It’s been a big week in terms of legislation related to tax and trade. CNN reported that, after speaking with Mexican President Enrique Peña Nieto and Canadian Prime Minister Justin Trudeau, Trump has decided not to scrap NAFTA after all. He instead plans to discuss the trade agreement with the other two partners to reach a consensus that he deems fair for all parties involved.
I received calls from the President of Mexico and the Prime Minister of Canada asking to renegotiate NAFTA rather than terminate. I agreed..
— Donald J. Trump (@realDonaldTrump) April 27, 2017
…subject to the fact that if we do not reach a fair deal for all, we will then terminate NAFTA. Relationships are good-deal very possible!
— Donald J. Trump (@realDonaldTrump) April 27, 2017
Furthermore, Trump’s tax proposal includes a plan to cut taxes on business to 15 percent—giving the U.S. the lowest headline corporate tax rate of any major economies worldwide.
CNN reports:
According to the Paris-based Organisation for Economic Co-operation and Development, America’s corporate tax rate of 35 percent is currently the highest rate levied by any of its 35 member countries. That rate rises to nearly 39 percent if taxes levied at state level are included.
A Congressional Budget Office report showed that the effective rate of corporate tax in the U.S. is actually just under 19 percent, which is similar to that of the U.K., Argentina and Japan.
It’s still much higher than the likes of China (10 percent) and Canada (8.5 percent), according to CNN.
The goal of this tax cut is to give U.S. businesses more opportunity to compete internationally.
One piece of legislation that was missing from Trump’s tax proposal was the Border Adjustment Tax, which would have added a 20 percent tax on imported goods.
The New York Times reported yesterday that the Trump administration had dropped its support for the tax on imports, citing two sources close to the matter.
That doesn’t mean that it’s going away forever, though. One of the sources told The New York Times that it may be revisited later, but “was shelved ahead of the Wednesday release of the White House’s new tax plan.”
While companies that import goods from the likes of Mexico can breathe a sigh of relief knowing their product cost won’t increase, the border adjustment tax did serve a purpose other than supporting American manufacturing.
The aforementioned slash of corporate taxes would cause a loss in revenue for the federal government. The border adjustment tax was designed to offset those losses. Without the border adjustment tax in this situation, it could cause the budget deficit to increase.
