What, Me Worry? Retailers Are Wrong About The Border Tax

Many retail executives have serious concerns over President Trump's proposed border tax, but they might be wrong, at least according to Prof. Phillip Swagel of the University of Maryland's School of Public Policy.

In an op-ed published on CNBC, Swagel suggested retail executives are "missing the forest for the trees" by not focusing on any potential benefits consumers will see from tax reforms and an improved economy. Specifically, a stronger economy with improving incomes and better job creations means families have more money to spend.

"That's what the Brady-Ryan tax plan will mean—a stronger economy—and that's good for retailers, even if they don't see it that way quite yet," the professor wrote.

Swagel explained the border adjustment tax in the current form will create a corporate tax system that taxes sales made within the U.S. regardless of where the company selling the item is located or if production occurs in the U.S. or outside.

Related Link: Trump's Proposed Border Tax Is Misunderstood By Many

By contrast, the current tax system favors firms that produce overseas and import their products into the U.S. which offers "backward incentives."

"The border adjustment means that all products sold in the United States will face the same tax, regardless of where the item is made, and U.S. firms selling overseas will not face higher taxes than their foreign competitors," Swagel explained. "He incentives that lead firms to shift production to low-wage countries or to use accounting wizardry to shift profits to low-tax countries like Ireland will disappear. Decisions about where to invest and hire will be made on business considerations rather than driven by the tax code. The U.S. can be a great place to do business – and to hire and make things."