Among his campaign promises, the president wants to:

  • Protect and Make America Great!
  • Create jobs in the USA
    • Incentivize US companies to produce in the US
    • Create the conditions of business growth (through deregulation)
    • Penalize US companies that manufacture overseas

In the USA, businesses currently are taxed at 35% on their worldwide income, while other Countries have a strategy to lower tax rates to attract businesses.

The new tax proposal by the Trump administration is based on the following principles:

  • Make the US businesses the most competitive in the world
  • Set up a massive tax reform in simplification
  • Lower rates


  • Deregulation
  • Setting up a Territorial corporate income tax system
  • Lowering the Tax rate to 15%

The House of representative currently proposes

  • A 20% tax rate
  • A Border Adjustment Tax . A border adjustment tax (BAT) levies a tax depending on where a good is consumed rather than where it is produced.


One of the sources of the tax debate is a paper (A modern Corporate Tax) by the Center for American Progress written by Alan Auerbach from the University of California, Berkeley.

In his assessment, Alan Auerbach describes a way to lower current pressure on the Corporate tax

“A system that ignores all transactions except those occurring exclusively in the United States would replace the current approach to taxing foreign-source income, excluding cross-border transactions from the tax base”.

“It would collect the corporate tax, now a cash-flow tax, based on the corporate products’ destination, not on their origin. This would shift the focus of taxation from ownership to consumption. In fact, a business cash-flow tax is equivalent to a consumption tax, but with one major differ­ence—the exclusion of wages and salaries from the tax base. “

In this scenario, export revenues are not taxed while imported goods are not deductible. This makes a tax on imports and an export subsidy.

This tax is designed to even out imbalances in money flows across borders and reduce corporations’ incentive to off-shore profits., “The key point is that the rate of border adjustments is paired and symmetric.  Thus, the effects on trade of these two components – the import tax and the export subsidy – are offsetting.  Adopting them together imposes no trade distortions even though Critics of the tax argue that prices will rise on imported goods adopting either separately would do so.” The tax’s creators respond that the surge in foreign demand for U.S. exports will strengthen the value of the dollar; in turn, a strong dollar would increase the demand for imported good, so that the net effect on trade is neutral.

By limiting the tax base to domestic cash flows, it would eliminate incentives to shift profits abroad without requiring U.S. participation in a race to the bottom to cut the corporate tax rate.

At the same time, it would eliminate one of the most complicated sets of tax policy provisions, those relating to international taxation.

Although the plan would maintain the corporate tax as a source of rev­enue, it would make the burden of this tax more progressive and likely increase domestic activity, income, and employ­ment. It is a corporate tax system that is much more appropri­ate for our current economic environment than the one we have inherited from a century ago.

Republican House representatives have argued that this change will stop companies from shipping manufacturing’s jobs overseas by giving them tax incentives to make products in the US. They are counting on border adjustment to raise more than $1 trillion to underwrite their tax reform plan, which also includes cutting the corporate tax rate to 20 percent from 35 percent. They also see the move as a way to keep U.S. jobs from moving abroad and leveling the playing field with other countries that have similar tax systems.

Critics have argued that consumers will ultimately pay for the tax when retailers importing goods raise prices to cover their higher tax bill.

Some economists say importers would benefit from a stronger dollar that would increase their buying power abroad, offsetting the new tax burden.

I created this blog to help understand certain basic aspects of proposed U.S. tax reforms. Of course, the discussion between Congress and the White House is ongoing and many things could change before the propositions are finalized into laws.

Please do not hesitate to contact me should you have any question

Blog in French is available: