The ‘Father of the Border Tax’ Explains Why it Will Work

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Father of Border Tax: It will work

Professor Alan Auerbach, chair of the economics department at UC Berkeley, on the impact of a border adjustment tax.

On Monday, during a speech at the White House to the National Governors Association, President Trump renewed his commitment to simplifying the tax code, adding

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“We’re also going to make taxes between countries much more fair.”

As Republicans in Congress work with the President on making these goals a reality, the highly contentious border-adjustment tax (BAT) has quickly become a hot button issue both inside the party, and among the opposition.

The tax, which is an income tax levied on imported goods sold domestically, is championed by House Speaker Paul Ryan, Dow Chemical CEO Andrew Liveris and the President himself.

During an exclusive interview with FOX Business’ Liz Claman, Professor Alan Auerbach, also known as the father of the border-adjustment tax, said the idea originated in countries that have valuated taxes.

“Countries that have valuated taxes do not impose the tax when the goods are exported and do impose the tax when goods are imported. So it’s really just borrowing the same approach in thinking about putting it with U.S. tax reform,” he said.

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Auerbach described exactly how the tax would affect companies.

“It really has to do with the fact that the tax effectively makes a transition from taxing companies based on the income they produce in a country to taxing based on where things are sold,” he said.

Critics of the core element of the House tax plan say consumers will bear the cost of a 20 percent across-the-board tax on imports. However, the UC Berkeley Economics Department Chair suggests the strengthening dollar would offset the added cost to U.S. consumers.

“[The dollar] will insulate retailers and other industries that rely on imports from higher costs that they would have to pass on to consumers,” Auerbach said.

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