Boeing has joined the push for the White House tax reform plan, which includes a sweeping overhaul of the U.S. corporate tax system that would simplify the tax code to three income brackets and reduce itemized deductions.
Although the plan released by the White House did not include details of a controversial “Border Adjustment Tax,” Boeing CEO Dennis Muilenburg and the 330-company Aerospace Industries Association he leads have made it clear they support the tax, reports the Seattle Times. Proponents believe the tax would make U.S. manufacturing vastly more profitable — a good prospect for Boeing.
The “border adjustment” element of the plan works like this: A company’s sales of products exported from the U.S. are exempt from the tax entirely.
By contrast, because the cost of imported goods is not deductible from a company’s revenues (unlike domestic inventory costs), the company would pay 20 cents in tax for every dollar in sales of imported goods.
The tax on imports would apply to both finished goods and component parts, such as the wings of the 787 that Boeing imports from Mitsubishi Heavy Industries in Japan.
Alan Auerbach, a professor of law and economics at the University of California, Berkeley, told the Seattle Times that he and other supporters of the system believe the dollar would appreciate 20 percent in tandem with the tax, “so Boeing or AvtechTyee would be buying their imports with a stronger dollar, exactly offsetting the impact of the import charge,” reports the Seattle Times.
Those who import goods will “pay the border tax, but with dollars that are more valuable,” Auerbach said. Due to the rise in the dollar, there would not be an increase or decrease in imports, he believes.
“It won’t affect the trade balance with other countries,” Auerbach said. “It’s not protectionist.”
Many retailers, including American auto dealers, have expressed their opposition to the border adjustment tax, saying that it is antithetical to free trade and would hurt their businesses. Boeing’s main competitor, Airbus, called it protectionism.