A controversial proposal to tax all goods and services coming into the United States has a better chance of becoming law than many on Wall Street suspect.
The so-called “border-adjusted” tax is part of the House tax overhaul plan that also would reduce the corporate rate from 35 percent to 20 percent.
The idea is to tax goods as they come into the country from overseas, but to avoid taxing U.S. exports at all. For instance, a car imported into the U.S. from Mexico would be taxed, but the American-made steel sent to Mexico would not.
Proponents say the proposed “destination tax” would encourage more U.S. production of goods and create U.S. jobs. But opponents say it will send prices higher, unfairly cut profits for some sectors, particularly the retail industry, and could prompt retaliation. The idea is similar but not quite like a VAT, or value added tax, common in other countries.
The stock market has been celebrating promises of lower corporate taxes that could boost business spending, but it has been ignoring proposals that could sting some companies’ bottom lines. Retailers, automakers and refiners are among the industries that could be hit if imports are taxed
source”cnbc”
