President Trump hasn’t made a decision on the import tax backed by House Speaker Paul Ryan, but something must be done to address the unfairness that U.S. companies face in selling their products abroad, Commerce Secretary Wilbur Ross said Friday.
“We’ve been studying it very carefully, but I don’t believe that the president has taken a position on it just yet,” Ross said in an interview with CNBC, adding that the administration would analyze the proposal after the House Ways and Means Committee produces legislative text.
Ross, who has been a major critic of U.S. trading partners’ trade practices, went on to argue that U.S. companies face a disadvantage because other countries adjust taxes at the border, “so something has to be done to fix that one way or another.”
The issue Ross was referring to is that most developed nations levy value-added taxes that are adjusted at the border. What that means is that U.S. businesses must pay the tax when selling into the country, while the U.S. doesn’t have a comparable tax.
“That’s an inherently unfair anomaly,” Ross said, although economists generally think that currency movements blunt the effects of border adjustments.
The rate-cutting corporate tax reform proposed by House Republicans would adjust taxes at the border by allowing companies to deduct export sales from taxable income, while prohibiting them from deducting the cost of imported goods.
The border adjustment would apply to the corporate tax. The U.S. is an outlier among rich economies in that it doesn’t impose a value-added tax.
While noting that the border adjustment could be one remedy to the unfair situation U.S. businesses face, Ross said the proposal would have to be looked at carefully to make sure that it didn’t create unintended consequences.
