Reviewing the Case Against a Border-Adjusted Corporate Income Tax

A key piece of the 2016 House Republican Tax Reform Blueprint proposed remaking the corporate income tax into a destination-based cash-flow tax (DBCFT). The new tax would have included a border adjustment that raised about $1 trillion in revenue to offset the cost of other tax cuts. Cash-flow taxes are relatively uncontroversial. They allow businesses to fully deduct their costs upfront so that they only pay taxes on their profits when investments are deployed productively. Destination-based income taxes, which require a tax and rebate system to "border adjust" the levy, face numerous theoretical and practical implementation issues. As Congress readies for the 2025 expiration of the 2017 tax cuts, policymakers will desperately search for ways to offset some or all of the more than $4 trillion price tag to make the reforms permanent.