A Key Part of the GOP’s Plan to Overhaul the Tax Code Is in Deep Trouble

Since Donald Trump’s surprise election victory, the president and Republican leaders in Congress have described tax reform as a top priority—a once-in-a-generation chance to overhaul the tax code in a way that lowers rates for companies and individuals, encourages businesses to make things at home instead of abroad, and ends incentives for companies to book profits overseas. All without raising the budget deficit.

Republicans in Congress, led by House Speaker Paul Ryan, have come up with what they believe is a key part to the solution: a border adjusted tax, or BAT. Their plan proposes scrapping the 35 percent corporate rate, one of the highest in the world, and replacing it with a 20 percent rate that applies to profits from domestic sales and to imported goods and materials. Money earned from exports would be exempted from a company’s taxable income—effectively letting U.S. sales abroad go tax free. By taxing imports the plan would raise about $1.1 trillion in federal revenue over a decade—enough to offset the revenue losses from lower tax rates.