, though, because in more than 100 cases worldwide when border-adjusted taxes were enacted by our foreign competitors the value of currency adjusted efficiently, lowering the costs of imports and keeping prices low for consumers.
It’s time to finally end the tax on “Made in America.”